Taking on the dreaded expense report

Tue Apr 30, 2013 9:23am EDT

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Lost receipts, misplaced corporate cards, arcane expense report software. The dreaded expense report is the bane of so many business travelers and freelancers. But a few high tech services have an answer, albeit with a dash of low tech too.

The mobile applications Expensify, Shoeboxed, and Lemon Wallet, all released over the past two years scan receipts, automatically turn them into spreadsheet files—and also automatically generate expense reports and even sophisticated financial analysis tools.

These time-saving receipt tools work thanks to top-notch scanner recognition. And the low-tech surprise of many of the receipt scanning apps: The use of human labor to verify auto-scanned receipts for expense reports.

Shoeboxed is open about human eyes looking at your receipts—promotional materials boast about "human-verified data extraction" of receipts at facilities in North Carolina and Australia. Both Expensify and Lemon Wallet also have verification of receipt data by human employees, although both use them to differing degrees. Lemon Wallet's co-founder Wences Casares said that the company initially used employees to input receipts, but switched to automatic scanning because of the cost and because too many errors were being made.

Alex Fitzpatrick, a political journalist at the website Mashable, swears by Expensify. "Expensify connects my credit and debit cards so I automatically submit expense reports, similar to how Mint <a popular efinance site> works. But some expenses—especially cabs in Washington, D.C.--are still paid with cash. If I ask a cabbie for a paper receipt, Expensify's scanner does a great job of reading the handwriting on it," Fitzpatrick said.

When a user photographs a receipt, the receipt then undergoes a scanning process which transforms the image of a receipt into usable text which can be plugged into expense reports. This takes anywhere from five minutes to an hour, since receipts are typically photographed under a variety of lighting conditions (the technology used is nearly identical to depositing a check through a mobile phone).

"The scanned receipt is uploaded to our server and then goes thru a number of processes. Our imaging system cuts the receipt into a lot of little rectangles and uses these to identify the merchant name, phone number, and other important information." Caesares said. "Then this information goes through scanning for every small rectangle; we apply an algorithm confidence level to this and pass it if it is more than 50 percent."

Expensify, Shoeboxed, and Lemon Wallet then all verify data against a customer's previous records to make sure it hasn't been entered yet. Because the scanner process is resource-intensive for these service providers, users are typically limited in the number of free entries they can make monthly: All three charge for premium accounts with unlimited receipt uploads.

Shoeboxed's Corey Post said that the occasional mistakes made by OCR readers justified manual entry. Employees working in shifts at Shoeboxed's North Carolina headquarters manually proofread OCRed receipts. However, this takes longer than Lemon Wallet or Expensify: While most receipts take an hour or two to process, they can take up to 24 hours. "We try to balance instant gratification with keeping all employees in-house in the United States," says Post.

One of the largest target markets for expense report-generating apps is the freelancer community. According to a 2010 Bureau of Labor Statistics report, there are approximately 10.3 million independent contractors in the United States. Many of these independent contractors work for multiple clients, all of whom typically require separate invoices. All three companies target their products at independent contractors and employees on business trips.

Ultimately, each service has distinct advantages and disadvantages. Lemon Wallet is by far the easiest to use, but has limited functionality. Shoeboxed offers an array of options and integration with Evernote, Quickbooks, Freshbooks, and a host of other external services, but takes much longer to process receipts and has more of a learning curve. Expensify, meanwhile, shares the service integration of Shoeboxed but has prices that could add up for small businesses with more than a handful of employees.

So should users feel secure with the use of human labor during the input process of their receipts?

Expensify's own website warns users not to upload sensitive information, or "a picture of anything you wouldn't be willing to throw into the trash."

(The author is a Reuters contributor) (Editing by John Peabody, Ryan McCarthy and Brian Tracey)

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