Have you ever stumbled upon a business expense that just doesn’t seem legitimate? Are you worried about losing money due to fraudulent expense claims?
We all know that expense fraud is a serious problem, which is why we’ve put together a list of the most common examples to watch out for.
Are you ready to learn how to spot, and stop expense fraud?
What is business expense fraud?
Business expense fraud is when employees claim unjustified or inflated expenses so they’re reimbursed for mow than they’ve actually spent, leading to more money in the employees pocket but significant financial losses for companies. This deceptive practice can involve submitting fake receipts, exaggerating mileage for personal gain, or claiming business expenses for non-business-related costs.
8 examples of business expense fraud
Misuse of corporate credit cards
Misusing corporate credit cards is a common type of expense fraud. This occurs when employees use company credit cards for personal purchases. For instance, one of your employees might use their company card to buy groceries or pay for a family meal, claiming these expenses as business-related.
Fake receipts and invoices
Employees may create fake receipts and invoices to claim reimbursement for non-existent expenses. A specific example would be your employee submitting a forged taxi receipt for a trip that never happened, thereby pocketing the reimbursement.
Falsified expense entries
In this type of fraud, employees enter false information into expense reports. For example, one of your employees could claim they attended a conference and submit expenses for travel and lodging, despite never having left their home office.
Misclassification of an expense
Misclassifying an expense involves categorising personal expenses as business-related to obtain reimbursement. In theory one of your employees could submit a spa treatment as a “client meeting” expense, thereby getting the company to cover personal indulgences.
Duplicate receipt submissions
This fraud occurs when employees submit the same receipt multiple times to get reimbursed more than once. For example, one of your travelling salesmen might submit a taxi receipt for £50 in March and again in April, pretending it’s a different trip each time.
Using corporate funds for personal use
Using corporate funds for personal use involves employees diverting company money for their own benefit. An example is your employee using company funds to pay for personal utility bills, claiming them as office expenses.
Fabricated mileage claims
Employees might inflate or completely fabricate mileage claims to get higher reimbursements. For instance, your employee could claim they drove 100 miles for a business meeting that was only 20 miles away, thus pocketing the extra reimbursement.
Over-the-limit meal expenses
Employees may submit meal expenses that exceed the company’s allowable limits, without proper justification. An example would be one of your employees claiming a £150 dinner when the company policy only allows for £75, rationalising it as a “client entertainment” expense.
How you can prevent business expense fraud
Depending on the size and structure of your business, the way you submit and approve business expenses will vary.
Here are four “easy” ways you can prevent business expense fraud:
1. Implement robust expense policies
A solid expense policy is the first line of defence against expense fraud. Clear guidelines on what constitutes a legitimate expense, the documentation required, and the approval process will set clear expectations for your employees.
- Define allowable expenses: specify which expenses are reimbursable and which aren’t.
- Set limits: establish spending limits for different categories.
- Receipt requirements: mandate itemised receipts for all claims (with justifications if necessary).
- Approval workflow: define who approves expenses and the process they must follow.
2. Perform audits
Regular audits are crucial in identifying and preventing fraudulent activities. By systematically reviewing expense reports, you can spot inconsistencies and patterns that may indicate fraud.
- Regular audits: conduct frequent audits to keep on top of your spend, and to keep your employees vigilant.
- Detailed reviews: check for duplicate receipts, altered documents, and expenses claimed outside of business hours.
- Trend analysis: look for patterns such as frequent small claims just below approval thresholds
3. Provide employee education
Educate your employees about the importance of adhering to expense policies and the consequences of committing fraud, such as disciplinary action. Training sessions can clarify what constitutes acceptable and unacceptable behaviour.
- Training programs: regularly conduct training sessions on expense policies and ethical practices.
- Communication: use newsletters or internal company updates to remind employees of any policy changes.
- Integrity initiative: encourage employees to report suspicious activities anonymously.
4. Implement expense management software
Robust expense management software offers several key features to help you prevent expense fraud effectively:
Electronic receipt capture
- Ensures all receipts are digitised and stored securely in one place.
- Reduces the risk of lost or altered receipts.
- Allows for easy and quick verification against claims.
Automated approval workflows
- Establishes a clear and systematic process for approving expenses.
- Enables multiple layers of review to catch inconsistencies.
- Speeds up the approval process while maintaining thorough checks.
Real-time tracking
- Provides instant visibility into all submitted and approved expenses.
- Alerts you to any unusual spending patterns immediately.
- Facilitates timely audits and reduces opportunities for fraudulent claims.
Policy enforcement
- Automatically flags claims that don’t adhere to your company’s expense policies.
- Ensures every claim is checked against pre-set rules and guidelines.
- Minimises the chance of human error or oversight.
Maintain control over your spending
Are you looking for a system that will make sure that every pound is accounted for and spent wisely? Look no further, book a demo with Capture Expense today and say goodbye to expense fraud for good.