In business travel expense processes, there is the danger of internal fraud. Yes, the word is loaded with negative connotations and it sounds rather dramatic, but this is a real threat that companies face.
Strictly speaking, an expense can be considered fraudulent if it does not fully comply with the company’s expense policy. However, such non-compliance may occur for various reasons that must be distinguished. Nevertheless, controlling fraud must be a priority in order to achieve an efficient expense management process.
First of all, employees must be given the benefit of the doubt. It may simply be a case of human error during the reporting phase. In fact, this is the most common explanation. Alternatively, the cause may be a lack of awareness of the company’s expense policy, which is often a lengthy document filled with rules that are hard to remember. The third and last case, which indisputably deserves to be classified as fraud, occurs when the expense report is deliberately exaggerated.
Of course, of the three cases, the most difficult to detect is deliberate fraud, as it involves the implicit will to remain hidden. The first step towards eliminating this problem is ensuring effective detection. This task is made easier if the company has a thorough and adequate revision process. Other weapons in the fight against fraud include tools that automate the expense report revision process. However, the offender is likely to have used some kind of method to make the numbers appear to balance, so there is no mechanism that protects the company 100%.
Although automated checks facilitate the revision process a great deal, it is crucial to be thorough and observant with respect to unusual figures, fluctuations, changes in spending patterns, etc. The variety of possible tricks that can be employed is huge and is merely subject to the fraudster’s inventiveness. To fight such fraud, we have the figure of the experienced supervisor who knows the company’s usual expense figures, the ins and outs of the process and the past attempts at “getting one over on them”.
Once a case of fraud has been detected, in order to manage the situation correctly, different factors must be taken into consideration in relation to the scope, quantity and frequency of the offence, before acting accordingly. Reacting in a measured yet determined way in such cases sends a clear message to the organization that will help to reduce future cases.
By its very nature, business expense management is an area that is prone to this type of problem. The main sources of fraud are often related to transport (particularly taxis) and restaurants. A practice that is recommended is to carry out regular audits of the process, particularly if no such inspection has ever been conducted. It may be a commitment that is hard to implement, especially in the case of smaller companies, but it provides basic data to gain a realistic overview of the expense management process. There are cases in which fraud reaches as high as 30%.