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How a war is being waged against business expense fraud

Wherever there are employees claiming expenses – there’s the problem of fraud. The falsification and exaggeration of reimbursements occurs throughout society – whether it’s in our businesses, charities, councils or parliaments.

It’s estimated that each year around $345 million continues to be lost to Australian businesses through workplace fraud and expense fraud accounts for 14 percent of all asset misappropriation.

Despite being so commonplace, this is a problem which remains largely hidden from our view. The vast majority of fraudulent expense claims pass through company systems undetected – never queried or challenged.

The consequent lack of accurate data on the exact nature of expense fraud has been one of the obstacles standing in the way of effective prevention strategies. To address this deficit, a global survey into the problem was commissioned in 2017 by webexpenses.

Mileage fraud – number one problem  

With more than 4,000 office workers surveyed and including a focus on Australia and New Zealand, the findings provide a valuable insight into the true nature of the challenge faced. The findings reveal that the most common form of expense abuse is mileage fraud, number one in both Australia (52%) and New Zealand (37%).

The results also highlight the multitude of different ways that employees are using to commit expense fraud. In Australia, 21% admitted to fraudulently claiming drinks for family and friends and nearly one-in-ten (9%) respondents in New Zealand have over-claimed parking costs.

Analysis of the data helped to reveal two key strategies that employees are using to avoid detection and successfully ‘game’ expense systems. These are:

1. Little and Often

The most typical pattern of behaviour was for employees to commit regular and low-levels of expense fraud, designed to remain safely ‘under the radar’.

This tallies with the fact that 37% of those surveyed said, if they were ‘sensible’ with fraudulent expense costs, they were confident the claims would never be challenged.

One of the typical comments made by a respondent was: “I don’t claim for anything crazy, just add a few extra miles onto journeys.”

2. Mix and Merge

The other strategy that’s revealed is the practice of obscuring fraudulent costs by merging them with legitimate business reimbursements.

It was found that 18% of Australian respondents admitting having over-claimed accommodation costs by adding on costs for family, friends or partners.

Having to untangle the legitimate costs from the fraudulent additions makes it particularly difficult for finance teams to identify and challenge.

The survey also looked at why businesses are struggling to control these costs and found the main factor to be reliance on outdated management methods that are preventing effective expense policy enforcement.

One third of companies were found to be still using traditional paper-based methods to manage costs, typically relying on a combination of paperwork, Excel spreadsheets and manual admin processes.

This creates a slow and inefficient way of working with finance teams often struggling to cope with processing a monthly flood of new claims. It’s by exploiting this organisational inefficiency that expense fraud has been able to flourish.

Starting the digital fightback

It’s a legacy problem which has a readymade solution in the form of digital technology, which is unlocking more powerful and effective ways to handle employee expenses. Webexpenses is one of the companies at the forefront of this fightback – providing businesses with the tools, knowledge and expertise they need to tackle fraud.

The use of an expense management system virtually eliminates the need for any paper-based processes or manual admin tasks. Any paper receipt that an employee receives can be instantly converted into digital form using a smartphone app.

The expenses app also accurately records the exact distance of any road journey, removing the previous reliance on employee ‘guesstimates’. It provides companies with the information they need to clampdown on mileage abuse.

The switch to digital typically reduces processing times by 25 percent and provides finance teams with real-time information on expense costs. This allows them to set automatic alerts that are triggered whenever a submitted claim falls outside set levels.

Faster, smarter and more secure

The digital approach also provides a level of management vision that’s not possible with a traditional system. Accurate data is automatically generated on every aspect of an expense operation with webexpenses including integrated reporting tools.

As more companies move to digital expense management, the risks for those who commit workplace fraud are getting significantly higher. In doing so, it’s helping to redraw the battle lines as businesses start to reassert control.

If you want to join the fight against expense fraud, you can get expert advice and guidance from webexpenses by joining our free webinar on 12th April at 11am (AEST). Register for your place, today.