There are millions of businesses around the world, and all of them are vulnerable to dishonesty on the part of their employees. Especially in the case of smaller businesses, the decisions of a minority of employees may have a disproportionately large effect on the company’s bottom line.
Accounting Fraud: What It Is and How to Spot It
Expense fraud is routinely regarded as the most common kind of employee fraud. The global average loss from fraud is estimated to be 5% of sales, while 14.5% of all discovered fraud is attributable to expense fraud alone. Some employees may want to gain financially at the expense of their company at any given time. False expenditure claims are always bad for business, although not all of them are done maliciously. Misplacing a receipt for a dubious or exaggerated amount of money might be used as an excuse, similar to a typo or a legitimate claim. Therefore, it is crucial to make your spending system as clear and unambiguous as possible, so that as much room for human mistake as possible may be weeded out. It is also crucial to thoroughly evaluate and investigate false accusations before speaking to employees about them. For expense fraud you need the right choice.
Simply put, what is the nature of expenditure fraud?
Expense fraud is when a person makes a concerted attempt to lie about their spending. A fraudulent expense report is one in which an employee knowingly files a false claim for payment. Overstating the amount that should be paid for restaurant tips, submitting more than the authorised amount, and providing receipts for products or trips that were not used are all examples of common forms of expense fraud. For example, they may try to pass off an expensive dinner with friends as a “work dinner,” or they may try to write off a business trip as a “pleasure” excursion on the corporate credit card. This is a double-whammy for your company.
- Some employees are chronic liars who save blank taxi and restaurant receipts in order to file inflated expense reports. These purchases are followed by submitting fraudulent expense reports and accompanying receipts.
- It’s important to remember that the people committing expense fraud are often those who are basically honest and have no intention of stealing from their employer. Employees are more likely to commit seemingly small offences that they don’t regard to be fraudulent since they know it’s possible for them to get away with it and they don’t think anyone would notice. Human error and a lack of familiarity with or understanding of the organization’s expenditure policies are two common causes of mistakes.
It’s true that “bad actors” only make up a small fraction of the people involved in cases of spending fraud, but the issue still has to be monitored regularly. There may be serious consequences for a company’s financial line if employees were submitting fraudulent claims for reimbursement of business costs.
Conclusion
To ensure that all employee expense reports are in accordance with the company’s guidelines, an annual audit of a random sample of these forms should be conducted. Make sure the proposed costs have enough documentation to back them up. If the company credit card was used, make sure the bill was paid in a timely way.