Understanding the threat posed by sundry employee expenses
In the world of business finances, dangers can come from some of the least expected places.
When it comes to managing employee expenses, threats can be posted by a seemingly innocuous-looking spending category. Usually, this is named 'sundry' or 'miscellaneous'.
This category is typically used to cover small reimbursement costs that don't fit into other expense categories created by a finance team. These are costs seen as insignificant and not occurring frequently enough to warrant the creation of a separate category.
Manual processing of sundry expenses
With finance teams having to process and transfer information by hand, the creation of any new spending categories becomes a complex and time-consuming process.
This is particularly the case for businesses that still use manual methods to manage their expense costs. Typically, this is a mixture of Excel spreadsheets and paperwork.
It is this reluctance to expand on the number of categories that has the tendency to make ‘sundry’ and ‘miscellaneous’ expenses a chaotic muddle of different costs.
Often these small claims will also be submitted outside of the main expense management operation. This is done via office-based petty cash systems that use imprest accounting.
Ineffective petty cash systems
Relying on an office employee to act as ‘curator’, these petty cash systems have a tendency to quickly become uncontrolled with only cursory checks made by the finance team.
It’s this combination of inefficient systems and ineffective monitoring that creates the ideal environment for workplace fraud. It allows employees to submit falsified and exaggerated ‘sundry’ expenses with minimal risk.
A 2017 study commissioned by Webexpenses highlighted the ‘little and often’ strategy used by fraudsters. They submit low-level dishonest reimbursement claims regularly to avoid detection.
Compliance threat of tax audits
The risk posed by sundry expenses is not just the cumulative losses. It’s also the compliance danger it creates when being audited by the Australian Taxation Office (ATO).
As a known weak spot in business finances, tax inspectors will search for anomalies in any sundry or miscellaneous categories.
The emergence of cloud-based expense management systems has provided an effective way for companies to shield themselves against these risks.
By handling the whole process digitally, finance teams can instantly create any number of new categories which are automatically applied throughout the system.
It means that the traditional sundry expense category can be removed entirely with each and every cost being accurately accounted for.
Smarter management of sundry expenses
A system such as Webexpenses also allows any petty cash set-up to be fully integrated into the main expense management operation. It gives finance teams the ability to centrally manage and monitor real-time petty cash claims.
Alerts can be set to trigger whenever sundry expenses fall outside of any spending limits set. It means that all expense claims receive the same level of scrutiny - irrespective of size or category.
Learn more about the Webexpenses expense management solution.