Detecting And Deterring Expense Report Fraud

Detecting And Deterring Expense Report Fraud

Detecting And Deterring Expense Report FraudBusiness expenses account for a whopping 8-12% of a company’s annual budget on average. That’s a lot of resources your company could be using elsewhere. The good news is that there is a surefire way to trim that budget. The bad news is that there is room to trim the budget because your employees are likely filing fraudulent expense reports.

By detecting and deterring expense report fraud, you can help keep your business travel expenses to a minimum.

6 Common Types Of Fraud

1. Claiming Non-Business Related Expenses

If your expense policy is in compliance with IRS regulations on Accountable Plans, your employees should only be claiming reimbursement for expenses with a legitimate business purpose.

A common way that employees commit fraud is by hiding non-business expenses in items with a legitimate business purpose. For example, a hotel room is likely a reimbursable business expense, but the in-room movie and mini bar charges likely aren’t. Far too often though, an employee will present the entire hotel bill as a single item to hide the non-business expenses.

2. Inflating Expenses

Another way employees commit expense report fraud is by inflating legitimate charges. This occurs most commonly in expenses for services that require a tip. For example, it’s easy to leave a $10 tip on a meal, and then submit a copy of the receipt seeking reimbursement for a $20 tip.

3. Claiming Legitimate Expenses For Personal Reasons

Common legitimate expenses such as hotels, gas, and meals are often abused because they can so easily be used for personal reasons. This is an especially proper type of fraud because it is so difficult to detect.

4. Double Billing

Double billing is exactly what it sounds like—submitting the same expense twice often as parts of different trips to help mask the scheme.

5. Exceeding Spending Limits

A lot of times companies will institute spending limits on certain items to ensure that employees aren’t making unnecessarily expensive purchases. Employees get around this by splitting large purchases into several items on the expense reports.

6. Seeking Reimbursements For Canceled Expenses

It is easy for employees to make a purchase, either cancel the purchase or obtain a refund, and use the receipt to request reimbursement on an expense report anyway.

Automate Fraud Detection

A good way to detect fraud is to determine if any of your employees is consistently incurring expenses higher than the average. Your accounting team can do this manually, but it is much easier if your expense report system is automated because the data is readily available to be analyzed without manual data entry.