AI-powered spend auditing in Manufacturing

Spend compliance is no small feat in Manufacturing

Manufacturing companies are under more financial pressure than ever before. With global competition, shrinking margins, uncertain supply chains, and regulatory compliance to contend with, finance teams have their work cut out for them. They need to keep business spending at bay, including employee expenses and direct and indirect invoice-based spend. They need to mitigate risk across all aspects of the business, from sourcing raw materials to maintaining strong labor relations to detecting accounting fraud to keeping the company out of legal hot water. That’s a tall order!

When it comes to your business spend, you need to suss out errors, waste, and fraud that can impact your profitability. That means watching employee expenses as well as invoice-based spend. On the expense side, managers, salespeople, and knowledge workers must travel to build relationships with customers, suppliers, and partners. Staying in policy may not always be on their minds. They make all kinds of mistakes like submitting the same receipt twice, fat fingering expenses on their report, upgrading plane tickets, hotel rooms, and rental cars, and going over your limit for their business meals.

Beyond errors and waste, fraud can also be an issue if you don’t keep an eye out. According to the Association of Certified Fraud Examiners (ACFE), Manufacturing is the second highest riskiest industry for corruption after Energy. The organization calculates the median loss for expense reimbursement fraud as $31,000 per scheme. Those infractions can add up and even lead to more sophisticated and costly fraud schemes if left unchecked.

On the invoice side, the median loss for fraud schemes is more than three times that of expenses, according to the ACFE. Besides outright fraud, there are tons of examples of invoicing errors that can hit your margins. Depending on your level of AP automation and centralization, your organization experiences an invoice error rate between 10 and 30 percent, according to the Institute of Finance and Management (IOFM). Many invoice automation systems catch simple errors like duplicates with the same number or amount, but usually miss more complex duplicates, especially if there are multiple charges or charges across AP systems. In Manufacturing, where every penny counts, making sure invoices reflect the correct payment terms and volume discounts you are owed is not easy at scale. Complicating matters, you may have disparate back-office systems that make keeping track of spend even more onerous than usual.