How to prevent expense fraud

The Latest Rules and Regulations That Impact Your Government Entity

When it comes to protecting your organization’s financial resources preventing expense fraud is critical. Expense fraud not only reduces revenue but also leads workers to believe they can get away with theft and possibly more profitable fraudulent activities.

Don’t miss: Net investment in capital assets calculation requirement

Steps to avoid expense fraud

Expense fraud isn’t always deliberate. An employee may not be aware of expenditure policies, or it could be the result of an accounting mistake. As documentation becomes more complicated finance employees can be overworked, but all these issues are solvable with the five steps below.

  1. To reduce the chances of human error and potential fraud, automation is a necessity. Without it businesses run the risk of losing money that could be better spent. Automating processes will not only save you time and money; it can also discover inconsistencies, generate independent reports and handle a large volume of documents with higher accuracy.
  2. Creating a policy that outlines what is considered an expense, submitting an expense and the steps that will be taken in the event of fraud plays a large role in preventing such fraud. Not only is it important to have such a policy but it is equally important all employees are aware and agree to the policy. This can be done through an employee handbook, discussion during new hire orientation and reminding staff on a regular basis.
  3. Unfortunately receipts can be easily manipulated. It is crucial to request original, detailed receipts/invoices. An employee can be asked to forward the original email/message, whether it is digital or a paper copy. Receipts should include the date of purchase, name of the specific products purchased and the business name.
  4. To ensure that tampering of the system has not occurred it is important to perform extra check and on-the-spot reviews. This allows for the company to detect abnormalities and ensure the process is running properly. Prior to any complaints, an employer should first notify an employee of any infractions. By doing this it will correct unintentional errors and deters employees from deliberating committing fraud.
  5. When creating an expense report policy it is also important to include a deadline for reporting costs, which will vary based on what is decided by the employer. This prevents employees from claiming expenses for prior or forgotten cost if they come across financial difficulties. Companies should find a happy medium for the deadline as they do not want to rush their employees and cause mistakes but waiting months for a purchase to be approved and paid is not ideal either.

While you can’t simply modify human ethics; by following these steps and ensuring that policies and procedures are not flexible you an head off premeditated fraud. If you have questions, contact a Henry+Horne tax professional.

Cheyanne Femiani

Get in on the conversation.

Unfortunately, we cannot give free advice to non-clients by email, comment response, or phone call. Thank you! Read our disclaimer.