This guide provides an overview of the challenges faced when managing travel expenses fraud and a look at how technology can help your organisation regain control.
The road to smarter expenses
The biggest danger posed by expenses fraud is ‘death by a thousand cuts’. It’s the multitude of small losses which can sap away at a business's resources.
Nowhere is this more clearly seen than with mileage expenses and the problem of fabricated and exaggerated travel costs allowed to go unchecked.
Instead of these abuses being challenged and tackled, they have all too often been grudgingly tolerated by businesses.
It helped to create an environment in which expenses fraud thrived. The National Fraud Authority estimates that UK companies continue to lose around £100 million each year to falsified and exaggerated expenses.
This is a problem companies no longer need to tolerate. Digital expenses management has transformed the way we’re able to manage and monitor our travel claims. Combining cloud-based software with GPS technology, we can now track employee journeys to within meter accuracy.
For employers, these tools reduces processing time, help to ensure legal compliance and act as a reassuring shield to help protect companies against fraud. For employees, they have a quick, accurate and hassle free way to ensure they are fairly reimbursed for any legitimate mileage expenses.
This guide provides an overview of the challenges faced when managing travel expenses fraud and a look at how technology can help your company regain control.
The cost of mileage fraud
To understand how the old ways of managing travel expenses have allowed fraud, it’s worth looking at some practical real-world examples. Here are four scenarios, based on cases, which highlight the various ways travel claims are abused by employees:
Scenario A: Falsification
A Bristol-based employee has to make regular journeys to another of the company’s offices in Leeds - a return journey of 420 miles. By checking the company rota he finds the days when the office manager is away and claims for mileage on those days.
It’s a weekly fraud which remains undetected more than five years with the phantom journeys hidden amongst genuine mileage claims. It’s estimated to have cost the company in excess of £18,000.
Scenario B: Exaggeration
A manager at a small Reading based manufacturing company makes a weekly trip to a supplier. There are multiple routes that can be taken - ranging from 15 to 23 miles in length.
The employee uses the shortest route but claims for the longest - a 50% increase on the actual distance he travels. Using this weekly claim, he is able to fraudulently receive around £2,000 each year.
Scenario C: ‘Rounding up’
A carer working for a Welsh health agency makes around five or six journeys each day to visit patients. She routinely ‘rounds up’ all of her journeys by one or two miles.
With expenses being processed on a monthly basis, it’s not possible for the finance teams to check the accuracy of each estimate. It results in the employee receiving around £2,000 each year in fraudulent expenses.
Scenario D: ‘Offsetting’
An employee at a marketing agency attends a monthly conference in Leeds. They claim for a 12-mile return journey from their home to the conference venue.
But once the morning conference has finished, they return to their office. The mileage reimbursed, therefore, includes the regular commute from office to their home. Over a 12 month period, it costs the company around £240.
The true scale of the problem can be seen when these kinds of losses are multiplied across an entire business. Once the abuse of travel expenses takes hold within a company, it tends to become a self-perpetuating problem.
Employees become emboldened by each and every fraudulent expense which is processed without being queried. It gives rise to a workplace culture in which workers are almost expected to be ‘creative’ with their travel claims.
Effective travel expenses management
The fundamental problem faced by companies when it comes to controlling travel expenses is the lack of information. It’s the grey area caused by not knowing exactly how, when or where an employee has travelled.
In the past, claims have been based on crumpled receipts and mileage estimates with no fast or accurate way to verify the information. But there is now an effective solution.
Digital expenses management changes the way companies are able to manage and monitor employee travel expenses. Cloud-based software, linked to a smartphone app, provides the tools required to regain control.
How it works
Expenses management software provides a fast, efficient and cost-effective replacement for old and outdated paper-based processes. The systems allow employees to use a smartphone app to instantly convert paper receipts, travel tickets and bills into a digital form.
A quality system will also provide users with the ability to track and log business journeys to within metre accuracy, using the GPS capabilities of a handheld device. Employees are able to ‘record’ their journey with all information stored digitally: time, date, location and exact route.
This information is uploaded to the user’s account and integrated into any subsequent claim they make. It replaces the need for mileage estimates and finance team’s previous reliance on a ‘postcode lottery’.
This is when, in the absence of accurate data, postcodes are used to estimate distances between A and B - often using an online tool such as Google Maps. With multiple routes available to travellers, it’s a system which can provide only a rough approximation.
One of the key features of management software is the ability to configure itself to the specific expenses needs of a company. The way travel expenses are handled will vary greatly between depending on a company’s size, structure and policy.
The power of a good expenses management system is the ease with which it can handle this kind of complexity.
A system such as Webexpenses allows companies to configure multiple set-ups to cater for up to five different types of mileage needs. Different limits can be set for separate categories and flags set to alert account managers when any limit is breached.
The system can also be customised to provide on-screen policy reminders via the user’s’ smartphone app - travel policy guidelines and compliance checks being delivered at the point of use.
One of the headaches involved with managing travel expenses is ensuring compliance with the various HM Revenue and Customs legislation. It can be a time consuming and costly process to untangle which expenses they need to be informed about and when VAT can be reclaimed.
With a good quality expenses management system, so much of this process is automated. The expenses data collected is seamlessly integrated with payroll software. It helps ensure your business claims back everything it’s entitled to and reduces the risk of fines for late or inaccurate submissions to HMRC.
The simplicity and accuracy of an expenses management system allow a company to effectively manage and monitor travel costs. It cuts processing time and reduces losses through inaccurate and fraudulent claims.
The long-term benefits can be more deep-rooted. By regaining control, companies are able to ‘detoxify’ the whole area of travel expenses. In the old business world of guesstimates and crumpled travel receipts, it is prone to becoming something of a company battleground.
Employees exploit the lack of checks and balances, while employers respond with increasingly strict and inflexible expenses policies. It creates a dangerous loop - employees feel justified in ‘gaming’ an unfair system.
An effective and properly maintained system removes the grey area in which this situation develops. It allows travel expenses to serve their original purpose - to reimburse employees for business-related journeys.