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Expense Policy Compliance and How Automation can Help?

Expense policy and compliance
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Businesses with robust policy compliance are likely to have fewer issues with expense management. Expense policy makes it easier for a company to manage enterprise expenses and lack of which would hamper your business’s financial health.

When employees realize that fraudulent activities can go unnoticed, that encourages them to do more. In contract, it can also cause trouble with the IRS for non-compliant expense reimbursements.

What is an Expense Fraud Policy?

An expense fraud policy is a set of guidelines a company publishes to prevent and detect expense reimbursement fraud. Fraud can involve manipulating expense reports to gain personal benefits, such as getting repaid for fabricated expenses or extending legitimate ones.

Expense policies and compliance

Types of Expense Frauds

Miscategorized Expenses:

Imagine an employee submitting a personal expense receipt and claiming it was a business expense. For example, they might use a receipt from a restaurant they went to with friends and claim it as a business meal with the client.

Splitting Expenses:

Suppose an employee merges personal purchases with small business purchases on one receipt and submits the whole receipt for reimbursement.

Fail to Return Unused Cash:

Assume an employee receives an advance payment for a business trip but spends less than expected, not submitting the unused money to the company.

Unnecessary Overpriced Expenses:

Presume an employee charge the company for an overly expensive meal or other unnecessary item for the business trip.

Duplicate Claims:

Sometimes, employees submit the same expense more than once, either with the same receipt or with slightly altered versions of the same receipt, to claim the refund.

Overstated Mileage:

Employees overstate the miles driven to get higher reimbursement for business purposes.

Collusion with Vendors:

Employees pre-plan with the vendors to create fake invoices or raise the cost of services or goods, sharing the profits of the fraudulent claims.

Ways to Improve your Policy Compliance with Expense Automation

Switch to Simple and Concise Enforced Policies:

Many companies write unclear, long, and complex expense policies, making the employers oversee essential information. By making the policies too complex, the employees have a chance not to read them and, therefore, not apply them. Usually, this leads to overspending and dissatisfaction with the employees when they realize companies will not reimburse these expenses in full for not following the rules.

Submit Expenses Instantly:

Managing expenses can be challenging, and employees often wait until the last minute to submit receipts. With the expense solution, your employees can submit receipts with their phones via mobile app as soon as they’ve paid. This makes it faster and easier to manage the stream of expenses.

How Setting Company Policies Help?

Company expense policies help reduce expense fraud by setting clear expectations and making it easier to detect fraudulent activity. Below mentioned how:

Clear communication:

The policy should properly mention what types of expenses are allowed for reimbursement. This will reduce confusion and help employees know what to submit.

Fixing reasonable spending limits for different categories (such as meals, travel, stay, and transportation) helps prevent excessive spending. The policy should also specify what documentation is necessary for reimbursements such as receipts and invoices.

Strong oversight:

Keeping a manager for reviewing the expense reports before approval helps catch errors or suspicious claims.

Regular audits of expense reports, even a small sample, can help you identify fraud attempts.

Overall, clear, and well-structured expense policies make it difficult to commit expense fraud and help employees understand how to submit proper expense reports and what the company expects of them.

How Automation Help?

Detection and Flagging:

Rule-Based Triggers: With automation, the solution can trigger custom rules to identify red flags, including costs exceeding limits related to specific cost categories (e.g. food), documentation including two receipts for the same expense, or a supplemental remote report of an employee’s work travel. It gets flagged if a report triggers a rule.

Data Anomaly Detection:

Expense automation systems can study past spending patterns and flag reports that differ from these norms. For example, an employee who primarily submits small expense reports suddenly submitting a large one might raise a concern.

Integration with External Sources:

The solution can easily integrate with credit cards through automation that enables automatic transaction verification, helping to detect fake receipts or tampered receipts.


Even though most of your employees are trustworthy and honest, a small fraction can commit fraud. When left undetected, this kind of fraudulent activity can cost your company millions. Therefore, staying updated on different expense fraud and investing in better expense reporting software is necessary.

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