How to manage the travel expense audit process

Even when you have a corporate travel policy that covers everything employees need to know about how to manage travel expenses in corporate, it’s also essential for you to complete regular travel expense audits. Travel expenses are large overheads for businesses, and when left unchecked, can become a huge drain on your business’s bottom line. 

This guide takes you through the importance of travel expense report audit procedures and best practices to help you ensure your current processes are not damaging your bottom line. 

What is a travel expense audit? 

Employees are required to keep all receipts related to business travel expenses, including hotel fees, airfare costs, meals and drinks, and other related expenses. They then submit receipts, travel expense forms, and other supporting documentation on return for approval and reimbursement. 

A travel expense audit examines employees’ travel expenses for the following reasons: 

• To check for errors in submissions (either due to confusion over the travel expense policy, or because of expense fraud)
• To monitor how “reasonable” the expensed items are
• To determine how well submissions and documentation of expenses align with business travel expense policies. 

Travel expense audits are crucial because they help you control costs, gain insight into travel expense data, ensure compliance with your expense policies, and help identify irregularities and expense fraud.

What challenges are involved in conducting a travel expense audit? 

Completing travel expense audits can be challenging for several reasons: 

1. Manual processes

Manual methods of travel expense management, such as requiring employees to submit paper receipts and using spreadsheets to collate information can lead to a disorganized travel expense audit process. 

For bigger businesses with a large number of employees submitting travel expenses while using manual methods, a significant amount of auditing time will be spent double-checking information. Automation of the expense process helps businesses streamline travel expense audits. 

2. Complicated travel expense policies 

Overcomplicated and lengthy policies can lead to accidental noncompliance. Employees might be reluctant to read wordy documents, or may skim-read them instead of taking time to read them through thoroughly. 

The simpler you make your travel expense reimbursement policy, the easier travel expense audits will be to carry out.

3. Increases in expense submissions 

As businesses grow, their travel expenses grow along with them. 

In a situation where large amounts of employees are manually submitting expenses, travel expense audits can become difficult to perform. This means that not only will discrepancies continue to occur, but you’re also unable to take swift action to stop them. 

How the travel expense audit process is managed

Travel expense audits are performed by auditors who compile reports based on the information they find. Becoming familiar with expense report audit procedures can be daunting. We’ve put together this travel expense report audit checklist to help you navigate the review process. 

1. Review of expense reports 

First, the auditor will conduct a thorough review of your travel expense financial information by matching receipts with travel expense submission records. For this first step to go smoothly, it’s important to have an organized expense system. 

2. Evaluation of travel expense policies 

Auditors will also need to review your corporate travel and expense policies. This helps them evaluate how rigorously managers follow the rules set out in the policies themselves, and how efficient they are at making sure their traveling employees follow them, too. 

3. Examination of suspicious travel expense claims 

During this stage, auditors can speak to employees directly if they come across any business expenses that don’t appear to fall under your travel expense policy, or seem to push the boundaries of "reasonableness". 

4. Verification of financial records 

This phase of the travel expense audit involves the auditor recalculating and investigating until any and all red flags can be explained. Clearer and more robust travel expense processes will mean that audits can be carried out less frequently. 

Travel expense audit best practices

As with any audit process, there are best practices to follow when travel expense audits are carried out. Travel expense audits are essential to ensure that internal controls like your corporate travel policies are working, employees are following the requirements, and that you’re not losing unnecessary money in the process.

Here’s a list of best practices to follow during expense report audit procedures. 

1. Conduct audits before expense approvals 

Your accounts payable department should audit expense submissions before sending them to the relevant manager for approval. These “pre-approval” audits save managers time since there will be fewer rejected expense reports, and will eliminate the need to try to recover funds that were issued from a non-compliant travel reimbursement once a travel audit expense has been completed. 

2. Audit all expenses

You can choose to audit different amounts of employee travel expenses. Typically, companies complete a travel expense audit of between 10% and 100% of their expenses. However, auditing 100% of expenses allows you to gain full insight into the effectiveness of your travel policies. 

Plus, employees or departments who frequently flout travel expense policy requirements will be forced to change their behavior when every expense payment is reviewed during a travel expense audit. 

3. Enable employees to use corporate credit cards 

A corporate credit card program for your employees allows you to better track and manage their travel expenses. The bigger your company, the more time consuming it will be to double check every receipt against each employee’s expense report. Corporate credit cards help eliminate the manual work involved in accessing travel expense audit information. 

4. Uphold submission timeframes

Provide employees with a set timeframe for submitting their expenses. Delayed expenses can complicate the travel expense audit process, and leave you without a whole-picture view of expenses across the business. 

5. Automate travel expense management

Automated systems allow employees to import expense documentation into a unified system for transparency across the board, companies can require reports to be sent to multiple approvers, and workflows can be implemented to simplify expense processes. 

Automated travel expense management makes for a smoother, clearer, and more streamlined travel expense process. In turn, travel expense audits also become much less burdensome to complete. There's a wide range of travel expense software on the market available for different business needs.  For example, with TravelPerk, you can set up an automated travel and expense process in just a couple of clicks. You can select an already integrated expense partner like Expensify, Yokov, or Paykawk. Or, you can integrate your own systems with TravelPerk’s expenses API—whatever works best for your business and you travel expense audit needs.