Oh those clever employees! The ones who buy something with cash, ask for a blank receipt, fill it in as a believable business expense and staple it to their expense report. Blank receipts from cab companies, hotels, and restaurants are favored along with double-billed plane tickets, seats and baggage fees. Coffee from Staples taken home instead of to the office, merchandise receipts marked as gifts to clients who never received them, charging movies to a hotel bill, or the “accidental” use of the company credit card on a business trip to buy everything from shoes to a pack of mints.
The Internet has made it easier than ever to fake receipts by offering Word templates to create customized receipts with fonts that resemble real stores, restaurants, and cab companies. Since the average investment in this fakery is around $40, you can expect that employees will turn in plenty of fake expenses to cover their costs and come out ahead.
Take the case of a sales manager with a client gift limit. While 75% of her purchases were for actual clients, she also used the card to purchase expensive gifts that she then sold on eBay.
So what is a responsible business owner to do in order to keep expense reports in check?
- Instate a zero tolerance policy for expense account fraud to keep employees honest. Announce that fraudsters may be subject to immediate termination if found out.
- Pay attention to expense reports at the manager’s level. One salesmen got away with fraud because he knew his busy sales manager never paid attention to details.
- Compare expense reports turned in by employees in comparable positions. If John and Joe have the same sales position, but John turns in $5K while Joe turns in $1K, there needs to be a good reason.
- Compare expense report spending to financial ROI. Only when sales trend higher should expense reports trend higher as well.
- Instate rules for spending limits and insist that traveling employees use certain hotels and restaurants so expenses can more easily be forecasted and verified.
- Train your managers who approve the reports, and alert them to trends in expense report fraud.
- Insist on receipts for everything so a $5 taxi ride doesn’t turn into a $15 ride.
- Instead of issuing company credit cards, consider company debit cards with limits. It makes the employee more budget-conscious. Salespeople who travel for the company would have a larger budget than those who work locally.
- Use automated expense management software with online expense entry, financial reporting and analytics.
- Hire a brilliant bookkeeper from Diana Louiso. In our biased opinion—the smartest move yet!