Avoid expenses fraud: tips for making business spending safer

“If we give more employees access to company money, won’t we increase the odds of getting ripped off on business expenses?”

That’s something we hear quite a bit from decision-makers in companies where work expenses are still run in an old-fashioned way. It’s a concern we understand and one we want to talk about.

Because one of the myths around tightly-controlled expense management is that it’s inherently more secure.

Business expenses: What we mean by “the old-fashioned way”

Typically, expenses have been managed in a centralised, manual fashion, meaning that all business spending originates from a single point.

Think of the CEO’s company card that gets passed around from employee to employee, whether that's to buy a round of drinks at the pub or for HR to buy some new office stationery.

Or in other companies, think of the single employee who’s designated as the point of contact for all purchases.

Not all heroes wear capes - some just manage everyone else’s travel bookings.

What is expenses fraud?

It's when someone submits an inaccurate expense claim or inflates a reimbursement, and it's one of the most common types of employee fraud. For example, if you and another employee separate your mileage costs even though you travelled together, that's expense fraud because it's not a legitimate expense.

But it's not always deliberate. It's possible for mistakes to arise because of human error, like accidentally submitting the same receipt twice.

How is expenses fraud happening?

The term “expenses fraud” might be enough to send shivers down the spines of CFOs.

In most cases though, it’s not some long-term masterplan to rip off an employer with gazillions in invented costs.

It can also be staff not realising something isn’t a legitimate expense. Or just being opportunistic.

And there's not just one type of expenses fraud. In fact, there are four types you should be aware of:

• Mischaracterised expenses: When someone submits personal expenses under the category of business expenses. For example, if an employee buys flights for their summer holiday and claims it's for work purposes.
• Fictitious expenses: When someone submits fake receipts that appear genuine. This is common in cases where a company doesn't require receipts for purchases under a certain amount.
• Overstated expenses: When someone inflates the cost of a legitimate expense, such as claiming they paid a bigger tip for a business meal than they actually did.
• Multiple reimbursements: When someone remits the same receipt for an item more than once so the finance team ends up approving duplicate payments and the employee cashes in.

Why do people commit expense fraud?

One in 10 employees in the UK say they submit fictitious expenses “all the time”, which gives you some clue as to the size of the issue. (Another reason it's so important to have a company expense policy that's widely understood and followed.)

An interesting piece in Forbes recently listed some reasons behind workers “cheating” their expense reports.

The scope it suggests is what stands out at first.

It's easy to see how fraud could come from lots of types of expense claims:

• The supervisor overspending on a work dinner to stay popular with their team
• The business traveller who feels micro-managed and makes up for it with exaggerated mileage
• The new hire annoyed at the CEO’s luxury hotel room who decides to upgrade themselves
• The long-standing employee with a side hustle, who buys office stationery and keeps it for personal use

Too many of these scenarios are made possible by traditional ways of managing spending. Plus, with only 34% of UK businesses offering fraud awareness and prevention training, it's easy to see how employees take advantage of loopholes.

The scope of oversight required in old-fashioned expense systems, coupled with the lack of real-time data, means even the savviest financial brain would struggle to spot all of these spending oddities.

And let’s say they did spot them all. How do you start to police questionable transactions if everyone’s using the same card?

Pleo can help you identify and prevent expense fraud

Decentralised spending through an expense management tool like Pleo changes the game.

There's a reason why 99% of users feel secure spending with Pleo.

With Pleo, multiple employees (maybe even all of them) have access to their own company card. Workers at all levels can make business purchases when necessary, without needing sign-off from multiple rungs of management.

So, back to where we began:

“If we give more employees access to company money, won’t we increase the odds of getting ripped off on business expenses?”

There’s a couple of reasons why - with Pleo - the answer is no.

The first is spending limits. As an admin, you can set individual spending limits on each card and adjust these whenever you like. So you don’t need to trust a new member of staff with the same limit as you offer an established head of department.

People are accountable for the money spent on their own card and their managers are accountable for making sure it’s in line. It works both ways and benefits both parties.

The real-time tracking of spending also helps. Rather than having to wait until the end of the month for a bank statement, your financial team can immediately detect anything that doesn’t look right. Thanks to Pleo Assurance, if someone overspends on their card, their manager will be alerted and will be asked to approve or reject the transaction.

If they do spot something that needs investigation, a Pleo card can be frozen instantly.

We can even help you build your own expense policy. If the rules and consequences for committing expenses fraud are crystal clear, people are less likely to try and game the system.

What do our customers think?

Here's what people are saying about using Pleo:

“Our team can make decisions quickly and easily without having to get our approval, because our approval has already been given in the limits that we set." - Phil Brian at Patch

"Pleo allows me to trust the system and the approach we have in place so I don't have any uneasiness about the level of spending in our business because I have great visibility and oversight." - Damien Ponweera at Techspace

"There’s real visibility – and not a sense that receipts are building up in a shoebox somewhere." - Steve Parks at Convivio

An expense management solution that benefits both boss and worker

But it’s not just the product features of Pleo that make it so much easier to identify possible fraud issues.

It’s about the trust you’re giving an employee when you give them their own Pleo card.

You’re taking away the headaches and antagonism that define the old-fashioned way of doing business expenses.

Transparency and accountability are big concepts, absolutely.

But they’re also a hell of a lot more fun than trying to figure out who’s been submitting personal expenses or rinsing the company card at the local Happy Hour for the past month.