Jessica Staley is vice president of SAP Concur. Views are the author's own.
Earlier this year, a Toronto restaurant campaign gained attention on social media by bringing business expenses to the cultural forefront. As a joke, the restaurant renamed its menu items to align with home office supplies (to be more “expense report friendly”). The chicken burger became a mini dry erase whiteboard. The cheeseburger became a silicon keyboard cover.
Amusing story? Yes. However, it also highlights the need for evolved compliance solutions that embrace post-pandemic realities around remote and hybrid work.
Some 17% of people in the U.S. were working from home pre-pandemic. One year into the pandemic, that number jumped to 41%. We now have a new group of workers who rarely had reason to submit expense reports in the past, but are now doing so regularly. Given this situation, it’s critical to set clear policy expectations. Companies will need a new set of tools to increase compliance, while still keeping employees productive.
Adapting to the new normal
What is the root of compliance problems associated with remote work? Often, it’s trying to directly apply existing rules to situations they were never intended to cover. Companies need to recognize this shift and implement new rules.
This can mean adapting existing concepts for travel expenses to new expenses that come with a distributed workforce. For instance, virtually all large companies have supplier relationships with approved airlines, car rental companies, and hotels, plus per diem expense limits for business travel. The same level of specificity must now be applied to home office expenditures.
Organizations should outline exactly what types of equipment and services qualify for reimbursement, e.g., lighting for conference calls, monthly internet fees and office furniture. They can consider enforcing spend limits around monthly supplies or big-ticket items like printers.
In SAP Concur data, we saw the incidence of expenses categorized as “Other” increase 58% from 2019 to 2020, as new spend needs around specialized supplies and equipment emerged — a ring light, for example. It wasn’t needed before, but with employees regularly on video calls, the lights are genuinely useful. These broad expense types lack the context needed to justify spend necessity and can leave finance with a lot of questions. Companies should create specific expense types with clear parameters, to minimize unidentified spending.
Keep in mind regulatory requirements as well. Many states, notably California and Illinois, have detailed rules about what expenses companies must reimburse. CFOs and their teams need to be aware of those rules to avoid potential lawsuits.
AI to the compliance rescue
Many companies discourage fraud and anomalous spend by stating that all expenses will be carefully audited. Even if auditing all expenses manually isn’t realistic, the threat that reimbursement requests could come under scrutiny is often a significant motivator for employees to do the right thing.
The good news? Today, automated systems based on artificial intelligence (AI) are making reviewing 100% of expenses a reality, for organizations of all sizes. These systems can evaluate expenses in seconds, spot errors or possible fraud, and flag which expenses need human review. They provide a broad expense management capability that fast-tracks the entire process, improving both employee reimbursement timelines as well as overall effectiveness for compliance teams.
For example, VMware implemented an AI-powered expense management solution, and the company moved from manually auditing random samples to fully and instantly auditing 100% of its 150,000 expense reports a quarter. As a result, the company saved 8,000 FTE hours, cut reimbursement wait times in half and increased employee satisfaction by 75%.
Toward a culture of compliance
Expense report volumes will likely remain at high levels for the foreseeable future. But organizations have two essential resources to help build a culture of compliance: clear rules and AI-based auditing. While most employees who know and understand the rules will follow them, AI-based systems can help catch the mistakes — and the rule-benders.