You may feel that you have a robust travel expense policy in place for your business already. But at a time when, according to the ACFE Global Fraud Study, 5% of the average organization’s annual revenue is lost to fraud, it’s vital that any anomalies or issues that may be under the radar are spotted quickly.
This is where travel expense auditing is so important. It can help identify any problems, either caused by human error or intentional fraud, so you can ensure everything is above board and fully compliant. In this guide, we’ll look at travel expense audit processes, key best practices, and how to make sure travel expenses aren’t damaging your bottom line unnecessarily.
What’s in this guide:
- What is a travel expense audit?
- Benefits of travel expense audits
- What challenges do businesses face conducting travel expense audits?
- Travel expense report audit checklist
- Best practices for conducting travel expense audits
What is a travel expense audit?
A travel expense audit is the process of investigating the expenses that employees submit for work-related travel. The audit checks for reporting errors, affirms that all expenses submitted are reasonable, and ensures that all claims comply with corporate travel expense policy.
This is important because, typically, employees submit travel expense receipts and/or forms to their employer’s finance or HR department for reimbursement. As many of these claims are still processed manually, human errors can easily creep in, and fraudulent submissions are often approved without detection.
Benefits of travel expense audits
Travel expense audits can take a lot of time, which is why many businesses shy away from them. However, the benefits of undertaking them far outweigh the time and resource commitment needed, including:
- Preventing fraud
- Detecting human errors
- Monitoring employee spend
- Regulating corporate travel expense policies
- Avoiding fines or legal recourse for non-compliance
Ultimately, expense audits can help your organization manage outgoings more closely, so you can save money and invest in other areas of the business. Auditing can mean the difference between a successful corporate travel policy and a time-intensive and inaccurate process.
What challenges do businesses face conducting travel expense audits?
Every business and travel expense policy is different, and so the main barriers to audit success can vary but three particular issues are commonplace:
- Undefined policies – constructing a fair corporate travel expense policy, free of ambiguity, is only winning half the battle. The policy must also be easily accessible and concise: human nature means many employees won’t bother to read it if it’s hard to find or too long-winded.
- Manual processes – human error can be a major issue for travel expense claims and auditing. SpendDesk research has found it takes an average of 20 minutes to process one claim; multiply this by however many claims need doing and it quickly becomes a tedious, time-consuming repetitive job where errors creep in. The same problem applies to travel expense reporting when it’s conducted manually: according to the Global Business Travel Association, 19% of expense reports contain errors. The best way to stamp out these errors is to use automation to conduct the nuts and bolts of travel expense reporting.
- Rapid growth – while a fast-growing business is something to celebrate, it can lead to issues if the travel expense auditing processes in place don’t scale up at the same pace. Businesses can suddenly find themselves overloaded with expense claims, and can’t keep up with processing them accurately, leading to late reimbursements and more errors in processing and reporting.
Travel expense report audit checklist
Travel expense audits may sound like a taxing task, but much of the legwork and burden can be eased through a better understanding of the process. A successful audit should follow this five-step process:
1. Collate all expense reports
Firstly, all expense reports should be reviewed, with receipts being matched up to expense submissions, all undertaken by a trained auditor. Organized expense reports and well-documented receipts will make the rest of the process much easier.
2. Review company travel expense policies
Before conducting any analysis, auditors should review corporate travel expense policies to understand what is and isn’t permitted as an expense, travel allowances, and to establish how effective managers are at applying and implementing the policy.
3. Investigate questionable expense claims
Auditors should contact employees directly in case of any suspicious expense claims, or those that contravene company policy. These can be escalated to those in charge of travel expenses if needed, and such claims may also uncover patterns of suspicious activity like expense fraud.
4. Verify financial records
The final step in the travel expense audit process is to verify any abnormalities that remain. If auditing is particularly robust, then this part of the process will be required less frequently.
5. Create a report
The overall process is completed by the creation and delivery of a report by the auditors, including their findings, and recommendations based on them.
Best practices for conducting travel expense audits
When conducted correctly, travel expense audits can have a huge positive impact on a business, from efficiency through compliance to revenue protection. These five tips can help ensure audits run smoothly:
1. Adopt the same process for all expenses
Instead of auditing a portion of travel expenses to get a snapshot of policy effectiveness, all travel expenses should be audited. This gives businesses total visibility and control over employee spending, deter employees from internal expense fraud, and encourage greater vigilance among the workforce in submitting accurate claims.
2. Conduct pre-approved audits
Pre-approval auditing is the process of auditing expense submissions prior to sending them to managers for approval. This can save time and money by cutting the number of claims that get rejected and removing the need to investigate and verify non-compliant claims post-approval.
3. Set expense deadlines
By requiring employees to submit travel expense claims within a defined timeframe, the auditing process can be streamlined. Your business can also gain a comprehensive view of overall travel expenditure without any missing data caused by late submissions.
4. Offer corporate cards
Businesses can gain greater visibility of employee spending when using a corporate card for travel expenses. This also removes the lead time for employees who have to wait for reimbursement of expenses due to their personal cards.
5. Automate travel expense management
Businesses continuing with manual travel expense processes are, according to BTN Europe, twice as likely to be affected by fraud. This is where an automated travel expense platform such as Gett is invaluable in overcoming that challenge, providing a centralized platform for all ground transport bookings, customized travel policies and automated travel expense reporting. Employees also benefit from the platform, as manual receipt submission can be eliminated, and reimbursement times can be shortened.
Control your business’ expenses by integrating your current expense management system for automatic expensing. Benefit from in-depth analysis which reveals the true cost of your business ground transportation. Find out how you can benefit from Gett – request a demo today.