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The Association of Certified Fraud Examiners (ACFE) conducted numerous surveys with anti-fraud professionals to understand the effect of the pandemic on expense fraud. What did they find?
Around 80% of anti-fraud experts agreed that expense fraud levels had increased dramatically over the pandemic.
Additionally, Pymnts reported that around 82% of employees said they had lied but not caught on fraudulent expense reports.
The funny part is that nearly two-thirds of them never felt guilty about misstating information on their reports.
These statistics show us one clear thing: The problem of expense fraud is real, and companies need to find new ways to mitigate it as soon as possible.
What Is Expense Fraud and How Does It Matter?
Expense fraud (or a fraudulent expense) is a deliberate and planned attempt by an employee to fool or play finance teams with malicious evidence. The intention is to gain more in reimbursements than the employee rightly deserves.
However, although every malicious report will indeed affect your business, remember that they all need not be intentional. Human beings are prone to typing errors, minor miscalculations, or even receipt losses frequently. Thus, it is essential to characterize a false report before you confront your employees.
How Can Businesses Characterize Expense Fraud?
When an employee deliberately creates false evidence to support their reimbursement claims, it is a fictitious expense. For example, common fictitious expenses would be designing fake receipts to make believable ones that claim more than what was the employee spent.
When an employee submits a receipt for a personal expense as proof for a business expense, it is a mischaracterized expense. Common mischaracterized expenses include mileage, food, and travel bills. This method has been widely prevalent. This is because it’s extremely difficult to differentiate between personal and business expenses by just looking at a receipt.
When an employee claims more than what they spent by modifying amounts in expense reports, it is an overstated expense. This can happen in the most common nuances. For example, an employee might change $20 to $25 during reporting.
Believe it or not, this method is much easier than it sounds and happens more often than you’d think.
When an employee uses old receipts as proof of new expenses, it is considered a multiple reimbursement fraud. These types of fraud are most common in food bills. In these cases, such receipts might easily slip the eyes of your finance team. This is especially true if your company still uses traditional means to verify reports.
It’s evident that the problem is real. An employee can easily game their finance teams if your organization still follows a traditional method for expense reporting. As a business owner, if any of the above scenarios seem even remotely familiar to you, it’s time for you to make your shift to using an expense management software.
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How Does Expense Management Software Help Prevent Expense Fraud?
The pandemic has caused an enormous surge in the adoption of AI-powered cloud expense management software. This is mainly because it helps streamline the reporting experience for employees. At the same time, it also enables finance teams to gain more meaning from the data.
An expense report software provides almost instantly all the data finance teams need to curb fraud or review budgets. With such software, your finance team can more easily spot top policy violators, departments that are overspending, department and category-wise expenditure, and much more.
Additionally, the software saves all receipts, reports, and other expense data in centralized cloud storage.
So, for example, every time an employee adds a new receipt to an expense report, the software automatically goes through its data to ensure there are no duplicate submissions. The software also comes with real-time data analytics that interprets all available expense data across departments, cost centers, and budgets. It also provides actionable insights to help finance teams optimize cost savings. This ensures a well-rounded system with no financial leaks.
With an expense management software, employees can submit reports in the following ways:
With access to just a mobile phone, an employee can submit their expense report from any place and at any time. It is as simple as taking a picture of the receipt on your mobile phone. Actually, that’s all it is! Take a picture of the receipt.
The software will automatically extract all relevant information from the receipt using OCR to auto-fill the expense report, thus eliminating all forms of manual entry.
What’s more, the employee can submit this to the finance team for approval directly in just one click. This saves precious time and money.
Cloud expense reimbursement software integrates seamlessly with other applications to enable employees to submit reports or invoices.
Keep in mind that corporate finance needs to comply with various government rules for their internal policies. The AI software can go through documents to detect policy violations and let users know about any errors they might have made.
A robust engine with the software enables the finance team to make custom policies based on a company’s needs. The result is that businesses see tremendous boosts in internal compliance and the elimination of multiple back-and-forths to process a report.
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How Can Businesses Curb Expense Fraud with Expense Data?
As a company grows, the volume of expense data it needs to process also grows exponentially. Therefore, with manual expense reporting, it can become impossible for a company to identify fraudulent expenses without external assistance.
By using an expense management software, companies can have all their expense data in one centralized location from the day of expense creation. Additionally, through automated compliance, it is a given that all expenses align with the company’s rules and regulations.
A company’s financial statements are greatly affected by expenses that do not comply with internal policies. Therefore, it becomes essential that employees only submit compliant reports. Also, last-minute reporting by employees would mean that finance teams would need to race ahead to meet their deadline, leaving them with no time to analyze or verify the data.
But through automation, finance teams can set up reminders for employees to submit their expenses on time. This enables them to have enough time for verification and cross-checking.
Why Is It Essential to Identify Spend Patterns and Trends?
Big data enables finance teams to identify employee spend patterns and also recognize notable trends. Based on these insights at an employee or department level, finance teams can predict or modify future budgets.
With the exponential growth in the volume of data worldwide, it is impossible to catch fraudulent reports by using traditional means of reporting. However, big data can enable finance teams to identify areas where violations occur most or are most likely to happen in the future.
Technology is enabling finance teams to develop financially backed plans that can make an organization financially more productive.
Development in AI, machine learning, and big data can enable modern professionals to become visionary thinkers.
As the pandemic has shown us, any “normal” way of working can be changed. Moreover, those who are quick in adapting themselves find new ways to scale while staying afloat.
Digitization has become increasingly important with the new norms of remote work. While it’s true that the pandemic is going to leave its mark, big data technologies and AI can ensure that your financial productivity can thrive without any form of compromise on the quality of work.
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