Alok, the CFO of an IT services firm in Bengaluru was spending yet another late evening trying to spot how he could optimize company expenses. While reviewing the pool of expense reports on spreadsheets and reimbursement requests, something bothered him: the numbers were there, but the story was missing. The reports told him how much employees spent but not why, whether the expenses were necessary, or if there were any hidden inefficiencies. He knew that some expenses could be exaggerated or even fraudulent, but the reports weren’t revealing the real picture. Alok is not alone. Many CFOs face this challenge where they have this all-too familiar feeling that their expense reports aren’t telling the complete story.
Let’s try to go beyond what your company’s expense reports are telling you and what they aren’t. By the end, we will uncover how with the help of expense management systems, expense fraud can be minimized with higher visibility and tighter controls. More importantly, how CFOs can do what they love to do: be a strategic advisor rather than a manager.
The Hidden Inefficiencies in Expense Management
Did you know that a 2022 survey by the Association of Certified Fraud Examiners (ACFE) revealed that companies lose an estimated 5% of their annual revenue to fraud, and a significant chunk of that comes from duplicate expenses? In India, compliance requirements are still evolving. Unfortunately, expense management inefficiencies do not raise immediate red flags.
Learn about the 5 common mistakes in expense management
Here are some of the biggest blind spots CFOs are concerned about:
1. Duplicate and Inflated Expense Claims
Let’s say Rajesh, a sales manager in your firm, frequently travels for client meetings. He books a flight for ₹15,000, but later cancels it and rebooks another one for ₹14,000. He submits both or the receipt with a higher fare. The finance team, under pressure to clear reimbursements quickly, approves them without noticing the fraud in them. Imagine this practice was prevalent throughout the company. It has the potential to cause losses of lakhs in large organizations.
Lack of automation leads to manual verification, which is prone to errors. Even when detected, rectifying these mistakes takes up valuable time and resources.
2. Unapproved and Out-of-Policy Spending
Expense policies exist for a reason, but many employees submit out-of-policy expenses, hoping they would get reimbursed anyway. Let’s say Paritosh, a manager in a large retail company, took his team out for dinner. They ordered alcohol which was not allowed as per the company’s policy Since Paritosh was in an influential position, the finance team approved the expense. There could be many such out-of-policy spends that reports do not reveal.
3. Vendor Collusion and Ghost Transactions
Many employees work with external vendors. Some of them create fake invoices for services never rendered or inflated receipts. This is a classic case of vendor collusion. In a traditional expense report, these transactions appear legitimate. It is only when a careful audit is conducted that the CFO’s team uncovers the truth. However, by then the money is long gone.
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How Smart Automation is Changing the Game
CFOs like Animesh are now turning to AI-driven expense management tools to get more out of their expense reports. Contrary to traditional systems, new-age expense management systems like Zaggle use data analytics, pattern recognition, and real-time verification to detect anomalies and enforce compliance.
Here’s how:
1. AI-Based Fraud Detection
Advanced expense management systems like Zaggle can automatically flag duplicate expenses by cross-referencing receipts and matching timestamps. For instance, if an employee attempts to submit the same receipt at two different locations or instances, it can easily detect it to prevent cash leakage.
2. Real-Time Policy Enforcement
Business travel is one of the most vulnerable expense areas that is prone to out-of-policy spends. The good news however, is that expense management software can flag these discrepancies immediately and ensure policy enforcement in real time. For example, an employee trying to submit expenses without supporting receipts, or claiming for meals beyond the daily allowed limit will be alerted immediately. The expense may either be outrightly rejected or highlighted to the approver at the time of approval.
3. Smart Receipt Scanning and Automated Approvals
We have already seen how manual verification is time-consuming and error-prone. Smart expense management systems now use OCR (Optical Character Recognition) and AI to scan receipts. They instantly detect tampering and auto-approve legitimate expenses while flagging suspicious ones. This drastically reduces approval cycles and improves compliance.
Learn more about the benefits of implementing an expense management system.
4. Payment through Corporate Cards or UPI
Solutions like Zaggle’s Expense Management System enables companies to integrate their corporate card or make payments via UPI. This helps companies control costs since employees pay for only legitimate expenses using the corporate card.
5. Expense Management on the Go
Imagine your sales manager was out on the field and paid for his cab and lunch with the client. If he were to come back to the office and then file his expenses daily, there is a chance he may either forget to file the expense or there could be a discrepancy. However, with mobile apps, employees can submit, approve, and access reports on the go. This leads to process efficiency at every step.
Some Employees Tend to Spend Out-of-Policy
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The Evolving Role of a CFO
A CFO’s role has always been to shape the financial health of the company. However, traditional approaches and systems to manage expenses and other areas have limited them to being financial managers, ensuring compliance and controlling costs. But in the digital age, they can do what they have always loved to do: uncover insights to grow the company strategically.
- Forecasting Better: By analyzing real-time expense data, CFOs can predict future spending trends and allocate budgets more effectively.
- Strengthening Compliance: Automated tools ensure every claim adheres to policy, reducing the risk of regulatory penalties.
- Improving Employee Experience: Employees no longer have to wait weeks for reimbursement, making them more productive and engaged.
Delayed Reimbursements Lead to Employee Dissatisfaction
Zaggle Enables Auto-approval for Expenses Within Policy
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The Road Ahead
For Alok and many other CFOs, managing expense reports isn’t the main problem but lack of visibility is. By adopting smart expense management systems like Zaggle, CFOs can reduce cash leakage, gain tighter control, derive actionable insights, and give the company’s financials a strategic direction. The future isn’t about just tracking expenses it’s about understanding them, optimizing them, and turning them into a competitive edge. Companies and their CFOs must introspect if they know what their expense reports are telling.
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