Category: Fraud


Steps To Take To Prevent Expense Fraud

It is very easy for a business to believe that a few dollars here and there in expenses will not be a problem.  However, this can add up over time and it will become harder to detect the expense fraud.  There are a number of steps that you can take to overcome this form of fraud in your business.

Have An Expense Report Policy The first step to preventing expense fraud is to have a clear policy for expense reporting.  Many small companies will have a simple policy while larger companies will need more complicated policies.  Some of the recommendations for your policy will include all expenses being submitted within a set time frame after incurring the expense.  Some businesses feel that this should be within 30 days while others allow for 60 days.

You should also look at implementing a policy where all purchases over a certain amount require receipts.  This will stop any fraud where extra is added to a larger expense. Itemization of multi-category purchases such as stays in a hotel is also recommended.

Inform Employees Of Violations Before Reports Are Submitted Most companies will have their expense report policy in their employee handbook.  The problem is that most employees will not refer to the handbook when filing out their expenses report.  To overcome this, you should consider an expenses system which automatically highlights policy violations.  The system should also look at automatically identifying duplicate transactions.

An immediate feedback loop is more efficient than having to go back to the employee after the report has been filed.  This will also lower the burden on accounting staff and supervisors who have to identify and reject any reports that violate the policy.

Have A Thorough Review And Approval Process The approval chain that you have should start with the appropriate managers.  They should be given the primary role of ensuring that all claimed expenses are accurate and are a true business expense.  If you have large departments, you should have multiple managers involved in this stage.

You can also look at having multiple approving managers for the different aspects of the business.  Project-specific expenses should be approved by the manager that is most knowledgeable of the project.  You should also consider the bookkeeping expense reporting tools that are used and how they can help with the approval and review process.

Utilize Data Analytics There is a lot of data available to you about the expenses that your employees claim.  You need to make use of the data to determine trends in the expenses.  You can see what certain employees are claiming, what the primary category of claims is and the merchant that the claim relates to.  This information can be leveraged and used to identify any unusual trends or items.

There are a number of steps that you can take to prevent expense fraud in your company.  It is best to start with a clear and easy to understand expense reporting policy.  Having a review and approval process that includes multiple managers should also be considered.

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