How to Prevent Expense Fraud in 2021

In our last blog, we looked at how expense fraud is one of the major issues plaguing most accounting and finance arms of companies. As the second-highest indirect expense after labor, managing expense spending and preventing fraud is critical to secure an organization’s financial resources. But when firms have an outdated, manual system of processing expenses and little transparency, unscrupulous employees may decide to skim off the top. Those fraudulent reimbursements can add up to millions of dollars.

Expense fraud isn’t always intentional, employees may not know about the company’s expense policy. Or an accounting error can cause major losses to go overlooked. And as documentation becomes more complex, finance workers are often overloaded.  

How to Prevent Expense Fraud

The good news is, you can take measures to prevent expense fraud. As we noted above, the primary enablers of fraud are outdated or manual technology, lack of transparency, and poor ethics. 

All of these can be addressed. While individual ethics isn’t something that’s easily modified, ensuring there is no wiggle room in policy or process makes it far more difficult for intentional fraud to take place. 

Automate as much as possible

In 2019, 43% of companies still manage expense reporting manually. To make matters worse, only 27% of firms have systems that automatically flag expenses that don’t match the company’s policy. 

In other words, nearly half of companies are at risk of both accidental and intentional expense fraud. And it just won’t be a few dollars here and there – these firms could be losing millions of dollars better spent on growth. 

To solve both human error and attempted fraud, automation is a requirement, not a recommendation. Automation not only saves companies time and money in processing reports, but the right solution can notify accounting of discrepancies, compile auditable reports, and process extensive documentation with high accuracy. 

By automating as much of the expense process as possible, you can effectively eliminate most loopholes of fraudulent occurrences. 

Establish and communicate an expense policy

In the UK alone, two-thirds of employees haven’t read the company’s expense policy. In fact, they may not even know their firm has one. 

To prevent fraud, you must design a clear and precise expense policy. This can include what counts as expenses, how to submit receipts and other relevant financial information, and any type of corrective action in case of fraud. 

Adding this information to your company’s employee handbook, discussing it when onboarding new hires, and reminding employees of this policy regularly are all ways to ensure that your workforce understands what counts as expenses. 

Verify with real receipts

It’s often easy to manipulate receipts, even before digitizing them. It’s important to request original, ideally itemized receipts and invoices. Even if a vendor submits a digitized invoice or receipt, ask the employee to forward the original message or email – not send them in a new attachment. All receipts should include specific items purchased, the date, and the business name of the vendor.

You can take this process a step further and verify the receipt data with financial transitions from a corporate credit card or other relevant reports. Receipt data capture features can rapidly match receipt data with other T&E expenses for fast verification. 

Review often and on the spot

To ensure no one is messing with the system, it’s essential to have an additional review of compiled expense reports as well as on-the-spot reviews. Combining a double review with regular audits will allow you to better spot abnormalities and check that the documentation process is working as it should. 

You’ll also want to inform employees of violations on the spot, before filing the report. Doing so serves two purposes: It corrects unintentional mistakes and deters intentional expense fraud. 

Simplify Your Expense Process

With Itemize, you can transform your accounting and finance process while significantly reducing the chance of expense fraud. Not only can you automate your documentation process, but you can do so with 99% accuracy. Learn more about how Itemize can revolutionize your expense reporting here


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