Want an Easy Fix for Expense Reimbursement Fraud? Read This

10 Things Every Small Business Should Know About Expense Reimbursement Fraud

Expense reimbursement fraud can be very expensive to small businesses. A recent study by Chrome River Technologies reports there’s potential for it to cost American companies up to $1.9 billion every year in total.

That’s approximately $35,000 per business.  Small Business Trends spoke with Anne Becknell, senior vice president of customer success at Chrome River Technologies about what small business needs to know.

Like the name suggests, expense reimbursement fraud is a crime that occurs when an employee submits a claim to get paid for false business expenses.

How to Avoid Expense Reimbursement Fraud

Use Updated Technology

Managing and auditing expense reporting needs to use modern technology to be effective. Using manual expense reports was the number one issue from the survey.

“It’s amazing how many small and medium-size businesses are still using the candlelight and crayon method,” Becknell says. “They’re still doing it by paper or with excel spreadsheets and emailing it around the firm.”

The issue with these antiquated systems is the inability to track and see trends that should set off alarms.  Technology incorporating tools like automated analytics helps you to spot the hotspots like the same receipt that’s been submitted a number of times.

Becknell says automation cuts expense reimbursement fraud in half.

Understand Men Cheat More

Expense reimbursement fraud isn’t one area where there’s equality between the sexes. In fact, the report states men were more than twice as likely to commit the crime than their female counterparts. Not only that, they were over four times more likely to add at least $1000 to their expenses.

Know Younger Employees Commit More of These Crimes

In fact, almost 83% of expense reimbursement fraud was committed by employees between 25 and 44.

Implement a Formal Written Policy

Not only is a written policy important, small business should have a procedure to go through that tells management employees have processed what they need to know. Becknell suggest getting employees to sign the document helps them to take ownership of the policy.

“When you sign something there’s an emotional attachment,” she says.

Incorporate High Level Rules

The policy doesn’t need to be overly detailed, but it does need to set the boundaries for expense spending. For example, while it doesn’t need to pin down the exact amount that you can spend on a cab ride, it should tell your employees whether business or coach class is acceptable.

Simplicity should be one of the benchmarks you use here.

Don’t Complicate the Process

Accountants often see the opportunity to drill deep into a company’s expenses when they automate the process. The result is an expense report that’s complicated and tends to get rubberstamped without being properly scrutinized.

Therefore, it’s important to take a look at how many times and why expense reports pass from person to person. Small businesses should be looking to streamline that part of the process.

Pay Attention to Personal Expenses

One of the biggest expense fraud claims is substituting personal expenses for business ones. One of the giveaways here is claims for weekend meals when the employee isn’t scheduled to be traveling.

Watch Out for Extravagant Expenses

Over one third of those who admitted to cheating in the Chrome River Technology reported adding amounts ranging from $100 to $499. Amounts that look altered are red flags you should be looking for. For example, a receipt that looks like it used two different types of ink is usually a dead giveaway.

Approve the Approvers

“You’ll want to make approval for these receipts meaningful and to train the approvers,” Becknell says. She adds it’s important they understand what to look for and that they are held accountable for catching any fraudulent claims.

Use Company Credit Cards As Proactive Step

Wherever it’s possible, using company credit cards discourages fraudulent claims. These are an excellent way to lock in important information like the date and the amount of any transaction.

Photo via Shutterstock

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Rob Starr Rob Starr is a staff writer for Small Business Trends. Rob is a freelance journalist and content strategist/manager with three decades of experience in both print and online writing. He currently works in New York City as a copywriter and all across North America for a variety of editing and writing enterprises.

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