What Are

5 Steps To Prevent Expense Fraud

What Are 5 Steps To Prevent Expense Fraud Expense fraud, according to the ACFE, is when an employee claims compensation for false or exaggerated expenditures.

Expense fraud is a big problem that most organizations' accounting and finance departments are dealing with. Managing cost spending and preventing fraud is crucial to protecting an organization's financial resources since it is the second-highest indirect expense after labor.

Millions of dollars can be lost due to bogus refunds, and this happens because of the old, manual, and unclear expense processing system of a company. Not only does misusing expense accounts reduce revenues, but it also fosters an atmosphere in which workers believe they can get away with theft and go on to more profitable fraudulent activities. Employees may not be aware of the company's expenditure policy; thus, expense fraud isn't necessarily deliberate. Alternatively, an accounting mistake might result in significant losses being missed. Finance employees are frequently overworked as documentation grows increasingly complicated.

Efforts may be made by businesses to avoid expense fraud. As previously said, obsolete or manual technology, a lack of transparency, and bad ethics are the major facilitators of fraud. All of these issues are solvable. While human ethics are hard to modify. ensuring that there is no flexibility in policy or procedure makes it far more difficult for premeditated fraud to occur. 


According to a study, nearly 50% of businesses are vulnerable to both accidental and deliberate expense fraud. And these businesses might be squandering millions of dollars that could be better spent on expansion. Automation is a need, not a suggestion, for preventing human mistakes and potential fraud. Automation not only saves time and money in report processing, but it can also alert accountants for inconsistencies, create independently verifiable reports, and handle voluminous paperwork with high accuracy.

Clear Expense Policy

A clear and accurate expense policy is required to prevent fraud. This might include things like what constitutes an expense, the process of submitting receipts and other financial data, and the steps to be taken in the event of fraud. It's also critical to ensure that all stakeholders are aware of and agree with the policies in place.

Including all the above information in the employee's handbook, discussing at the orientation of new hires, and reminding staff of the policy on regular basis are the methods to guarantee that all the employees understand what constitutes an expense and what doesn't.

Validate Using Original Receipts

Even before they're digitized, receipts can be easily manipulated. It's critical to ask for original, detailed receipts and invoices. Companies can ask their employee to transmit the original message or email, even if the vendor submits a digital invoice or receipt. The date and name of the specific products purchased, and the vendor's business name should all be included on all receipts.

Financial transitions from a corporate credit card or other related reports can also be used to validate receipt data. Receipt data capturing features can quickly match receipt data to other travel and expense costs, allowing for quick verification.

Regular And on Spot Review

An extra check of collected expenditure reports, as well as on-the-spot reviews, is required to guarantee that no one is tampering with the system. A double-check combined with frequent audits will enable employers to detect anomalies faster and ensure that the documentation process is running smoothly. Before submitting the official complaint, employers should also notify employees of any infractions on the spot. This accomplishes two goals: it corrects inadvertent errors and deters deliberate expense fraud.

Include A Deadline in Expense Report Policy

A deadline for reporting costs should be included in the expense report policy. E.g., employees should submit claims no later than 30 days after the expenses are incurred. When staff come into personal financial difficulties, this prohibits them from filing claims for prior or forgotten costs.

Companies should not strive to rush things to the point that their employees make reckless mistakes. Waiting months for a single purchase to be approved and paid, on the other hand, isn't ideal.

Employees should be informed about the company's expense policy in advance to reduce the danger of employee errors or fraud. When these policies are combined with an automatic spend monitoring system that alerts the employer about irregularities with employee spending, the odds of the company being a victim of fraudulent expense reimbursement and the necessity for disciplinary action are drastically reduced.