Why you should internally audit your expense claims
Internal auditors provide an unbiased and objective analysis of an organisation’s activities and operations. It is not uncommon for large corporations to have a dedicated internal audit team in place, continually keeping an eye on various parts of the business, including employee expenses. However, not all organisations can afford to maintain a whole department. Small and Medium enterprises tend to share some internal auditing tasks amongst managers which, while not a dedicated team, should also ensure includes employee expenses in their audits.
Although expense claims may not seem like a huge deal in terms of their presence in the Profit and Loss Statement, their administration, processing and ongoing reimbursements involve many hidden costs, which could sky-rocket if not addressed. On top of that, even though the employees generally have the best intentions, there are many things that could and frequently do go wrong, which may affect various parts of the organisation indirectly.
Internal vs. external expense audits
Expense internal audits are performed differently to an accounts audit done by external auditors. A manager or team-member would need to evaluate the actual expense claims to ascertain how closely they align to the expenses policy. If certain expenses seem out of the ordinary, further checks may be required, such as review of the supporting documentation, most commonly receipts.
The premise of such an internal audit is not to penalise employees for some supposed complex expense fraud, but to assess and, if needed, improve the end-to-end process including communication, entry, submission, approval, book-keeping, reimbursement and reporting. It may just be that current processes lack effectiveness and are costing the business more money and draining the time of your staff and finance team. Therefore, a periodic internal audit of the expense claims is a good idea and may help identify areas requiring improvement.
Your expenses policy may need an update
The expense claims process is only as effective as the guidelines provided in the policy. If the policy is laden with jargon and complex ifs and buts, it would be hard for employees to follow it. To minimise chances of the policy being the problem area, we recommend updating the policy on a yearly basis with clear wording and distinct expense categories. An internal audit can help to identify where your current expense policy is missing the mark and where effective communication, software and processes can be improved.
Bulk processing may be hampering accuracy
If there are no time limits set by the organisation, some employees may put many unrelated expenses in a single claim after many months. In this case, the approver would likely be less able to scrutinise a bulk of line items and a folder of invoices closely, resulting in things being overlooked. The entry in the system, therefore may have errors.
Your expense claims may be increasing
Sometimes, processes lose their effectiveness when the circumstances change. A fundamental overhaul of the processes may be required. The approvers or bookkeepers may not be able to stretch their bandwidth to deal with an increased number of expense claims.
Extracting the relevant data from manual expense claims and reviewing paper receipts would be a mammoth task and may be one of the reasons why an internal audit of expenses is put off. With an automated expense system in place, the data would be much easier to sort and backing documentation a breeze to sift through.
Cloud-based expense management solutions, like Access Expense, can not only greatly reduce manual effort in managing expenses, but also help analyse claims expenses with built-in analytics, making internal auditing both far easier to run, less time consuming, and more valuable to your organisation.
For more information on how Access Expense can help automate your expense management and support auditing of your expense process, you can download the brochure here.
