Strategies to prevent expense fraud
Safeguarding the financial integrity of your organization is a top concern, and in that concern lies the critical task of preventing expense reimbursement fraud. As businesses navigate the complex landscape of financial transactions, the shadow of fraudulent activities looms large, underscoring the need for protective measures.
We understand managing expenses and reimbursements is a tedious task and therefore easy to overlook what may be a clear red flag; however, expense fraud is expected to reach over $16 billion by 2027 (source), and it’s important for your business’s bottom line to minimize that fraud as much as possible. In fact, now is as good a time as ever to establish strategies to protect your organization from expense fraud.
In this article, we’ll provide tips to help your organization take strides toward preventing expense fraud. Let’s take a look.
Establish clear expense policies
Maintaining clear, detailed policies reduces the likelihood of misunderstandings or intentional fraud, so be sure to offer clarity to employees by defining and communicating expense policies to all employees. In addition to writing down and communicating the policy, you can:
Specify what classifies as a legitimate business expense and provide guidelines for using categories and departments.
Require images of receipts or invoices to accompany reimbursement requests, which helps to prove the validity of the expenses, and makes for smooth audits.
To remove a bit of doubt in the reporting process, consider offering your employees a company credit card or a corporate card program. With every swipe of a corporate card, you can be confident that the merchant, date, and amount have not been manually input or edited. With Expensify, you can require receipts for all or specific transactions, so individuals are unable to submit reports without attaching those required documents.
Tighten the approval process
Implementing a stringent approval process for expenses helps to reduce the chance of expense fraud during the expense submission process. Consider:
Setting clear guidelines for what qualifies as a legitimate expense, and involve multiple layers of review and approval to ensure that no employee has unchecked authority over reimbursements.
Developing a multi-level approval workflow and segregating duties related to the reimbursement process, separating roles such as approval and reimbursement. This segregation reduces the risk of collusion or unauthorized reimbursements, not only adding to the element of accountability but also deters potential fraudsters, knowing that several sets of eyes will be reviewing their submission.
Embrace technology
Leverage expense management software to help admins review submissions during the reimbursement process. Not only does this streamline the workflow, but it also creates a digital trail, making it easier to track and audit expenses. Automated systems can flag irregularities for further investigation.
For example, when an employee uses Expensify’s receipt scanning app:
The merchant, date, and amount are automatically input using OCR technology.
If any of these points are edited or input manually, this is flagged to be sure the approver takes a closer look at the expense.
If an expense is a duplicate of another expense that has been attached to a report, it’s flagged for both the submitter and the approver to review.
By leveraging technology for fraud prevention, you can use automation to help minimize human error or oversight.
Conduct regular audits
Don't let complacency sneak in - conduct regular audits of your company’s expense reports to catch any discrepancies. Whether it's a monthly, quarterly, or even random check, staying vigilant will help you stay one step ahead of potential fraud. While performing regular audits, keep an eye out for:
Travel and expense trends within your organization, specifically any repeating merchants or amounts.
Excessive claims by an individual or department.
Monitoring trends helps to proatviely address issues before they escalate. To stay ahead of evolving fraud tactics, it’s recommended to regularly reassess the cadence of audits and review periods and update preventive measures.
Knowledge is power
Training employees to properly submit expenses and educating approving managers and admins on red flags can go a long way in preventing expense fraud. Still, it really is an effort that requires a combination of technology, training, and good old-fashioned vigilance. By implementing these strategies, accounting firms, small businesses, and enterprises can protect their books with confidence, ensuring a secure and flourishing financial landscape.
Check out all the ways you can empower your business with cutting-edge tools for fraud prevention and more by starting your free trial with Expensify today!
