Expense violations vs. AI: The policy compliance showdown

Have you ever wondered how many expenses slip through the cracks without anyone noticing? More than you might imagine. Nowadays, businesses are continuously driven to save time, cut costs, and maintain policy compliance. When it comes to modern spending management, AI has taken the focus. However, it is not the ideal answer for expense violations. It has both advantages and disadvantages, just like any other tool.

Let's look at how AI is transforming expense management, what obstacles it faces, and why a combination of technology and human expertise is an ideal way ahead.

The impact of expense violations

Finance teams across the world are plagued with expense violations. Conventional methods like paper-based evaluations are painfully slow and prone to such errors. Employees may, for example, claim a personal expense as a "business lunch." In the same way, someone could stretch the rules by booking a flight through a vendor that isn't approved. Businesses often need to be made aware of how these situations happen and how they are not isolated. The actual cost of such violations is beyond money. It's the loss of trust, hours spent manually checking mountains of receipts, and occasionally even damage to one's reputation.

AI to the rescue?

Here's where AI steps in, promising to simplify finance teams' lives. AI is faster and more competent at identifying discrepancies that go unnoticed. Mundane tasks like receipt scanning, flagging duplication, policy violations, or identifying spending patterns are handled efficiently by AI-powered expense management tools.

For instance, an employee usually books three-star hotels for work trips but suddenly submits an expense claim for a five-star hotel. While a human reviewer might miss that, an AI tool would detect anomalies and flag it immediately. Or if a company started using AI to track mileage claims, they might learn that employees often recorded their distances with inflated numbers because AI tracks the actual routes. This could save the company thousands of dollars annually and eliminate disputes over "guesstimates."  

The downside of using AI

Of course, AI has its flaws. Like a student cramming for a test, it can only perform using the data it's trained on. If the data is insufficient, poorly updated, or biased, the system may make mistakes or fail to detect violations. That being said, it is crucial to remember that scammers are constantly evolving. Even the most advanced technologies can occasionally be tricked by someone, such as fabricating receipts to appear authentic. Someone familiar with the AI's functionality may devise unique methods to influence it, too.

Striking the right balance

The most sane way to tackle expense violations while also leveraging AI's power is not to rely on AI alone and have human intervention to make the process seamless and error-free.

Here are a few examples of how that would work:

• Clear and practical expense policies
  Start by establishing ground rules that leave no room for guesswork. Spell out precisely what's allowed and what isn't. For example, say, "Conference meals over $50 need pre-approval" instead of vaguely stating "reasonable meal expenses." The more precise the policy, the fewer violations there are.

• Innovative AI tools with defined roles
  Let AI handle the repetitive, time-consuming stuff like scanning receipts, cross-checking amounts, and flagging unusual claims. These tools excel at spotting trends, like identifying employees who consistently submit out-of-policy expenses or flagging duplicate submissions.

• Human oversight for the gray areas
  While AI catches the apparent stuff, humans bring judgment to the table. That flagged $400 dinner was actually for an important client meeting and within reason. Human reviewers step in where AI draws a blank, ensuring no context gets lost.

• Consistent checks and training for the AI
  AI tools should evolve, just like your business does. Regularly updating the system with real-world feedback, like new policies or fraud tactics, keeps it sharp. A company that tracks its tool's performance and retrains it as needed will always stay a step ahead.