Chris Baker, MD of UK Enterprise, Concur
Internal expense fraud is a growing epidemic amongst businesses across the UK. And while it is not a new phenomenon, dodgy expenses are increasingly becoming a cultural norm – one which is seriously affecting bottom lines.
High profile media cases exemplify the issue. Take the recent example of the city PA who conned a firm out of £264,000on a credit card shopping spree. For a small business, this type of fraud could shut the doors permanently. And it is not just businesses that are affected. Hackney City Council this month had to fire an employee over the unexplained use of a purchasing card.This is alongside theConservative Party which is also being investigated for expense fraud during the 2015 election campaign.
While it may seem like a problem that happens anywhere but your business –you might be surprised. Despite the fact that the above examples are extreme cases, figures from YouGovsuggest that one in five employees believe it is acceptable to exaggerate expense claims. Every small, fraudulent claim can add up and is just as important as the huge headline events.
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The public outcry over the recent MP expense scandal, where MPs claimed for toilet brushes and foot stalls, coupled with an increasing focus on HMRC tax compliance means that the issue of internal fraud has never been more in the spotlight. But why is it such a prevalent and growing issue?
Firstly, finance teams are simply too busy. How many managers actually review what their teams put through their expenses? TheConcur Employees Expenses Benchmark Report actually revealed that while 10 per cent of the claims approved by managers are not actually within policy, only 1.2 per cent of these are actually queried or rejected. Clearly then expenses are not monitored carefully enough.
In the current economic climate, finance departments are frequently overburdened and often the expense approval process is a secondary concern. Coupled with this is the fact that companies often lack any tangible way of tracking or linking the invoices that come into their company and the expenses that go out of it. The process is background noise, rather than a priority, and therefore workers are often knowingly, or unknowingly, able to slip fraudulent expenses through the net.
This is because expenses are the process that time forgot. While the majority of business operations have been significantly improved by technological advancements, expenses are often still run on the humble Excel spreadsheet, which undoubtedly leads to mistakes. In fact, stats from ClusterSevenreveal that 58 percent of finance professionals believe that the frequency of errors on spreadsheets is either ‘fairly high’ or ‘very high’. This makes catching internal fraud all the more difficult as finance teams lack real-time visibility into their data. Spotting irregular, irresponsible or questionable behaviour is therefore much harder to identify and outdated processes make it easier for both honest mistakes and calculated fraudulent behaviour.
There is also somewhat of a culture of internal expense fraud within many companies across the UK. As mentioned above, a massive 20 per cent of employees believe that is it acceptable to exaggerate expense claims. The more people get away with fraudulent claims, the more they will continue to do it.
Worryingly, this culture is exacerbated by the fact that employees have ever more sophisticated means of exaggerating their expenses. For example you can buy books on Amazon on how to pad out your expenses. Clearly in many companies it has become a cultural norm. Businesses, and finance departments need to instead instil a culture of security and trust when it comes to expenses, and stop dead the idea that a small expense fiddle is normal.
Whether expense fraud is planned and considered or off the cuff, it can be extremely costly for businesses of all sizes. But as it continues to escalate, how can companies ensure they do not fall victim?
Businesses need to make certain that they have good governance over their expense process and a clear best practice policy. Furthermore, a culture of trust should be fostered to discourage fraudulent claims. Educating staff in how costly it can be for your company and discouraging the notion that one small exaggerated expense won’t hurt can help towards this. Finally, upgrading from spreadsheets to a system that can give real-time visibility and data insight will alert you to any expense related red flags, mitigating the risk of fraud slipping through the cracks.
Overall, in an increasingly busy world, overburdened finance teams are being left behind when it comes to effectively monitoring expense claims. However, as the culture of expense fraud continues to increase, companies need to revaluate their processes and stop it from truly spiralling out of control.