How to Prevent Employee Expense Frauds in the Workplace?

 |  Nov 23, 2017

Did you know that your own employees are more likely to commit a fraud than your agents or intermediaries? This striking revelation was made through a recent survey that was conducted by Kroll advisory services.

According to the report, about 80% of the frauds are committed by junior employees, freelancers, and senior or middle management employees. What’s more, these frauds cause an estimated loss of as much as 3% of your overall revenue.

Types of Frauds

All frauds can be broadly classified into two categories:

Submission of False Expenses:

An employee may submit expenses that never incurred in the first place or don’t qualify for reimbursement. Examples include:

  • Food or personal items masked as business expenses
  • Manipulated receipts
  • Expenses for services that were never availed

Manipulation of Legitimate Expenses:

An employee may exploit legitimate expenses for personal gains. Examples include:

  • Adding additional costs to basic expenses, such as tips for restaurant and hotel bills, etc.
  • Deliberately choosing higher class flight tickets, hotel rooms, even when cheaper options are available
  • Inflating the conveyance expenses

How to Prevent These Frauds?

The main reason why in-house frauds are prevalent even today is that most businesses are unaware of the problem and the kind of financial damage it can do. Even those who are aware are being lax. However, this doesn’t change the fact that it’s a serious problem and must be addressed.

Fortunately, tackling the problem of employee expense frauds isn’t that hard. The following are some of the ways you can go about it:

  1. Creating an Expense Policy

Creating an expense policy will hit the nail on the head. It will show that you are serious about expense management and will closely watch for expense frauds.

By setting up rules and regulations on how the employees should deal with business expenses, you can maintain transparency and ensure that the employees don’t incur unnecessary expenses or deliberately inflate the necessary ones.

  1. Performing Background Checks on the Employees

A lot of times, employees that indulge in frauds have a history of such acts. They also tend to switch jobs frequently to protect themselves from getting caught.

So, it only makes sense to conduct a background check on every employee you are going to hire. If references are available, then look into those. For full assurance, feel free to validate their prior work experience by contacting the company they worked with prior to leaving.

  1. Looking Out for Signs

There are often some tell-tale signs that suggest fraudulent activities. So, you may want to investigate just to be sure if an employee is:

  • Shying away from disclosing certain personal details
  • Showing anomaly in their financial records
  • Frequently absent from work
  • Involved in missing certain files or documents
  1. Setting up a System that can Record all Expenses Digitally

A large number of organizations are still using antiquated first-generation expense solutions even when affordable enterprise-level solutions are available.

If you are still recording your business expenses and invoices in excel sheets or other types of self-created documents, then maybe therein lies the problem.

By switching to a professional expense management software, you can bring a high level of transparency in the expenses and also identify areas where costs can be reduced. Since it will allow the employees to report the expenses in a structured and digital format, they will find it difficult to commit frauds. Of course, you on your end will also be able to monitor the expenses easily.

Expense fraud is a serious problem which often goes overlooked because of the lack of a robust expense management system that can help you identify the problem in the first place. You could be losing a sizeable portion of your revenue because of the in-house frauds. However, there is no easy way to discover the same unless you use a new-age expense management platform or service.



Getting paid was endless and many a times embarrassing series of follow-ups. With numberz it begins with a click and ends with a click! Sraboni Harlalka Partner at Wodehouse Capital

Join the 18,000+ companies that use numberz.

Learn More