How to prevent employees from committing expense fraud

Stamping out expense fraud starts with a clear business expense policy.

 Expense fraud is costing businesses billions of dollars. The solution could be as simple as improving your business policies and expense management tools.

Most companies take clear steps to curb external financial losses, but when it comes to those occurring from within their business, the response can be less decisive. 

Based on a survey of 4,000 office workers in Australia, New Zealand, North America and the UK, the 2017 Global Report on Employee Expense Fraud by expense management software company webexpenses reveals that 42 per cent of Australian respondents have fudged their mileage figures and 22 per cent have claimed meals and drinks with friends or partners as work expenses. A further 21 per cent have claimed personal items, and 20 per cent have claimed personal meals and drinks.

A flaw in the system

Stamping out expense fraud starts with a clear business expense policy – and ensuring your employees have read and understood it.

“There’s a lack of robust expense policies and communication within organisations,” says Ashley Whiteman, Asia Pacific general manager of webexpenses. “Just over 60 per cent of respondents said they hadn’t seen or read their company’s expense policy within the last 12 months.”

Australian Taxation Office guidelines set out limits for reasonable allowance expenses, such as meals during business travel, and the amounts vary according to salary levels and destinations. An employee earning an annual salary of $117,450 and below travelling to Sydney, for example, may claim up to $106.90 a day for food and drinks, however the expense must be incurred for work-related purposes. 

If you are implementing an expense policy from scratch, or updating an old one, companies such as webexpenses can provide standard policy templates and guidance around a fair expenses policy. 

Once a policy is in place, you need to ensure your employees have read it, and refresh their knowledge of the limits regularly. Emily Jaksch, director of Melbourne-based HR consultancy HR Gurus, says: “Online HR information systems are a great tool for policy compliance, as they usually require a sign-off or quiz section that serves as a record that an employee understands a policy.”

Automated expense systems can also ensure your staff are familiar with your policy terms, and identify non-compliant expense claims. “Systems such as webexpenses can be set up with spending limits across all expense categories, so users can see what the limits are, and be alerted if they exceed them when claiming back their expenses,” explains Whiteman.

An easy win

It appears employees also often assume, correctly, that they can get away with expense fraud. The webexpenses research found that 86 per cent of office workers across the globe have never had an expense report challenged or declined. More than a third of respondents believe a “sensible” fraudulent expense report would not get challenged.

CPA Australia’s Employee Fraud guide includes a range of strategies to minimise the risk of fraud. Paul Drum, CPA Australia’s head of policy, says authorisation controls can limit false expense claims. “Never sign or authorise payments if an employee has not fully followed the policy,” he says. “If employees know that someone is checking the legitimacy of a claim, they’ll be less likely to try to fudge the system.”

Update and automate

Manual expense claim management can also often allow expense fraud to go unchecked – especially as headcount and the volume of claims grow. 

While employees may be tempted to round up their mileage in a logbook, digital expense management systems like webexpenses integrate with online maps within their mobile app to precisely record employee mileage claims from start to end postcodes. Digital systems also create out-of-policy alerts for employees and finance teams, and include in-built policy statements to remind employees of expense rules.

“An automated expenses system enhances visibility, validation and rigour for claimants, approvers and accounts teams,” says Whiteman. “With this enhanced visibility, there’s less likelihood of personal items being pushed through as business expenses.”

To find out how automating expense management has helped other companies reduce employee expense fraud, or to request a demo, visit www.webexpenses.com

Read next: Are your employees cheating on their expense claims?


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September 2019
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