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Did you know one in 10 UK employees admit to submitting erroneous expenses all the time and one in 5 do so irregularly, according to the Global Payroll Association? Which can only mean one thing: it’s highly possible that expense fraud is happening inside your business.
In this article, we show you what expense fraud looks like, how you can identify it in your business, and what you can do to stop it.
To learn more about employee fraud, check out our blog post.
What can you do about expense fraud?
Expense fraud is difficult to detect, but not impossible.
The person committing it rarely sees it as theft. Often, otherwise honest employees happily inflate expense claims simply because ‘everyone else does it’.
Plus, it tends to involve relatively small amounts, which are easily overlooked.
But this shouldn’t put you off dealing with it, because the longer it goes on, the bigger the dent it will put in your bottom line.
A multi-pronged approach to expense fraud
There’s no one-size-fits-all solution to combatting expense fraud, you need to adopt a multifaceted approach. Including:
- Ensuring employees understand their responsibilities
- A straightforward, transparent, and accountable way of filing expenses
- Thorough checks
- Appropriate ways of dealing with offenders
While there’s no fool-proof way of making sure that fraudsters will be stopped or caught, being proactive should minimise fraud.
Types of expense fraud
Expense fraud comes in many different shapes and sizes. Nonetheless, they tend to fall into two distinct categories: inflated expenses and fictitious expenses.
Inflated expenses
Perhaps the easiest to commit, these claims involve the employee overstating the cost of a legitimate expense.
Some common examples of inflated expenses include:
- Exaggerating the miles travelled on a mileage claim
- Accounting for tips that were never provided
- Unnecessarily purchasing first-class tickets
Fictitious expenses
These types of claims can be hard to detect and involve falsifying documents to claim for expenses that didn’t happen.
Some common examples include:
- Using design software to create bogus receipts (or manipulating existing receipts) and then using them in an expense claim.
- Taking receipts from establishments and using them as their own.
- Seeking reimbursement even though a refund was received.
Other types of expense fraud
Not all expense fraud is malicious. Many employees don’t know what they can and can’t purchase. Whether it’s purchase limits or expense category restrictions, if your workers are not told the rules then the rules are open for interpretation.
Common examples include purchasing premium fuel for vehicles unnecessarily, buying alcohol with meals, and spending too much on specific expense types.
5 top tips to detect and tackle expense fraud
Expense fraud tends to flourish in organisations where expenses aren’t policed properly.
Often a healthy mix of policy, procedure, and technology are all that’s required to get control of your business expenses.
We’ve put together our five top tips for discouraging future abuse and fraudulent activity and helping to safeguard your bottom-line.
1. Write an expense policy
Combatting expense fraud starts with a policy. It’s vital that it’s transparent, unambiguous, and accessible. A policy that is vague is open to abuse.
Setting clear expectations and boundaries is often all that you need ensure that most workers don’t fiddle their expenses.
Defining limits and restrictions is key to an effective expense policy. Employees are more likely to spend appropriately if there are tighter expectations and controls in place.
Have you checked over your policies recently? If not, we recommend you take a look!
Learn how to write an effective expense policy.
2. Audit your expenses regularly
Routine auditing is vital to detect expense fraud. It can be a laborious task, but it’s important, particularly when it comes to new hires.
Regularly auditing their expense reports will help you to find out if they understand your policy and comply with it. Picking up any transgressions early means they’ll learn their responsibilities quickly and note that checks are in place.
It’s also important to keep an eye on your more established employees. Often, those who have been in the business longest and understand the culture get away with the most. Fraudsters justify their actions because they put in overtime and feel like they’re owed extra, which is common for senior employees.
3. Define your procedures for catching a thief
Making it clear from the outset what happens when your trust is abused not only makes it easier to manage when it happens, but it will make your employees think twice about exaggerating claims.
If you find evidence of expense fraud, then HR should be your first port of call.
Don’t worry if you don’t have an internal HR department, there are plenty of skilled, independent practitioners available who can help. Search Google or ask your network for recommendations.
A word of warning; unless you’re confident that you have the right skills, we wouldn’t recommend dealing with it yourself. Employment law is complicated and is easy to get into trouble.
4. Leverage technology
If you’re serious about stopping expense fraud, it’s time to ditch the paper receipts and expense reports and invest in expense management software.
Studies show that employees who submit paper receipts are more than twice as likely to commit expense fraud compared to those using digital platforms.
Fortunately, there are several tools available, from simple receipt tracker apps through to full-service expense management platforms like accountabl.
5. Combat expense fraud with accountabl
Effective expense management is key to combating expense fraud in your business. However, implementing a successful programme requires time and dedication, which isn’t always readily available.
So how do you tighten spending controls, and improve accountability and visibility without devoting countless hours each month?
Well, the answer is accountabl.
Greater control of spending
Empower your teams to purchase everything they need, but nothing more.
Accountabl allows your team to make payments without spending their own money, while increasing control and transparency.
With accountabl you can:
- Set spend individual spend limits and expense category restrictions
- Approve or reject transactions on the go
- Identify your biggest spenders
- Review all transactions at card, group, or company level
- See spend in real-time
If you can’t see fraudulent activity as it happens, the damage could be significant by time you identify the problem.
With accountabl, all transactions come through to the manager’s app instantly. So, if you see something that doesn’t look right, you can take immediate action.
Often, with traditional expense processes, the context surrounding the expenses can be blurred, especially if you’re reviewing the transaction weeks or months later.
Not with accountabl. Front-end users can apply notes to transactions to provide further detail, boosting a manager’s ability to hold their team accountable for their purchases.
Plus, thanks to its security features, rogue employees can be stopped immediately by cancelling or blocking cards.
Use less paper
All front-end users of accountabl are required to upload receipts against their transactions in the app. Afterwards, the receipt along with all the transaction data sits in the cloud, ready and waiting for when you need it.
Accountants can easily export the transaction data into their accounting package. So, workers don’t need to submit old-fashioned expense reports.
Not only will it reduce admin when you’re auditing your expenses, but it will help the wider organisation by freeing up more time to focus on areas such as spotting fraud.
Hold your team accountable
Because accountabl is digital, finding employee transaction history takes seconds, not hours, with just a few clicks. Reducing the chance of unauthorised spending, and if it does happen, you’ll have everything you to efficiently review spending and act on it.
Next steps
By following these tips, you might not stop expense fraud altogether, but you will significantly reduce it, as well as its impact on your bottom-line. Implement accountabl, and you’ll boost efficiency, unlock vital information about where all your money is going, and transform your business.
See for yourself with a 30-day free trial of accountabl.
