Traditional expense reporting systems lack accountability. With the hundreds, if not thousands of expense reports being filed on a monthly basis, depending on the size of your business, expenses rarely get the scrutiny needed to detect fraudulent expense reports.
Because expense reports in these traditional systems are filed on paper and then manually entered into accounting software, it’s not only difficult to detect fraud during first level review, but it also takes a longer time to detect usage patterns that indicate fraud. In fact, fraud in the business place occurs for an average of two years before being discovered.
Financial analysts can look at expense reports during an audit and find fraudulent expense reports—eventually. But absent a specific reason to suspect fraud, performing an audit is also a long and expensive process that is best avoided.
Recent events in Canada highlight the fact that traditional expense reports are way behind the times in terms of preventing expense report fraud. Canadian Senators Patrick Brazeau and Mac Harb were charged with claiming fraudulent travel and living expenses in 2014. The fraud ended up costing Canadian tax payers hundreds of thousands of Canadian dollars in misused public funds.
As a result of these cases, the Auditor General of Canada performed a full audit of the entire Canadian Senate and found that 30 senators had made improper charges on their expense reports and that 9 of those senators should be criminally investigated for fraud.
Automating expense reports and expense reporting can help introduce accountability into the process by making it easier to detect fraud.
With automated expense reporting systems, expense reports are filed into and approved on the system to begin with—no manual data entry needed. This means that the data is readily available whenever you want to perform a fraud analysis.
The most common fraud scheme is double billing, which is basically seeking reimbursement twice for the same transaction. With common expenses such as meals or taxi fares, it’s very easy for these transactions to fly under the radar. Automated systems can detect such duplicate transactions automatically, nipping fraud in the bud before it even starts.
Employees who know that their expense reports are subject to closer scrutiny are less likely to file fraudulent expense reports to begin with—introducing greater accountability into your organization.