In any organization, expense reimbursement fraud can happen in a number of ways. So, which type of organization is most vulnerable and what are the best practices organizations can adopt to reduce the risk of fraudulent claims?
Fraud can happen even in organizations with company wide expense reimbursement policies. If someone is not taking a hard look at reimbursements, instances of fraud can go unnoticed.
How Accounting Department Prevents Expense Fraud
Accounting is where expense reporting fraud can be caught. Even the strongest controls cannot guarantee fraud prevention or detection. Following are a few internal controls that will help detect potential expense fraud schemes:
Limit Personal Credit Cards
When employees use personal cards instead of corporate cards, companies cannot track credit card statements and see if expenses are corporate related.
Corporate expense policies should be reviewed and updated on a regular basis. Also taking feedback from frequent flyers will help outline travel and expense policies that work.
Enforce Two-step Approval Process
Credit card limits and their job titles should be monitored regularly. Cards should be recovered when an employee changes positions and do not require a corporate credit card. In addition, multi-layer approval workflow should be defined to minimize the risk of unauthorized issuance.
Preventing Expense Fraud
Manual and automated controls can minimize the risk of expense fraud.
Having a solid expense reimbursement policy requires you to include original receipts for all expense claims, controlling personal card usage, and mandating authorization for reimbursements. Consequences for submitting out-of-policy expense claims should be clearly articulated in the policy.
With various payment methods being widely accepted, cash payments should be monitored carefully. Making payments using cash is one of the areas where fraud can happen the most.
Submitting multiple reimbursement claims such as one employee submits a detailed receipt and another employee submits a credit card summary receipt for the same expense should be monitor closely for a date, other details and see if there are any details missing.
Cross-verify Employee Work/vacation Schedule
Compare expense reports to the employees’ work and vacation schedule; this will help identify personal expenses submitted for reimbursement.
Enforce Corporate Travel and Expense Policies
Enforce corporate policies consistently for everyone including the chief financial officer. If employees realize the policy is not enforced, they are less likely to comply with the company rules.
Expense report solutions are very efficient in managing employee expense reports. Key features include:
Flagging multiple reimbursement requests for the same expense
Import credit card transactions automatically
Pre-approval requests and multi-layer approvals
Comprehensive reporting features
Despite the best practices, policies and internal controls, fraud can happen in organizations. Potential risk can be reduced by making sure reimbursement policies are clear, concise and constantly followed and enforced. The accounting department is critical and must address issues promptly. By following travel and expense policies outlined, leveraging expense report software and making sure reimbursements are done in a timely manner, you can reduce the potential risk of fraud in organizations.
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