What are 5 steps to preventing expense fraud?

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As the global pandemic has driven many of us to work from home, it is more important than ever for employers to be able to trust their staff members. 

Given that more employees are choosing to work remotely, business cost fraud is naturally one of the top concerns for employers. 

This article covers the definition of business cost fraud, its several subtypes, and how to spot it at your own organisation. We also outline the top 5 ways that employers may stop business cost fraud in their workplaces. 

Fraudulent Business Expenses: What Is It? 

Fraud typically happens when an employee submits claims for expenses to which they are not authorised. Businesses may lose a lot of money as a result of business expenditure fraud. NatWest estimates that fraud costs UK businesses £190 million a year, with 40% of that amount being stolen by employees. The Global Payroll Association reports that one in ten UK employees admit to routinely making false cost claims, while one in five do so occasionally. Exaggerated mileage claims come in first place on the list of fraudulent expenditure claims (27%) followed by purchasing office items for personal use (20%) and inflating the cost of a cab trip in order to claim a higher reimbursement rate (16%). 

Explaining the Many Forms of Business Expense Fraud 

Business cost fraud can take many different forms, with one of the most prevalent varieties being expense misclassification. An employee does this by classifying personal spending as company expenses. An illustration of this would be going out to dinner with friends while claiming expenses for a client meeting. 

False expenses are a different kind of business expense fraud in which the employee totally makes up the expense. A typical illustration of this is to request blank receipts from cab drivers, fill them out, and then submit them as an expense. 

Moreover, some employees submit multiple claims in various formats for the same expense. Using a bank statement and an aeroplane ticket as proof, for instance, when filing an expense for two separate international client travels. Employees who engage in expense fraud are all too aware of how difficult it is for finance departments to thoroughly review each and every receipt, especially in large organisations. 

The Best Ways to Spot Business Expense Fraud 

As the key is understanding what red flags to look out for, fraudulent expenditure claims are frequently simple to identify. Each of these typical symptoms is listed below. 

 – Enquire about any lost receipts 

It’s crucial to ask the employee for the receipt if you discover that one is missing for an expense. If they are unable to give one, they might be trying to commit fraud. 

Employees who are reluctant to hand over receipts might not have actually visited the establishment or business stated on the receipt. If your employee won’t respond, that may be a warning sign. 

 – Check for overlapping claims 

Be sure you aren’t incurring the same expense more than once. You need to make sure that your employee doesn’t submit an expense claim for the same amount if, for instance, you bought a hotel room for their work trip and included it in their expenditures. 

 – Be cautious when combining personal and professional expenses 

Employees have frequently been exposed utilising company resources for personal gain, or even worse, stealing money from the business and afterwards claiming they reimbursed themselves. Check each claim against your company’s spending policy in addition to thoroughly inspecting the receipts to make sure it complies. 

 – Be alert about late filing 

When an employee consistently submits their expense claims late, this could be a sign of business expense fraud. There are several reasons why an employee can submit their cost claims late, and late filing is punishable. The employee may be trying to conceal something if there is no obvious explanation for why they submitted their expenditure report later than expected. 

 Other things might be: 

  • Refunds with missing mandatory fields should not be accepted. 
  • Receipts lacking any of the necessary fields may also be evidence of employee expenditure fraud. 

 Receipts should typically include the following mandatory fields: 

  • Date of service or purchase. 
  • Money paid (including total price, sales tax, and tip). 
  • Business name and location (if applicable) 

When accepting expense reports with receipts, make sure your expenditure policy calls for all necessary fields. But, you may set up automated policies and save time. 

 How to Stop Corporate Business Expense Fraud 

The question is: What can be done to stop employee expenditure claims that are fraudulent? Here are our top five suggestions: 

  1. Continue to follow the rules and regulations for expenditure reimbursement

Businesses should have stringent measures to prevent or at least decrease employee spending fraud because it might wind up costing them thousands, if not millions, of pounds. 

Employees should be informed of the repercussions of engaging in expenditure fraud and the clear definition of the expense process, since these factors may deter fraud. 

For instance, you can modify the conditions for the existence of a receipt or set a cap on the maximum claim value in your expenditure policy. In order to prevent your employees from feeling the strain financially and being tempted to engage in cost fraud, your expenditure policy should also specify when they will be reimbursed for their out-of-pocket spending. 

  1. Establish a structured review and authorisation procedure

A rigorous, open, and well-communicated review and approval process is also essential since it makes the process tougher and, as a result, lowers the loss brought on by employee cost fraud. 

A structured approval procedure, for instance, could need permission from several levels of management before the spending is authorised. 

  1. Ask for a duplicate of the initial receipt

Make sure that each time a member of your staff submits an expense claim, they also provide a copy of the original receipt. 

This goes back to developing a clear expense policy that you discuss with your staff members as soon as they start working for your company because repeatedly reprimanding staff members for improper usage of their expense accounts is ineffective. 

  1. Use cloud-based services

The ability to control employee spending is something that many businesses just lack, which is why cloud-based expense management tools like Sage Intacct and its Expense Management Software module can be helpful. Instead of mailing or handing in receipts to the finance department, employees can swiftly and conveniently upload their spending using cloud software. As it helps to ensure that receipts and claims don’t get misplaced, this can be much more efficient. Employees find it easier because they don’t have to travel to the office or spend money on postage to submit claims, for instance after a work trip.  

As the expenses are submitted, the system can also immediately identify any violations of business policy. 

  1. Punish offenders

Last but not least, it is essential that you ask your staff about unusual spending and promptly address any violations. 

Make sure to look into the incident and speak with the employee in issue about the alleged expense fraud if it is discovered that someone has falsified expense reports. You can only certain that this won’t happen again with other employees following suit when you take the necessary steps. 

How to Avoid Corporate Spending Theft with Sage Intacct 

Software for managing expenses, Sage Intacct, makes it simple and error-free. This entails maximising income while keeping your staff’s attention on client objectives rather than costs, accounting, and reporting. The procedures for invoices and revenue recognition are seamlessly moved from time and expense data by Sage Intacct expense management software. 

Managing time and expenses is simple with Sage Intacct. Whenever, anyplace, your employees can enter time and cost information. Managers are immediately notified to examine and approve reports. Workers are promptly repaid in the appropriate currency. 

Your time and expense accounting data is accurate and available with Sage Intacct software. Tracking the development and profitability of each client and project is simple with your dashboards. Or track hours to set and achieve billable hour targets for the entire team or for specific personnel. 

Your time and expenditure information immediately flows to your invoicing and revenue recognition processes when using Sage Intacct expense management software. Create accurate invoices for projects and clients quickly based on the time and costs actually incurred. Post labour expenditures, both direct and indirect, and promptly recognise revenue. 

Who we are 

Itas is a multi-award-winning Sage partner. Having started in 1995 with just one customer, we now support over 200 clients nationwide. They know we are always there to provide a helping hand, whenever they need us. Trusted by our customers for over 20 years, Itas has been built on referrals from customers and IT professionals that love the expert yet personal service that we offer. 

If you would like to know more about how Itas can help your business with Sage implementation and improve purchasing control, you can get in touch at info@itassolutions.co.uk, call us on 01824 780000or contact us via our website at https://itassolutions.co.uk 

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