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3–14 Automate Expense Reporting
The audit work is usually carried out by the internal audit department, rather than
the accounts payable personnel, since the internal auditors are appropriately
experienced in this sort of review work.
When using this best practice, there can be a concern that employee reporting
abuses will go unnoticed until an auditor finds a problem after the fact. This is a
legitimate concern. However, when the audit staff selects expense reports for
review, they should stratify the sample of reports so that there is a preponderance
of very expensive expense reports in the sample, which means that any poten-
tially exorbitant abuses will have a greater chance of being discovered. Though
these discoveries will be after the fact, when employees have already been paid,
the company can still seek reimbursement, especially if the employees are still on
the payroll, so that adjustments can be taken from their paychecks. On the other
hand, if employees have already left the company, any overpayments probably
cannot be reimbursed.
In short, replacing a total review of all expense reports with an occasional
audit can significantly reduce the workload of the accounts payable staff, though
there is some risk that employee reporting abuses will result in large overpay-
ments prior to discovery.
Cost: Installation time:

3–14 AUTOMATE EXPENSE REPORTING

One of the tasks of the accounts payable staff is to check carefully all of the
expenses reported in an employee’s expense report to ensure that all expenses are
valid and have the correct supporting documentation. This can be a major task if
there are many expense reports. This will be the case if a company is a large one
or has a large proportion of personnel who travel, which is common if a company
is in the consulting or sales fields. Luckily, some companies have found a way to
get around all of this review work.
A best practice that nearly eliminates the expense report review work of
the accounts payable staff is to create a ‘‘smart” computer program that walks an
employee through the expense reporting process, flagging problem expenses as
soon as they are entered and requiring back-up receipts for only selected items.
The system is highly customized, since the review rules will vary by company.
For example, one company may have a policy of requiring back-up for all
meals, whereas another company may automatically hand out a per diem meals
payment and will not care about meals receipts. Such variations in expense
reporting policies will inevitably result in an automated expense reporting system
that is closely tailored to each company’s needs; such a system should probably
be programmed in-house, which is a very expensive undertaking. Due to the
high level of expense, this best practice will only pay for itself if it offsets a
great deal of accounts payable work, so there should be a very large number of