Blog - General Data

5 Indicators That Expense Claim Fraud Might Be Occurring In Your Company

Written by Ritwik Ruia Monday, 13 April 2015 11:20

Studies conducted by the Association of Certified Fraud Examiners show that employee expense claim frauds make up 15% of all business fraud - a significant chunk. ACFE also indicates that on average a period of about 24 months is needed for expense report frauds to be detected and substantiated with proof.

If you suspect your employees are taking advantage of the company expense management processes, then the following are some signs to watch out for:

1. Employees spending more than their peers


Staff members with identical job descriptions or comparable positions in your organization should have similar expenses.

For example, say you have two employees John and Maxwell at the same position in your organization. If Maxwell expenses are about $2000 and John’s $9000 in a month, you should take a look at John’s expense report for some time. He could be manipulating amounts or making fictive claims.

When looking at spending trends, try to see if they correlate with your ROI. Employees with higher expenses should at least be able to justify and link those claims with higher income generation.

Standard policies should define the types of places employees of different ranks stay and eat at when on business trips.

2. Inflating acceptable expenses


Whenever possible, request a receipt for every expense claim. This is because a dishonest employee could try to marginally inflate expenses – not by much, just a few rupees or dollars – here and there. Suddenly what should be a Rs. 15 bus ride becomes Rs. 20, which is easily overlooked since it’s such a small amount. As a single case, the above example doesn’t seem too serious. But imagine 100s or 1000s of these inflated expenses occurring every month, they can really add up and cause significant drainage of company resources.

Two Zento features that enable you to curb this are a) allowing you to place an upper limit on reimbursements allowed without a receipt, and b) allowing you to analyze previous trends and find anomalies

3. Claiming non-business related items


Employees and managers alike should be educated on what actually counts as a chargeable business expense. A junior employee indulging in a luxurious and expensive 10-course meal probably won’t be looked at too kindly if he charges it to the company. To reduce or stop expenses of this type, your company needs to be very selective about the types of expense claims allowed.

This can also be accomplished by educating employees and managers. Charges accepted by managers should always be fair.

Granted, some job profiles might command higher flexibility in spending, such as those related to sales and client servicing. A look at your ROI should help you determine what’s important for your business. There should be a clear understanding of expense limits and that employees will be held accountable should they cross these limits.

4. Double billing


Watch out for employees that double bill by using devious methods like charging expenses twice, under different trips or on different days.

Also, some employees may use company credit cards for a purchase and later submit a receipt as if the same purchase was made using cash.

Zento allows you to set controls that help identify duplicate transactions and send you automated alerts. Your finance department has its work cut out by not having to manually crosscheck paper statements or spreadsheets to catch duplications.

5. The company card being abused


Corporate credit cards are often provided to employees who rack up significant business expenses since it simplifies payment, tracking and consolidation. The HR and Finance departments get a consolidated view of card activity.

However, a drawback to this is that your employees may end up spending more than the necessary amount. When the company credit card bill arrives, you should take the time to review the charges before signing a check.

You might also want to consider prepaid debit cards for travelling employees. Here, it is possible for you to set the spending budget for trips way before time. With this in place you prevent your employees from overspending by keeping them budget conscious from the get-go.

The takeaway

Good expense policies and automated expense management systems like Zento can dramatically reduce cases of fraudulent expense claims and reimbursements.

If you are struggling to monitor and curb employee expenses or need a better way to enforce spending policies on your employees, Zento will help you both govern and authenticate your employees’ expenses as well as facilitate legitimate reimbursement.

Last modified on Monday, 08 June 2020 15:27