Prevent Expense Claim Fraud With These 3 Steps
Expense claims are an important part of company finance. But this leaves businesses at the mercy of expense claim fraud.
Minor expense fraud is unlikely to threaten the company’s finances, but repeated behaviour may be a symptom of a larger problem at the company. There is not only a risk of escalation to larger-scale fraud, but it is also a reflection of poor company culture.
What Is Expense Claim Fraud?
According to the Association of Certified Fraud Examiners (ACFE), expense claim fraud constituted 11% of all asset misappropriation schemes in 2021. The ACFE defines expense fraud as “a fraudulent disbursement scheme in which an employee makes a claim for reimbursement of fictitious or inflated business expenses.”
The types of expense claim fraud include:
- Mischaracterized expenses, for example characterizing personal expenses as business expenses.
- Overstated expenses, for example inflating the cost of a receipt.
- Fictitious expenses, for example submitting fake receipts that appear to be genuine.
- Multiple reimbursements, for example submitting duplicate claims.
Identifying and Preventing Expense Claim Fraud
Stopping expense fraud is not complicated, but it isn’t quick either. Maintaining strong internal controls is a good start – but it isn’t quite enough.
Here are a few key steps your business can take to minimize fraud.
Set a Clear Expense Claim Policy
A clear policy on expenses is a great start to combatting such fraud. Frequently, expense claim fraud is committed unwittingly due to ambiguity in the existing policy. Employees may be unaware of the expense policy, or there may be human error in the approvals and processing.
With a clear policy, you can limit fraud by providing detailed information on what can or cannot be claimed, as well as the claim limits. This policy should be communicated to everyone, with HR and finance prepared to investigate claims according to the new policy.
Conduct Selective Audits
Conducting audits at random is a good way of monitoring expense claims for fraud. Checking backdated claims also allows you to correlate claims with business trips that the employee may have taken.
However, this puts a burden on HR or finance, so only do this if you suspect fraud is a problem.
Keep Allowance Rates Fair
The single most important thing you can do to prevent expense fraud is to keep your allowance rates fair and up-to-date. Often, employees commit such fraud because they feel the company ‘owes’ them in some way. By properly reimbursing your employees, you can cut down on incidences of expense claim fraud.
Bear in mind that according to the ACFE, the median loss for expense claim fraud is US$40,000, committed over 18 months. Stopping such fraud by increasing allowance rates and paying employees properly not only cuts down on fraud. It also elevates employee engagement and productivity, offsetting any added costs for the business.
Make Expense Claims Easy and Secure with BrioHR
If you’re still using paper receipts to process claims, stop now. The claims process using hard copy receipts is easily manipulated.
With BrioHR’s expense claims module , you can make it easy for employees to submit an expense claim and get approval. You can also keep track of all claims with automated notifications, while managing expense claims limits.
BrioHR’s all-in-one, cloud-based solution automates repetitive tasks and empowers HR in a user-friendly interface. This enables business owners and HR teams to truly focus on what matters most – people.
Visit briohr.com and get a free demo now.
Expense claims are an important part of company finance. But this leaves businesses at the mercy of expense claim fraud.
Minor expense fraud is unlikely to threaten the company’s finances, but repeated behaviour may be a symptom of a larger problem at the company. There is not only a risk of escalation to larger-scale fraud, but it is also a reflection of poor company culture.
What Is Expense Claim Fraud?
According to the Association of Certified Fraud Examiners (ACFE), expense claim fraud constituted 11% of all asset misappropriation schemes in 2021. The ACFE defines expense fraud as “a fraudulent disbursement scheme in which an employee makes a claim for reimbursement of fictitious or inflated business expenses.”
The types of expense claim fraud include:
- Mischaracterized expenses, for example characterizing personal expenses as business expenses.
- Overstated expenses, for example inflating the cost of a receipt.
- Fictitious expenses, for example submitting fake receipts that appear to be genuine.
- Multiple reimbursements, for example submitting duplicate claims.
Identifying and Preventing Expense Claim Fraud
Stopping expense fraud is not complicated, but it isn’t quick either. Maintaining strong internal controls is a good start – but it isn’t quite enough.
Here are a few key steps your business can take to minimize fraud.
Set a Clear Expense Claim Policy
A clear policy on expenses is a great start to combatting such fraud. Frequently, expense claim fraud is committed unwittingly due to ambiguity in the existing policy. Employees may be unaware of the expense policy, or there may be human error in the approvals and processing.
With a clear policy, you can limit fraud by providing detailed information on what can or cannot be claimed, as well as the claim limits. This policy should be communicated to everyone, with HR and finance prepared to investigate claims according to the new policy.
Conduct Selective Audits
Conducting audits at random is a good way of monitoring expense claims for fraud. Checking backdated claims also allows you to correlate claims with business trips that the employee may have taken.
However, this puts a burden on HR or finance, so only do this if you suspect fraud is a problem.
Keep Allowance Rates Fair
The single most important thing you can do to prevent expense fraud is to keep your allowance rates fair and up-to-date. Often, employees commit such fraud because they feel the company ‘owes’ them in some way. By properly reimbursing your employees, you can cut down on incidences of expense claim fraud.
Bear in mind that according to the ACFE, the median loss for expense claim fraud is US$40,000, committed over 18 months. Stopping such fraud by increasing allowance rates and paying employees properly not only cuts down on fraud. It also elevates employee engagement and productivity, offsetting any added costs for the business.
Make Expense Claims Easy and Secure with BrioHR
If you’re still using paper receipts to process claims, stop now. The claims process using hard copy receipts is easily manipulated.
With BrioHR’s expense claims module , you can make it easy for employees to submit an expense claim and get approval. You can also keep track of all claims with automated notifications, while managing expense claims limits.
BrioHR’s all-in-one, cloud-based solution automates repetitive tasks and empowers HR in a user-friendly interface. This enables business owners and HR teams to truly focus on what matters most – people.
Visit briohr.com and get a free demo now.
