Expense fraud accounts for approximately 15% of commercial fraud and is the reason millions of dollars are lost in the U.S. A study by the Association of Certified Fraud Examiners (ACFE) found that 2,690 cases of fraud reported in 125 countries resulted in total losses of $7 billion.
One of the most common forms of fraud is employees manipulating their expense accounts. Whether through fictitious charges, false receipts or other misuses, an expense account is a potential area for fraud because of its low risk and high reward.
Your company must take appropriate steps to prevent and protect itself from fraud. This will prevent expense accounts from being exposed to fraud.
Here are 6 tips to help you strengthen your expense account protection against fraud:
- Request a copy of receipts
If a purchase seems strange to you or is not related to your normal business expenses, it is important that you ask and investigate the source of the purchase. It’s critical that you don’t let too much time pass because an employee might excuse himself or herself by saying that he or she doesn’t remember exactly what the suspicious expense was used for.
Don’t pass up the opportunity to clarify and request supporting documentation such as a copy of the original receipt to find out the purpose of a particular expense or expenses, especially if you consider it strange or out of the ordinary. You of all people should know what the expense account is being used for.
- Implement cloud solutions
With technology, it is much easier to back yourself up in case of fraud. You can make use of cloud software for employees to scan and upload their expense receipts immediately without having to wait for them to reach the finance department. This can ensure that receipts and claims are not lost.
Software can give you the resources you need to manage employee expenses quickly, easily, and efficiently.
- Constant monitoring
It is your responsibility to monitor expense reports and generate a history for each employee. Regular monitoring helps you gain better control of employee expenses because you will be able to observe expense trends over time and how they relate to each employee’s position. In this way, it will be easier to detect any anomalies by having a pattern of employee spending.
- Create budgets for specific purposes
Rules and structures are good for maintaining order in any company. But it is also important not to be extremely rigid, as this can cause employees to feel that they are being watched or that you distrust them. This would lead to resentment and a bad atmosphere in the workplace.
One solution to this is to set clear and firm limits on spending so that employees feel that there is trust in them. For example, you can set a monthly budget for transportation.
There are platforms where you can create budgets for specific purposes such as business travel or commuting. Each employee will be responsible for administering and managing how they spend the budget.
- Have a policy and code of ethics for employees.
Another of the most effective ways to prevent expense account fraud is to have clear rules for all employees with no exceptions. Regardless of position, department or level of authority, a formal written policy will make every employee aware of the rules and code of ethics. This policy should be signed by all employees, so that each employee agrees to abide by it.
It is important that the policy includes information on how the company handles breaches of the policy. It is critical that the policy be clear about the consequences of fraud for employees.
- Establish strict rules for credit card use and expense reimbursement
Fraud is often committed with the use of credit cards and then seeking legitimate reimbursement for various expenses. It is important that the rules state how personal cards are allowed to be used and request review of receipts and expenses claimed. The policy may include a maximum value as a limit for expense claims.
Expense fraud can be a creeping and under-the-radar form of fraud, both internally and in filing. Make sure to implement as many of these roadblocks to expense fraud as possible, otherwise, you may find that there is a lot left on your company’s balance sheet at the end of the year.