All risk and no reward makes finance a dull job

Tina was a well-respected sales director in a rapidly scaling business with around 400 staff. Her role involved plenty of travel, so no one gave a second thought to the considerable T&E claims she submitted every month. What nobody knew – until it was too late – was that many of her expense claims were fraudulent. For three years she regularly submitted inflated claims, duplicate claims and false claims in order to fund mortgage payments on an impressive holiday home in Ibiza.

When HMRC uncovered the fraud during an audit, the consequences were dire. Her company’s human resources were put under a great deal of strain as they cooperated with the investigation, the fine levied was substantial enough to put a significant dent in its growth plans and its previously flawless image was dangerously tarnished. And Tina? She received a fine and a spell in prison.

Far-fetched or all-too-likely?

Okay, Tina’s story is fictional this time, but it isn’t as far-fetched as you might like to think. In 2009, a KPMG director received a four-year prison sentence for his fraud. The MPs expenses scandal (duck house, anyone?) may have faded into the distant past, but it did reveal a certain attitude towards travel and expense claims. Research shows that one in five employees think it’s OK to exaggerate expense claims. More troubling still, 28% of 18-24 year old employees think it’s normal practice.

So given the likelihood that there’s an element of fraudulent non-compliance in every business, what should you look out for?

Don’t try this at home – the most common examples of T&E fraud

1. Rounding up an expense claim, particularly around mileage. Mileage fraud is the most common type of fraud for good reason. It’s the most common expense claim and deception is all-too-easy to do and all-too-time-consuming to spot without a tool to automate the process.

1. Submitting a bogus expense claim. Today’s sophisticated image editing software means it’s very easy for the committed fraudster to create an invoice for a fictitious hotel stay or imaginary train journey.

1. Submitting multiple claims for the same expense. It could be an honest mistake and you can imagine a situation in which an embarrassed employee apologises for their carelessness. But what if it wasn’t carelessness at all? Either way, you need to catch it.

1. Claiming expenses for a partner’s fares. These days, many companies encourage spouses and partners to accompany employees on business trips as a good way to improve the work life balance and improve morale. But paying all the extra travel expenses for the spouse or partner might be a step too far.

1. Attending events or accepting gifts. The Bribery Act was not intended to prevent corporate hospitality. But if the event or gift is particularly lavish and the intention is to get the recipient to do something he or she should not, then an offence could very well have been committed.

How can you avoid falling foul of the law?

If you want to avoid being the hapless company that Tina worked for, what can you do?

The first step is to realise that if HMRC decides to audit your travel and expense claims, their inspectors won’t just be looking at your completed forms and the receipts. They will be looking at your process from end-to-end. The more transparent it is, the better it will be. And more importantly, the harder it will be for anyone to take advantage in the first place.

A clear paper trail is a good place to start – and if it’s digitised, all the better. A digital expense process that harnesses the benefits of cloud technologies and mobile apps will substantially reduce your workload. In fact, it’s likely to transform your working practices to such an extent that making HMRC’s life easier is likely to become a mere fringe benefit. Organisations that invest in end-to-end expense-management solutions see processing costs decrease 37% and policy compliance increase 44%. And they’re the sort of figures that will make any finance team smile.

For more information

If you’d like to find out more about how automated expenses processes could help your business, check out The Blueprint of a  Best Practice Expense Process.