How to prevent expense fraud

Do your employees have expense accounts? If so, you’ll want to make sure your accounting department pays close attention to what’s being submitted on their expense reports. If they’re not, your company could fall victim to expense fraud.

Simply stated, expense fraud is what happens when people “expense” one or more non-authorized items for reimbursement. For example, let’s say you have a salesperson who is flying out of town to attend a convention. And while you allow your staff to expense things like rideshare expenses, hotel and airfare charges, and meals, you do not allow your employees to expense alcohol.

Using this same example, let’s say your company has been allowing staff to submit non-itemized receipts from restaurants (which you’ve been reimbursing them for as long as the daily expense falls below the preset per-diem.) In this case, if your salesperson winds up spending $40 on drinks during happy hour, and provides you with a non-itemized receipt from the restaurant he went to, you’d never know that he was expensing

The good news is that there are several proactive steps that you can take to ensure that your company is protected.

Require receipts for everything

A lot of companies don’t require staff to provide expense receipts for items below $10.  This could include everything from sandwiches, to a cup of coffee, to a glass of wine they had at an airport while waiting for a connecting flight.  Although asking for receipts for everything (down to the $2.50 someone spends on a bagel) can feel a bit tedious, this will help ensure that your employees aren’t charging you for 1) things they shouldn’t be adding to their expense report and 2) for items that were never actually purchased.

Don’t allow credit card statements to be a substitute for actual receipts

Again- when your employees provide detailed information in their expense reports, this can help prevent fraud. If you accept credit card statements in lieu of original receipts, you might not be getting the full picture- as this is essentially the same as them submitting non-itemized restaurant receipts.

In closing

Expense fraud costs business just like yours thousands of dollars each year. If you have questions about the types of steps you should be taking to prevent it, or you have questions about the types of things that indicate your staff might be asking for improper reimbursements, call our office today to schedule a consultation with a licensed CPA