Expense management is a crucial aspect of business operations. Many small businesses track their expenses through simple spreadsheets or logbooks. But, once a company grows, expenses become more challenging to monitor.
However, with the emergence of AI, companies can now properly streamline their expense management processes. As a result, your workers can stop spending too much time sorting out your organization’s finances and focus on what’s important: bringing in revenues.
So, what exactly is AI expense management? Let’s start with the benefits that AI can bring in this area.
Benefits of AI in Expense Management
The primary purpose of using AI, no matter the industry, is to save time and reduce manual intervention. Businesses use smart apps for various everyday tasks. Think marketing platforms, your CRM, your email finder tool, or even call recording software.
So, when you implement AI in your expense management processes, you reap benefits, too.
Here are some of those benefits:
Improved Accuracy in Data Entry and Categorization
Manual data entry and categorization leave room for potential errors since they’re tedious and repetitive tasks. Moreover, mistakes add up over time. A human error worth $100 a month can cost $1,200 a year.
AI and Machine Learning (ML) capture and categorize data based on set rules. They also create alerts on important updates and events. So, AI tools detect inaccurate data points and miscalculated costs, then notify you so you can make the necessary corrections.
Fraud Incidence Reduction
AI processes can help businesses cut down on expense fraud. For example, faulty employee expense reimbursements can cost your company thousands of dollars. AI-powered tools flag anomalies when comparing data with historical and external data sources.
Increased Speed and Efficiency
Expense management tools help you reduce manual paperwork. So, gone are the days employees would resort to receipt stacking. Instead, all data goes directly into the system, where it is stored and retrieved whenever needed. As a result, getting information related to payments, receipts, and approvals becomes effortless.
Better Insights and Reporting
AI expense management software can come up with extensive reports for you. For example, your employee expenses can be divided into various categories for each worker: cost, currency, project, department, type of expense, location, etc.
The software can analyze the data and detect patterns and preferences that could have been missed if done manually. As a result, your business gains insights to make better financial decisions.
Enhanced User Experience
With AI solutions, users can photograph and upload their receipts to the user-friendly expense management system. Their Optical Character Recognition (OCR) feature allows the extraction of information from the images. OCR is a faster, cheaper, and safer alternative to manual submission.
The intuitive mobile app ensures an enhanced user experience as the expense input process becomes effortless. The Google Maps integration also allows the submission of employees’ mileage expenses easily.
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Use Cases of AI in Expense Management
Now that you’ve learned the benefits of AI expense management solutions, here are some use cases of the tools you should know:
Receipt Capture and Processing
AI expense management software uses OCR to recognize patterns and process images. So, your employee no longer has to spend time on manual data entry and filing receipts. Instead, they only need to scan and upload them from anywhere.
The OCR extracts the details, then compiles these into an expense report with the relevant data.
Automated Categorization and Tagging
An expense form is designed to capture all relevant expense data automatically. Users can also tag the expenses by project, category, or cost center. Then, the expenses are assigned to other users right from the form.
Fraud Detection and Prevention
AI-powered expense management solutions check for possible fraud before submitting receipts automatically. It scans for fictitious and overstated expenses, dubious merchants, duplicates, weekend or holiday expenses, and unusual spending.
Predictive Analytics and Reporting
The tool provides in-depth reporting and risk analytics. It collects data and highlights risks related to expenses by analyzing changes in spending behavior or behavior against company policy.
Virtual Assistants for Users and Administrators
Users and administrators can use AI expense management systems as their virtual assistants. All employees need to do is submit receipts. Then, the administrators set expense policies on spending rules and limits. After that, the system does the rest.
Challenges and Limitations of AI in Expense Management
Despite the benefits of AI in expense management, there are still some challenges and limitations.
One of them is training people with the new skills and expertise needed for AI implementation and deployment. Implementing new solutions usually brings some anxiety. This can happen whether you’re introducing new tools to improve your sales processes, content optimization for your website, or expense handling.
You also need a suitable infrastructure, storage, and devices with up-to-date processing capabilities for the systems to work. Storing data may create data privacy and security issues as well. The more data your company stores and the more users with access to it, the higher the chances of data leakage.
Cybercriminals constantly target companies to acquire sensitive information on the dark web. The thing is, they target companies across different industries. For example, just look at the graph above.
As this has become a global problem, companies must take extra care regarding the data management environment of sensitive data, including expense management data.
Biases are also a limitation of AI in expense management. Biases are anomalies in the output of ML algorithms. These are produced when assumptions or prejudices are based on inaccurate or incomplete data. Low-quality data often go hand in hand with racial, gender, age, communal, and ethnic biases.
Companies should, therefore, ensure it gets good data to prevent challenges arising from biases. Transitioning to AI entails ensuring your chosen tool integrates with your current systems and processes. The challenge is to ensure that the data input, storage, and infrastructure are secure with the tool's integration. In other words, your current systems should be compatible with all AI requirements. Otherwise, transitioning to the tool wouldn't make sense.
Best Practices for Implementing AI in Expense Management
AI and automation can handle vast amounts of data. But they still need human input. This human input can come in the form of submitting receipts, cross-referencing any findings, and providing real-life context to data management. Therefore, ensure those involved get the necessary training for stress-free tool adoption.
If you want to get your employees onboarded quickly, ensure the software you choose has plenty of learning materials and support. Remember, the technology adoption lifecycle has been described as a bell curve. The sooner you train your employees, the sooner you'll reach the bell curve's end. That means you'll get your entire department (or even company) acquainted with the AI expense management tool quicker.
For a smooth and stress-free transition from manual to AI expense management solutions, there are certain practices you should follow.
When choosing the right tool for your organization, focus on your business needs. Different software vendors have different product selling points. You should adequately compare tools considering these selling points before making a final purchase decision. Also, consider your company size, the number of employees using the tool, your budget, etc, before making your final decision.
If you’re wondering where to start your search for an AI expense management solution that can handle everything end-to-end, please sign up for a demo and check Fyle out today!
Monitoring the latest trends is critical in expense management. After all, different payment methods and even currencies have emerged. It’s on the business to track these changes and improve expense management processes whenever and wherever necessary.
Future Trends and Directions of AI in Expense Management
But what are these trends and future directions to look out for in the first place?
User expectations are constantly growing and businesses are seeking new ways to automate and save money. In the years ahead, we can expect more advancements in ML and NLPs.
As companies constantly work on improving their products, the world can expect a further increase in the use of predictive analytics and AI-powered solutions.
In expense management, more accurate reports will result from two things: better assignments of expense general ledger codes and a smarter categorization of expense types.
More businesses will likely incorporate smart contracts into expense management as well. A smart contract is a script processed on a blockchain. It can automate specific actions, like the release of payment once a new client contract is signed. This technology speeds up processing time and reduces labor costs.
Businesses are already using AI in operations and finance-related areas for automation and better decision-making. Integrating expense management processes in those corporate areas will be desirable for businesses. Therefore, the demand for such tools is expected to increase. Software vendors will continue to, therefore, strive to meet that demand and market expectations.
Forward-thinking companies make use of tools like AI expense management software.
This article covered the benefits, use cases, and possible challenges and limitations of expense management systems. You also learned about the best practices for implementing the tool and future trends and directions of AI in expense management.
The bottom line is, if you haven’t already started using AI in expense management, you’re missing out. Now is a good time to test it out and enjoy its benefits. Over to you.