According to the Association of Certified Fraud Examiners, a typical company loses 5% of annual revenue due to fraud, 15% of which is down to fraudulent expense reporting. And it’s not just large enterprises that are at risk; small and medium sized business are just as likely, if not more so, to suffer damage to the bottom line thanks to loose spending by employees or expense abuse.
As it turns out, there are plenty of opportunities for employees to ‘go rogue’ with their travel expense submissions. Common types of fraud include exaggerating mileage claims, or using altered or fraudulent receipts to claim for fictitious expenses. Then there are the more creative transgressions such as hiding personal expenses as business charges – for example, entertaining friends and family, rather than clients, to dinner.
While most employees don’t set out to maliciously defraud the company they work for, falsifying expense claims is an everyday occurrence for some. As a recent KDS survey among business travellers revealed, a quarter admitted to embellishing their company expenses. The study, commissioned to investigate the attitudes, actions and behaviours of business professionals when booking work-related travel and reporting expenses, found that over one-fifth of respondents will regularly round up their business mileage while a quarter had taken advantage of a blank taxi receipt to submit an inflated claim.
Whether it’s a minor or extreme infraction, organisations often need help to address the issue of problematic and inaccurate receipts. Then there’s the challenge of how to manage those business travellers that initially comply with established travel policies when booking flights and hotels, but upgrade without permissions at a later date.
Implementing a strong expense policy and ensuring adequate procedures are in place to prevent fraud can help prevent staff ‘going rogue’ when it comes to travel bookings and expense claims. But there are other steps organisations can take to significantly decrease incidents of fraud.
1. Ditch the paperwork
Our survey shows that over 40% of respondents still used time intensive spreadsheets for tracking and submitting their expenses, with 80% filing their claim during working hours. As well as undermining organisational productivity, employees face the challenge of organising and collating a mound of paper receipts and appending these to their expense submission. It’s an approach that opens the way to inaccuracies and estimations of ‘lost receipts’.
A good travel management tool, however, will enable a more efficient and accurate approach that saves both time and money. It also enables the direct invoicing from suppliers, which at a stroke eliminates the risk of receipts getting altered by employees. Plus, an automated tool can make it easy to exclude non-allowed items not approved for reimbursement.
2. Establish clear policies and procedures
An expense account policy is an essential first step in the battle against fraud, along with clear procedures. An expense management tool can help firms apply and administer these, saving effort and time for staff submitting claims as well as the administration and finance team responsible for reconciliation.
A good travel expense process should be intuitive and easy to use; logging and submitting should become second nature to business travellers, so they are more likely to input as they go along rather than saving receipts up. And by making it easier to transfer documentary evidence and produce expense accounts, companies will save employees time and frustration. Our survey showed that with no access to an automated expense tracking tool, the majority of business travellers found keeping track of travel receipts on the go a challenge – over 73 percent kept receipts in one place like a wallet or envelope.
3. Communicate your expectations
Staff need to be well informed about the travel expense policy and why some roles, such as sales personnel on the road, may have more freedom with expenses than back office staff. Having a policy that makes sense and is clearly understood by all will eliminate the risk of grudges building up – and minimise assumptions that ‘what’s good for them, is good for me too’.
Inflating an expense claim is viewed by some staff as a fair ‘trade-off’ for the inconvenience of being on the road in the first place, so it is essential staff understand the potential consequences of ‘rogue’ spend or falsified accounts.
A good first step is to educate teams on the impact of staff expenses on revenue and profit, and that rounding up a mileage claim or falsifying a taxi receipt is a criminal act.
4. Empower managers
Managers need to encourage teams to stick to the corporate travel policy, and should have the confidence to challenge reject or challenge suspicious looking claims. Turning a blind eye only encourages a culture of rogue expense claiming which, if left for long enough, can be viewed as an entitlement.
That means all levels of personnel should be subject to the same scrutiny, including senior members of staff and long-serving employees. Leading by example, and from the top, ensures that staff at every level of the organisation won’t be tempted to follow the suit of their ‘elders and betters’ and fiddle expenses. A consistent and public procedure to deal with all ‘wrong-doers’ should be in place and applied.
5. Reimburse staff in a timely manner
On average, it takes 17 days for an expense claim to be checked, processed and reimbursed. Employees experiencing this typical ‘cash lag’ will be less motivated to engage in appropriate behaviours when it comes to expense submissions, and some may genuinely encounter financial difficulties as a result of reimbursement delays.
If you automate expense account management, reimbursement is immediate. And that generates positive feelings that encourage employees to be compliant and do ‘the right thing’.
6. Make it easy to be compliant
The Aberdeen Group estimates that a typical company will spend more than 10% of its annual budget on expenses relating to business travel. And small and medium sized enterprises can spend as much time managing expenses as they do generating new business.
But it’s not just organisations that suffer. Cumbersome submission processes make the task of expense submission a chore for employees. Our survey found that 45% of business travellers found their company’s expense claim process less than satisfactory.
Ineffective and outdated travel and expense management systems put companies at risk of significant unnecessary wastage – with travel expenses being open to neglect at best, and abuse or fraud at worst.
Many of today’s companies fall foul of outdated or clunky travel and expense systems which limit choice or sacrifice usability. All of which forces employees to book direct, while encouraging ‘rogue’ spend and fraudulent expense claim behaviours.
But implementing an automated expense management tool will not only give organisations greater visibility and control of staff spend. It will also generate the real-time analytics and business intelligence that makes more accurate projections possible while generating significant administration efficiencies.
Putting in place an automated expense management tool, designed with the mobile traveller in mind, speeds up accurate claim submissions and is also less likely to leave employees ‘out of pocket’ should they lose paper receipts in transit or forget to claim for a journey or a meal.
Used in combination with the right policies and procedures, organisations can ensure employees are able to operate at maximum efficiency and adhere with ease to enterprise travel and expense policies.
To see a full report on the KDS Travel and Expense Survey findings, please visit: http://page.kds.com/survey2016.html
By Dean Forbes, CEO, KDS