When expenses seem expansive – the top 5 expense frauds you need to watch out for

It’s horrible to think an employee could be pulling the wool over your eyes by fiddling their expenses. It’s easy to assume it couldn’t happen to you. But all the signs point to the fact it does happen.

One in five employees think it’s OK to exaggerate expense claims and from the low-level mileage exaggeration to the full-blown submitting of fake invoices, it all adds up to a big problem in business. Research from the Association of Certified Fraud Examiner suggests that expense fraud costs every business worldwide over £30,000 a year. It’s a figure that becomes even more troubling when you consider it takes about two years for fraud to be detected.

So if you think you need to be taking a closer look at the expense claims your business receives, what are the common practices people use to deceive?

Spending more than others

Perhaps the biggest flag is when one member of the team’s hotel bills or subsistence claims are higher than other members in similar roles.

This is likely to be caused by a lack of understanding about what constitutes an acceptable amount. You don’t want an employee having an evening meal in a Michelin-starred restaurant every night, but equally, you don’t expect them to be eating supermarket sandwiches on the end of their bed. The solution is to make sure your travel and expenses policy has clear guidelines on what is acceptable and what isn’t.

Claiming non business-related items

Your employees need to be able to relax at the end of a hard day when they’re away on business, but it’s unlikely your expense policy says it’s acceptable to claim for an entire evening’s worth of drinks at a local bar.

Again, the solution is to provide more guidance about what is and isn’t OK to claim for. It’s also important to train your managers to take a moment to think about a claim before approving it. Fairness and consistency are key.

Inflating acceptable expenses

Cash purchases an employee has made out of their own pocket are some of the easiest to inflate. A few pounds on a taxi fare here, a couple of pounds to buy fruit and cake for a client meeting there, might not sound like much but it soon adds up.

The answer is to request receipts for every purchase wherever possible or at the very least set a maximum amount for which it’s possible to claim without a receipt.

Overcharging the company card

A company credit card is an excellent way to reduce administration time for a travelling employee and the finance team back home. But don’t assume that all the payments made on it will be legitimate: ask managers to check every statement for unacceptable claims and ask your finance team to make spots checks too.

Splitting the bill

If an employee knows the bill for the upgrade to first class is going to raise a red flag, they might choose to split it into a couple of smaller claims in the report so they will fly under the radar.

To avoid this, set expense limits for each trip according to the levels of expense it would be reasonable for the employee to incur. Alternatively, consider a debit card so you can set and enforce a budget for each trip much more easily.

Words to the wise

Avoiding being duped by employees over expense fraud boils down to a few simple messages.

Educate your employees with a clear T&E policy and make sure it’s easily accessible and front of mind. Remember that enforcement needs support at every level – over 99% of managers approve expense claims regardless of whether they meet the business’s expenses policy or not. And consider the advantages of an automated expenses claim system that will give you much greater transparency and control at every level of the process.

If you don’t have a T&E policy in place and are looking to set one up, take a quick quiz and we’ll build a customisable template for you in a few minutes.