AppZen, the world’s leading AI platform for modern finance teams, has released its August 2019 “The State of AI in Business Spend” report, which uncovers trends and insights on enterprise spend auditing. The report details are based on expense reports, invoices, and contracts from billions of transactions across hundreds of direct enterprise customers.
Spend audit overview: On average, 96.3 percent of an enterprise’s non-payroll business spend is accounts payable-based and 3.7 percent is T&E-based. Most enterprises that don’t use AI only audit up to 10 percent of spend, while companies that use AI are able to audit 100% of invoices, contracts, and expenses. AI flags 8.7 percent of expenses as high risk, commonly due to unauthorized expenses, errors in keyed-in amounts, and duplicate spend. AI also flags four percent of invoices as high risk commonly due to price, discount, or terms that don’t match the contract, inflated prices compared to market data, and duplicate spend (across invoices or with T&E).
Regulatory non-compliance: A payment to a foreign official, foreign-owned government entity, politically-exposed person, sanctioned or debarred entity, entity on an export control list, or even to a healthcare provider can constitute a regulatory violation. Based on AI discovery, for every 10,000 expenses, two contain a regulatory violation, and for every 10,000 invoices, one contains a regulatory violation. To put this in context, on average, enterprises process 8,876 expense reports per month and 60,354 invoices per month. The average monetary corporate sanction imposed for a Foreign Corrupt Practices Act violation is $233 million in 2019, according to Stanford Law School.
Non-compliant or wasteful spend: The most (ahem!) “creative” expenses employees submitted for reimbursement last quarter include lunch with an oligarch, “Airbnb” on a friend’s couch, cufflinks, strip club “services,” private helicopter rides, and an “extramarital” travel companion. The most creative accounts payable transactions include an invoice for IT equipment that is five times the market price, a partner contract that expired a year ago, an invoice from a debarred supplier (a supplier that the government will not work with), an auto-renewing contract for a no-longer-used service, and a supplier invoice with the same remit details as an internal employee.
Spend thresholds: On average, auditors approve 79 percent of above-limit expenses, an indicator that it may be time for companies to revisit their expense thresholds. For example, the average limit for alcohol spend is $266, yet 86 percent of alcohol purchases over the threshold are approved, with an average above-limit approved amount of $1,044. Another example of over-the-limit spending is gifts. The average limit for gifts is $88, yet 78 percent of above-limit gift purchases are approved, with an average above-limit approved amount of $509.
“There’s a lot that can go wrong in the enterprise spend audit process. Manually reviewing vendor invoices and employee expense reports is time-consuming, error-prone and simply ineffective. Most companies resign themselves to conducting partial audits well after the transactions have occurred, which leaves companies at risk for errors, waste, and fraud,” said Anant Kale, CEO, and co-founder of AppZen. “AI can improve the audit process by auditing 100 percent of spend in real-time and before payment to uncover expense misuse, double-check invoices, find regulatory violations, discover fraud and duplicate payments, and most importantly, audit before you pay.”
AppZen’s “State of AI in Business Spend” report compiled trends, best practices, and recommendations based on aggregated, anonymized data from the AppZen Platform. Conclusions are based on expense report, contract, and invoice data from billions of transactions across hundreds of enterprise customers from April 1, 2019, through June 30, 2019.
AppZen delivers the world’s leading AI platform for modern finance teams. Starting with business spend, we automate manual process, uncover problems, and optimize decision making for enterprises around the globe, including 25 percent of the Fortune 500. Our platform combines patented deep learning, computer vision, and semantic analysis with intelligence from thousands of online data sources to understand financial transactions in business context and make decisions before those transactions happen. AppZen is a must-have for CFOs and their teams to reduce spend, comply with policy, and streamline process.
Since we released our platform in 2016, over 1,000 enterprises have standardized on AppZen, including three of the top ten banks, four of the top ten media companies, three of the top ten pharmaceutical manufacturers, two of the top five aerospace companies, and five of the top ten software providers. Visit us at www.appzen.com and follow us on Twitter at @AppZen.