How to Prevent Expense Fraud Effectively

Expense fraud happens everywhere and many times in one’s life. A few bucks here and there may be overlooked but how about scenarios like ‘claiming air ticket fare for a cancelled flight’ or ‘a hotel fare for a lavish night stay in the Terranea resort in California’? Small expense frauds accumulate over time and it becomes difficult to detect them.

A study conducted by the Association of Certified Fraud Examiners, showed that people in the ‘upper management or executive level’ in an organization account to 27% of reimbursement fraud cases. Dismissals and disciplinary actions taken against key members in the company may lead to chaos, as experienced by companies like Walmart and HP.

Employees are likely to keep crossing the line unless there are strict and clear guidelines. The following steps could help you setup guidelines and minimize fraud expenses.

1.      Set a clear policy on your expense report

Smaller organizations are more likely to have simpler policies than the bigger ones. However, the following points must exist irrespective of the size of your company.

  • Reimbursement claims must be made within a month or two of incurring the cost.
  • Receipts must be submitted for all things purchased above $25.
  • Multi-category expenses like hotel bookings, meals and other entertainment require itemization.


2.     Alert all your employees on policy violations prior to submission of expense reports

Traditionally, expense report policies are featured in an employee’s handbook. However, very few people check their handbooks before preparing their reports.



Try making an expense report system which automatically shows policy violation or identifies duplicate transactions automatically. This system not only maximizes policy compliance but minimizes the burden on accountants and supervisors who identify or reject unauthorized expenses.

3.      Prepare a strict expense examination and approval guidelines    

The first step you might want to take is to appoint the right manager(s). The primary responsibility of your manager would be to ensure accurate expenses are claimed and they are supported by proper billing documents. Depending on the amount of the claimed expense, multiple managers or approvers may have to work for a single claim made. When choosing your expense-reporting software and tools, you may consider the essential needs of today and the coming years.

4.     Make use of data analytics to master the trends of expense reporting

Charts and graphs are great for monitoring expense trends by specific merchants, categories or employees. Organizations may leverage expense-report platform to determine and investigate unusual billings.

5.     Members in the management department ‘must set the tone’

Even though all members in the organization must take responsibility for accurate reporting of expenses, people in the management department may have to create high-quality control process. Members in the management must set the tone by participating in the review process and setting examples in following the guidelines.

According to the survey conducted by Association of Certified Fraud Examiners, occupational fraud accounted to 5% of a company’s yearly revenue. By tightening the process of expense-reporting, you can easily and effectively prevent expense fraud at different levels.

Setting up a clear and thorough reporting guidelines and ethical leadership commitment can ensure that a company’s revenue and reputation is on track. 


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Image Credit: Office Expense, Expense management