Best Practices and Checklists for Efficient Expense Audits

Fewer costly mistakes and redoing of work. A reduced risk of fraud from inside and outside. A lower likelihood of catching ire and penalties from tax and other regulators. They’re all benefits of following best practices that can improve efficiency, processes, and what you want most from expense auditing: compliance.

Compliance is a daily challenge across numerous functions and roles, from booking business trips and submitting expense reports, to checking invoices and identifying taxable items. Building a foundation of audit controls and the technology enabling them allows organizations to keep up with their own shifting rules and priorities as well as ever-changing tax regulations and accounting requirements, no matter how far and wide they do business.

Explore this guide to develop best practices and refine your approach to expense auditing. Learn:

• Key questions to ask – the when, what, why – to clarify audit essentials and build your strategy.
• How smaller businesses benefit from automated expense auditing and spend compliance.
• Steps and tips to improve audit efficiency and tighten audit controls.
• Why auditing should be seen as an opportunity and not just a chore.
• Examples of how specific businesses achieve compliance and success with spend compliance solutions.

The audit essentials: key questions for best practices

To determine audit essentials and implement best practices for closing the gaps in compliance in your organization, you must ask some basic questions: When, what, and why are you auditing?

Why are we conducting expense audits?

The basic and sensible reply is to improve compliance, ensuring employees follow the rules and allowing you to see trends that can move the business forward faster – or slow it down.

But there are many possible objectives that go beyond basic spend compliance and clarify purpose:

• Control costs for travel and expense, often one of the largest budget items and one that can cut into or bolster margins.
• Spot bad behavior and reinforce a culture of responsible spending.
• Find and avoid mistakes such as duplicate expenses, incomplete expense reports, and missing receipts.
• Reduce regulatory and audit risk by satisfying tax and other regulations that if broken can bring fines, seizures, and jail.
• Manage value-added tax (VAT) reclaim with targeted audit tools that help recapture more of what your business is due.
• Improve your processes through better spending visibility and insights into what’s working and what isn’t.

What (and whom) should we audit?

Audit every single expense claim, for starters, because it creates a baseline for your audit strategy. If this isn’t feasible, focus on high-value targets such as cash purchases, regular travelers, new employees or departments, and teams or employees that frequently break policy.

Other spend compliance steps to take:

• Mandate corporate card use for better control and spending visibility.
• Require receipts for every item, give employees mobile tools to capture them, and insist missing ones be justified.

When should we audit employee business expenses?

• The simple answer: Before approval of an expense report. While many businesses wait until a report is approved, this choice leads to inefficiencies like forcing harried managers to rubber-stamp approvals or accounts payable having to claw back money that’s already gone out the door. Instituting a pre-approval step allows employees to correct claims early and reveals problem areas.

What should I audit in a small business?

The audit rules you choose depend on your industry, culture, and regulatory requirements. What they shouldn’t depend on is size, as even a small business can reap improvements with audit best practices that simplify compliance and expense reporting.

Smaller businesses, after all, have the same needs for control, efficiency, and scalability as big organizations. And with owners and executives often handling the functions of HR, marketing, IT, and more along with the big-picture strategy, best practices and compliance audit tools can bring improvement without taxing limited resources. They include:

• Having a single platform for expense and travel that handles receipts, invoices, and tax documentation, easily integrates with other systems, and scales with the business.
• Automating expense processes to reduce manual tasks, free your team for more valuable work, improve analysis, and ensure you have the information to meet filing deadlines.
• Creating a culture of spend compliance where the right choice is the easy choice because solutions are simple to use and reinforce policies.
• Seeking expertise from technology providers so owners and operators can focus on the other important things already on their plates.

How to improve audit efficiency

Businesses have multiple reasons to improve how they audit expenses. Here are two that hit home: 13% of misappropriation fraud comes from expense reimbursement schemes, with median losses of $50,000.¹ Let’s look at specific steps to improve audit efficiency and tighten audit controls.

A checklist to increase audit efficiency

Spend compliance is a big tent covering tax obligations, spending with chosen suppliers, detecting and deterring fraud, reclaiming VAT, and ensuring your processes are both solid and agile enough to allow your business to compete and grow.

Consider some expert advice to increase audit efficiency:

• Calculate audit costs so that you have a baseline for comparing manual vs. automated process and the time and money they consume.
• Require corporate card use so that spending is automatically captured, categorized, processed, and ready for audit. It improves spending visibility and employees spend less time putting together expense reports.
• Limit expense report touches by identifying issues and categories that result in reports being kicked back to submitters, approvers, processors, and audits.
• Integrate artificial intelligence (AI) into your expense auditing, using it to check every expense for compliance and allowing your team to focus on exceptions flagged by the technology.

Tips to tighten your audit controls

Your audit rules must align with your company’s processes and goals. A key step in tightening audit controls is deciding where to direct resources so high-risk expenses don’t slip through.

Some tips for creating audit rules include: 

• Identifying low-risk, low-dollar items that auditors spend time checking and instead letting automated AI tools oversee them.
• Taking an intentional approach to audits, focusing your efforts on riskier purchases (think cash or “miscellaneous”) instead of gambling that randomly selecting reports pays off.
• Setting benchmarks for such key indicators as exceptions, rejections, and report review rates, so you can gauge improvement and compare with industry peers.

Tips and checklists help formulate and refine your approach to expense auditing. Another core step is refining your philosophy about auditing and seeing its potential benefits instead of viewing it as a necessary evil.

Consider auditing an opportunity instead of a chore

Risk reduction, tax regulation and digitization, sustainability, cybersecurity, and AI are among the many challenges surrounding compliance. But with a positive mindset they can be a business opportunity instead of chore.

You can turn compliance requirements into business opportunities by:

• Seeing tax and regulatory compliance as a way of avoiding costly penalties, reclaiming the VAT you’re due, and improving productivity with intelligent technology.
• Strengthening internal spend compliance with solutions that audit expenses, automate manual tasks, make processes and employees more efficient, improve control and insights, enforce and simplify policies, and save time and money to help the business move forward faster.
• Helping the planet and your people by supporting and tracking environmental, sustainability, and governance (ESG) measures that countries increasingly require and many employees favor.
• Leveraging AI to improve compliance, efficiency, and business transformation, while proactively protecting data and developing ethical standards for the technology’s use.

Understanding audit best practices and looking at challenges through the lens of opportunity are important pieces of the puzzle. So, too, are examples of how other organizations achieve better spend compliance.

Examples and success stories of best-practice expense auditing

The why, who, when, and what of expense auditing are the foundation.  But examples and success stories from other organizations demonstrate how audit best practices could play out at your business:

• Uber cut help desk tickets 70% using AI-powered solutions that check expense reports and notify employees of rejections so they can bring them into compliance.
• PETRONAS, a global energy group, used our integrated spend management platform to lower travel and expense costs 20%, reducing non-compliant spending and the associated costs.
• Penn State University uses SAP Concur solutions to prepare required state reports, corral receipts, and manage purchasing cards and data to improve spend compliance across 24 campuses.
• Chobani, with Concur Expense and Verify, saved three to four hours daily using AI-embedded automation to audit expense reports, increasing the efficiency of its finance team.

“Once we established that we were using Verify and we were going to an AI audit tool, I saw compliance immediately improve. Employees knew that every line item, every expense in every report was going to be reviewed by AI,” says Marcy Hagenbuch, Finance Systems Specialist at Chobani.

6 Tools to Improve Clarity, Compliance, and Control

Extend the power of Concur Expense with Budget, Intelligent Audit, Consultative Intelligence, and other solutions and services that help with group events and provide expertise and in-app support.

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Conclusion

Involving multiple steps and mastery of many details, expense auditing and compliance are obviously complex processes. But, as with other finance tasks, automated solutions enable the streamlined processes and improved control that businesses seek for expense auditing. Combined, technology and systematic intent add up to compliance.

“Users can create their hotel and entertainment line items seven times faster and also the submission time decreased,” says Zeta Lazar, Team Lead at KUKA, a global robotics manufacturer. “And from the processor side, they are finding fewer errors, and they need to return fewer expense reports.”

¹Occupational Fraud 2024: A Report to the Nations, ACFE, 2024.