18 Jun Beware of Expense Fraud!
There are millions of businesses maneuvering throughout the world, and each one of them, in some way, is susceptible to employee fraud. The minority who do can induce a lot of damage to company financials, particularly when it comes to minor businesses.
Expense fraud is classified among the most frequently occurring kinds of employee fraud. With an anticipated 5% of revenues characteristically lost to fraud around the world, expense fraud single-handedly accounts for 14.5% of all fraud uncovered.
There will constantly be employees seeking to gain at the expense of their employer for one cause or another, but whilst every erroneous expense claim hurts your business, not all of them are done deliberately. Inflated or unverifiable amounts can at times be put down to a plain typing error or a justifiable claim where an employee misplaced their receipt.
For such reasons, it’s indispensable to guarantee your expense procedure is uncomplicated and clear to evade as much human error as doable, as well as evaluate and investigate inaccurate claims meticulously before confronting employees.
What is expense fraud?
Expense fraud could be a premeditated, formulated attempt at inflating reimbursements. It happens when an employee deliberately completes erroneous expense claims. Over-claiming for restaurant tips, submitting in excess of allowed amounts, and turning in receipts for new items or trips are some of the most general expense offenses. They may, for instance, charge your company for a costly dinner with friends, asserting this as a “business dinner”, or expense hotel costs for a business trip they afterward turn into a vacation.
Further common reimbursement fraud schemes can comprise employees submitting:
- Bills for trips that were never happened, for instance, canceled airline tickets or hotel registration repays
- Assertion for items they didn’t purchase, for example, office supplies
- Distinct auto mileage bills from employees who traveled together
- Exaggerated mileage totals
- Bills for non-reimbursable expenses, for example, alcohol or leisure activity tickets
How to spot and prevent expense fraud
Upholding your organization from turning a victim to expense report fraud doesn’t have to be complex, though there’s no rapid solution. It’s significant to begin by maintaining strong internal controls—there are some key steps finance teams can take into contemplation to help cut down instances and diminish impact when it comes to balancing the books.
Begin with policy
Place an understandable and fair expense policy—one that’s free of uncertainty, but yet shows understanding, predominantly for frequent travelers. A well-written strategy and an expense management system that flags indiscretions can help reduce expense fraud.
Your policy should be frequently communicated to your employees, and give thorough info on forbidden activities and per diem amounts. Employees will consider twice if the rules and the consequences are obvious, and finance teams can examine out-of-policy claims rapidly and efficiently.
Give your employees the correct tools
Almost one-third of business travelers are still spinning in paper receipts to claim expenses, though employees who make use of hard copies have been found twice as liable to commit fraud. Putting systems and tools in place can abridge the procedure, making it easier for employees to assert the right amount, and for policy to be followed.
Modify how you do expenses
Employ corporate charge cards for better control. With corporate cards, companies can inquire about each card separately and get improved oversight over spending. You’ll also be able to obtain credit activity reports every month through the issuing company.
Audit selectively
A good practice is to attempt auditing the first ten expense claims of all fresh hires, to ensure they comprehend and are conforming to your expense policy. You can subsequently continue scrutinizing by auditing every tenth claim submitted, for instance. Remember to look at backdated claims as well, so that you can associate receipts with particular events or trips.
Fetch in HR support
Expense fraud can appear from learned behavior, so ensure managers—and their managers—are getting advice and information on the suitable penalties that help to discourage future fraud.
In major cases, employees are presumed to be honest and trustworthy; though, maintaining tight controls and often reviewing expense reports for observance can thwart larger problems down the road.
A certified accounting and auditing firm in London, Thakur-Chabert Limited can be relied upon to provide you and your company with instant and trustworthy assistance and guidance against all kinds of financial frauds and market evils.