AppZen, a provider of expense management auditing software, is expanding into audits of supplier invoices and contract compliance using artificial intelligence.
The San Jose, California-based company said Wednesday its system would be able to audit invoices in real time before they are paid to detect compliance issues, incorrect rates, and potential fraud. It will also use AI to monitor supplier contract terms to enforce compliance across the entire accounts payable process. In addition, the system will continue to perform expense report audits prior to payment to spot compliance issues, as well as detect waste and potential fraud.
“For the last two years or so, we have been focusing on real-time auditing of expense reports built on our AI platform,” AppZen CEO Anant Kale told Accounting Today. “Now what we are announcing is entire spend auditing, which means it goes beyond just expenses to include all kinds of spend that happen in a company, that is, accounts payable receipts, accounts payable invoices, contracts that are signed and documents... This is a comprehensive way of real-time auditing all the spend transactions happening in a company.”
The system will be able to check to make sure invoices are in compliance with the contract terms. “We are auditing the entire contract,” said Kale. “Today someone in procurement or payables is looking at the contract and figuring out what are the terms of the contract, what are the payment terms, what are the discounts that I can get, what is the pricing, what are the credits that the vendors are supposed to give me in case of any volume increases, and so on. This is a manual process which people are doing today, then using that information in the contract and applying it to the vendors. With our AI engine, which uses natural language processing, it is able to read and understand all the different terms of the contract. We have trained it by reading through different contracts that our customers have access to. It’s not just looking at all the terms around pricing and discounting, but also terms around service level agreements and insurance liabilities and warranties and extracting that information.”
Even though it’s technically a startup, Kale has been building AppZen’s presence through some high-powered partnerships and customers, including with Amazon, Salesforce, Novartis and Citibank. “We are an artificial intelligence platform for finance teams,” said Kale. “It’s not a general purpose application. It has been built to improve compliance and streamline processes in the finance team. It pretty much works similarly to how a human would actually work in finance. It requires domain knowledge. What we have done is we have built this platform, which today can real-time audit 100 percent of a company’s spend transactions, something which is being done manually today.”
AppZen introduced its expense management software about three years ago, but Kale said he has seen massive growth in the last year and a half. “For Amazon, we audit their spend in more than 35 countries today, across languages, countries and currencies,” he said.
Now he is ready to expand beyond expense management. “It’s more than expense fraud,” he said. “The idea is to really figure out what is going on with your expenses. Most employees are trying to do the right thing, and most companies also believe their employees are doing the right thing. We find everything from errors and mistakes that employees do when submitting their expense claims, all the way to sometimes being opportunistic and then sometimes they intend to defraud. That’s one part of it. Anything that you catch around that obviously helps you reduce the spend. Finding something you’re not supposed to be paying an employee for, or reimbursing an employee for, means that you can save that money. The most important thing CFOs want our system to do is to improve compliance, making sure the spend is happening in compliance with their policy, and people are not spending where they’re not supposed to, but also regulatory compliance. We also ensure things around anti-bribery and corruption.”
AppZen has been able to dig into its system and uncover some macro trends. For example, AppZen found that 46 percent of companies reimburse employees for gifts and 39 percent reimburse them for golf. But only 16 percent of businesses reimburse employees for room service and 15 percent for mini bar charges. While 41 percent of companies provide reimbursement for cell phone expenses, 24 percent reimburse employees for car washes and 19 percent for clothing. Last quarter, the average large enterprise processed 4,374 expense reports. Each report included an average of 11 expenses.
Now AppZen is going beyond expense management. “Our second product is for invoices and contracts,” said Kale. “It essentially takes the same approach. Can you read a contract, way beyond what the pricing is and what the amount is? What’s the SLA [service level agreement]? What discounts are you getting? Can you read an invoice and can you match it? Can you figure out in real time what a normal, traditional PO [purchase order] matching would do? Can you figure out duplicates? Can you figure out expenses that were also claimed on invoices? The spend on that is probably a dozen times more than you would see on T&E, which we are now enabling for existing customers. Our new product expands on T&E and takes it to the entire spend of a company.”
