How to prevent employee expense fraud

It is estimated that businesses lose up to £100 million each year in fraudulent expense claims. Employee expense fraud occurs when an employee make claims for expenses which they are not entitled to.

There are several different types of expense fraud, including expense misclassification, which is one of the most common types of expense fraud. This is when an employee claims personal expenses as a business expense. An example of this would be going out for dinner with friends and claiming expenses as if it was a business meeting with a client. Another type of employee expense fraud is fictitious expenses, which is when the employee completely fabricates the expense. A common example of this is asking taxi drivers for blank receipts, filling these out and submitting these as an expense. Some employees also make multiple claims for the same expense, but in different formats. For instance, submitting an expense for travel twice, using both an airline ticket and bank statement as evidence. In large organisations in particular, it is impossible for finance teams to fully check every single receipt, which is something employees who commit expense fraud are all too aware of.

Preventing expense fraud

As employee expense fraud can end up costing the business a lot of money, it is worthwhile for organisations to incorporate strict policies to prevent or at least reduce this. For example, there could be a structured approval process, whereby the expense is not authorised unless it’s approved by various levels of management. This kind of process can, of course, have its drawbacks, but it can also help to prevent fraud.

The expense process should be clearly defined and employees should be aware of the implications of committing expense fraud, as this may make them less likely to do it. Other methods of preventing expense fraud include using corporate charge cards, so that all expenses are in the one place. Conducting an annual audit of employee expenses can also help to pick up any discrepancies.

Cloud solutions

Many companies simply don’t have the resources to manage employee expenses, which is where cloud based expense solutions can be useful. Employees can use cloud software for receipt scanning and can upload their expenses quickly and easily, rather than having to send them or hand them into the finance department. This can be much more efficient as it helps to ensure receipts and claims don’t get lost. It makes it easier for employees, as they don’t have to send anything in, visit the office or pay the cost of postage for sending in claims. It can make it much easier to run reports too, which is good for the employee if they are using accountancy packages and for finance, who can audit the expenses and check for any unusual activity. The system can also automatically flag up any breaches of the company policy as the expenses are submitted. It is important to have expense management tools in place, as this makes the process much stricter and thus, reduces the loss associated with employee expense fraud.

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