How to stop your company expenses policy being abused

According to the Association of Certified Fraud Examiners, a typical company loses five percent of annual revenue due to fraud, 15 percent of which is attributable to fraudulent expense reporting.

Common areas abused are bumping up mileage expenses, falsifying taxi receipts, inviting friends to meals instead of clients and claiming tips are not paid. A recent KDS survey amongst business travellers has revealed that a quarter admit embellishing their company expenses. The study, commissioned to investigate attitudes, actions and behaviours of business professionals when booking their work related travel and reporting expenses, found that over one fifth regularly round up business mileage and a quarter add a bit extra to blank taxi receipts.

On one hand, it is important to recognise that most employees aren’t maliciously setting out to defraud the company. It’s just human nature to push boundaries. However, it’s an expensive business and organisations often need help to address the issue of problematic or inaccurate receipts. Small changes like ensuring expenses are submitted on time and exclude non-allowed items that are not approved for reimbursements can make the world of difference. For instance, how do you manage business travellers that initially comply with established travel policies when booking flights and hotels, but upgrade without permissions at a later date? Whilst many organisations have travel policies, travel managers and often travel and expense management programmes, how can they overcome instances of staff ‘going rogue’ when it comes to logging, tracking and claiming expenses?

The expense account policy is an essential component of the fight against fraud. Over restrictive policies encourage rebellion. Adapting a travel expenses policy to make it fair and relevant and establishing a clear procedure could all help in significantly decreasing incidents of fraud.

Tips for reducing instances of rogue travel expenses

Policy and procedure

Have a clear policy and establish a clear procedure. An expense management tool will help apply and administer these, saving time and money for both the finance department and on the member of staff submitting a claim. The hidden costs of expense account management are significant with the time it takes increasing according to the amount concerned. Filling in an expense account for more than £700 takes over an hour and is a lengthy tedious task of no added value to the company. Conversely for the employee though, it is a question of not losing money. In our recent survey, over 40 percent of respondents still used time intensive spreadsheets for tracking and submitting their expenses and 80 percent file their claim during working hours.

Communication and ease of understanding

Ensure that staff are well informed about the travel expense policy and that it is fully understood. A good travel expense process should be intuitive to use and not require training. Logging and submitting should become second nature to the business traveller so that they are more likely to input as they go rather than save receipts up. By making it easier to transfer documentary evidence and produce expense accounts, companies will save employees time and reduce their costs.

Similarly, ensuring that staff understand that the travel policy is relevant to their role can make a big impact. Often a revenue generating role, such as in sales, will have far more freedom with expenses than back office staff. If this is policy, then make sure the reasons behind it are communicated so that grudges don’t build up. Have a policy that makes sense to the people that use it.

Reimbursement

The average time it takes to be reimbursed for an expense claim is 17 days.

Long reimbursement times are commonplace because expense accounts have to be checked and processed.  However, is it fair to expect the employee to tolerate this cash lag?  Does it encourage appropriate behaviour? If you automate expense account management, reimbursement is immediate and so no bad feelings are being harboured.

Empower managers

Make sure managers that approve expense claims feel empowered to say ‘No’. Sometimes it’s easier to turn a blind eye which encourages a culture of rogue expense claiming. If left for long enough, it then becomes viewed as a sense of entitlement. A manager who will lead by example and encourage their team to stick to the corporate travel policy will run a far more efficient ship and will be inadvertently combatting fraud.

Consequence

Ensure that staff understand that there will be consequences for ‘rogue’ spend or falsified accounts.  First start by educating them on the impact of staff expenses on revenues and profit.  A staff member who understands the percentage of their company’s revenue that is spent on expense accounts is more likely to think twice about their next transaction. 

However, if that isn’t enough motivation for them, being reminded that rounding up a mileage claim or falsifying a taxi receipt, however minor it might seem is fraud usually does the trick.

Smart supplier management

Whenever possible insist on direct invoicing to the company. That way you have the most accurate and efficient invoicing and payment process.  A good travel expense management tool will enable this and save both time and money.

There are so many benefits to gaining control of corporate expenses. When an organisation has control of its staff’s spend, it is in a far stronger position to understand its own cash flow, see real-time analytics and business intelligence, and make accurate projections. That alongside the time efficiencies discussed already are often incentive enough for most. However, there are other softer benefits. A company expense scheme that’s administered well is more likely to be compliant for tax and regulatory purposes. It’s just a natural benefit.

Companies are falling foul of outdated process and clunky travel and expense systems which limit choice or sacrifice usability, forcing people to book direct and encouraging ‘rogue’ spend. Putting in place an automated expense management tool, designed with the mobile traveller in mind, not only speeds up accurate claim submission but is also less likely to leave the employee ‘out of pocket’, for example when losing paper receipts in transit or forgetting to claim for a meal or taxi ride.

As the Aberdeen Group estimates a typical company spends more than 10 percent of its annual budget on expenses related to business travel, travel and expense management is increasingly coming under scrutiny. Companies need to understand the importance of having the right procedures and solutions in place to ensure staff can operate at maximum efficiency.

To see a full report on the KDS Travel and Expense Survey findings, please visit: http://page.kds.com/survey2016.html

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Read the May 2016 issue of Business Review Europe magazine.