Don’t pay for pants: How your small business can tackle expense fraud

A manager must be sensitive to different workplace cultures around expenses, argues Dafydd Llewellyn.

Businesses can face ludicrous expenses claims

Businesses can face ludicrous expenses claims

Have you ever thought about claiming your underwear on expenses? Or pet food for your dog? How about flights for a nice holiday to the Caribbean? Me neither. But these are just some of the surprising claims revealed by HMRC last month that highlight the issue of ludicrous claims and fraud facing businesses around the country.

It’s a serious problem. In the austerity era and with businesses facing uncertainty from a range of geopolitical developments, firms can’t afford to pay out on whimsical claims for employees pushing their luck. Or for the HMRC fines that follow.

So how can businesses tackle expense fraud?

Thankfully, there is a myriad of technology that can help managers uncover both intentionally and unintentionally fraudulent claims by analysing big data. Similar to the performance tracking vests worn by many professional athletes, software can monitor data and highlight patterns or anomalies to those monitoring. It’s no longer a case of if suspicious activity is seen, but when.

But powerful as modern financial tech is, it’s no substitute for an educated workforce and a manager’s human touch. Technology can flag an anomaly, but a manager must make the call and be sensitive to different workplace cultures around expenses. A combination of the two approaches will yield the best results.

Don’t underestimate the importance of good internal communication

On the whole, employees actually want to do right by the company. Make it easy for them to do so with a clear best-practice policy – free from jargon – that doesn’t leave staff members wondering if they are doing the right thing. Keep the rules and scenarios simple and easy to understand and people will be more inclined to follow them. To help ensure everyone is on board, businesses could offer employees sessions clearly outlining the process and rules they should be following, to avoid any misunderstandings. These are especially important for new hires, but also when you make changes to any policy this can help you explain why and field any uncertainties early.

Spruce up your systems

Creating a culture where intentional fraud is truly frowned upon requires the right technology. Expenses are a prime example. In the majority of companies, expenses are the business process that time forgot. If you’re still relying on Excel spreadsheets you’re making it easy to abuse the system. If how you manage expenses hasn’t moved on since the 1970s, the chances are that the culture of ‘I’ll round up the mileage on that trip to the client’ probably still prevails too.

Furthermore, bribery has become a real issue in recent years and, in many ways, The Bribery Act has provided much-needed impetus for businesses to integrate different systems in order to better understand employee spend across the business. Many of our customers are either in the process of, or have already, triangulated their expenses and CRM so that they can better monitor any suspicious behaviour and alert the business.

Managers need to get tougher

How much attention do line managers really pay to employee expenditure? In a manual process, it’s difficult for managers to keep control. Often, they don’t know the policy well enough themselves. At other times they don’t want to deal with the confrontation of saying no to a claim, and so just let it go.

Technology helps to solve this problem by flagging to the employee anything that they are trying to claim that is outside of policy, and asking them for a comment to explain the claim – after all, sometimes there is a legitimate reason to go outside the policy.

Expense fraud isn’t going to be eradicated anytime soon. As the HMRC claims reveal, some people will always look to chance their arm. But companies can prepare themselves to keep fraudulent claims to a minimum and eliminate the most egregious.

The key is to use technology to monitor claims on a regular basis, educate your employees and managers on adhering to company policy and make sure internal communications are clear and advice is regularly updated.

It’s only by making sure your processes aren’t pants that you can avoid paying for someone else’s.

Dafydd Llewellyn is MD SMN at Concur.

Further reading on expenses

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