How to Identify and Prevent Expense Frauds

Jun 16, 2017 1:54:39 PM

Expense frauds may not seem like a huge deal in comparison to other occupational frauds. Most companies actively try to prevent it, but are not completely protecting their bottom line.

Expense reimbursement fraud makes up about 15% of the business fraud and takes close to two years to detect.

No company should square accounts with employees who produce bogus receipts or simply disobey company policies. Furthermore, manual data entry can lead to process-led reporting errors and processing hazards like duplication of claims, loss of receipt and more.

Here is an interesting example, Morgan Stanley fired one of its employees, in 2010, for overstating $4000 in fake receipts. These “restaurant” receipts were filed in 2008-2009 and the employee was reimbursed for them.

Most common expense frauds are seen in the following forms:

How can organisations identify expense fraud?


Compare Employee expenses - Expense fraud Compare Employee Expenses

It is likely that two salespeople have a similar range of expenses. Say, Jared, your trusted sales employee for the past 3 years spends $7000 every month on various expenses, but David, a salesperson you recently hired spends on $1000. It is possible that Jared may be inflating some of his expenses. Most employee’s expenses tend to follow a trend. They are almost always in a tight range when the employees have the similar roles in the organization.


Double Billing Double billing - expense fraud

This is the most common way of manipulating the expense report. Many a times, employees will record the same expense under two different trips. It is vital for the company to monitor the expenses that the employee states he has made. This is done in a few organizations, but manually. Manual process comes with an inherent error of margin that provides some room for double billing.

Furthermore, employees may use the company credit card to make the expense and later submit a receipt to be reimbursed. Duplicate transactions should be thoroughly checked, ideally through automation.


Stick to the expense policy - expense frauds Keeping within Company Policy Limits

Through various means, including overstating expenses and claiming money on recreational or non-business-related channels, it is probable that employees will be right under the limits set for the maximum amount that can be reimbursed. To be fair to the employees and for better protection of the company, it is useful for the auditing team or the managers to perform thorough checks on the higher end expenses, regardless of whether they seem to be exaggerated or not.


How to Battle Expense Frauds

Prevention is better than damage control. Two strong measures companies can take are:

  • Creating and Enforcing Stronger Expense Policies
  • Actively start Automating Expense Management
Employees hardly spend any time understanding the company policies. By keying in the necessary information about the policy and setting spending limits, employees will be shown the required information and violations (if any) when they Fyle an expense. This will help them be more methodical with their expenses and due to automation your company has real-time communication with the employees helping them comply with the regulations and inform them of policy violations.

Policy compliance with Fyle

Fyle offers both these essential expense management features, making it easy for the finance heads to focus on more revenue generating activities. The software lets you key in your company’s policies including capping employee expense. Any expense that is beyond the capped limit or that violates the company's policy are flagged and the employee is made aware of the breach. All expense or changes to any expenses are recorded and the audit trail allows the admin to view the history.

The software also stores the unique bill ID along with the date of transaction to make sure that no expense is filed twice with the same bill, hence eliminating the chance of duplication.

Put expense management on auto pilot with Fyle and put an end to expense leakages and frauds!


One click for paper receipts
One click experience and automatic data extraction, so
you never have to spend time with data entry.