4 Tips to Prevent Expense Fraud

Expense fraud costs businesses millions of dollars each year. Suffice to say, if your staff members have expense accounts, you’ll want to make sure what they’re submitting is on the up-and-up. Below are 5 tips you can take to help prevent fraud.

Define your policies

Make sure your employees understand what they can and cannot expense. For example, if they are not permitted to expense alcoholic beverages, be clear about that.  If they’re allotted a certain per diem, each day, to cover food expenses while traveling, make sure they’re aware of that.

Make sure expense receipts are itemized

Asking your employees to submit itemized receipts can help ward off fraud. For example, an itemized restaurant receipt will let you know if they spent $40 on a meal and sparkling water as opposed to whether they spent $40 on Kettle One and tonic.

Additionally, having employees submit itemized hotel receipts will let you know if the $50 that was added on to their room charge was for a meal, or if they decided to splurge on pay-per-view.

Implement a review process

Some companies have one person review expense report submissions, while others have two sets of eyes review each one before it’s paid out. In some cases, organizations will do random audits of expense report submissions, where one out of every 10 submitted gets pulled for a thorough examination. Random audits can help ensure that no one employee is being targeted, and whether all employees are abiding by the rules.

Set a threshold for reporting

If you have a large organization, having employees submit receipts for each $2 cup of coffee, or every $4.95 breakfast sandwich can be daunting (not to mention paper-intensive).  If you’re not going to require employees to submit receipts for small-ticket items, make sure they know what the reporting threshold is. For example, many companies only require staff to submit receipts for expenses that are above $25.

If you do set a reporting threshold, be sure you have systems in place to ensure that employees aren’t taking advantage of that.

In closing

If you’re interested in learning more about how to prevent (and spot) expense fraud, it may be best for you to schedule a time to speak with a CPA. For more information on this topic, or to schedule a consultation with a member of our team, call our office now to get started.