How To Fend Of Expense Fraud: Ways To Prevent Fraud In Businesses

How To Fend Of Expense Fraud In your Business | Image Source: Pixabay

The sources of expense fraud are not always the employees — many times, it is the lax and ineffective processes, policies, systems, and practices that you use that lead to expense fraud. In this post, we will talk about the source and ways to fend off expense fraud.

There are several statistics that show how big a problem expense fraud can be for organizations. Usually running into billions of dollars, expense fraud is one of the factors that make a dent in the bottom line. This, of course, doesn’t have to be this way. There are many ways organizations can safeguard themselves from expense fraud and proactively prevent the scope of fraud from even occurring in the workplace.

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But first…

What Is The Source of Fraud?

Plainly put, the main sources of expense fraud are the employees. It is they who cut corners and try to slip in expenses that might not completely be covered under the company’s policy. However, what’s more important for the management to consider is the process and practices as a source of fraud. It is only then that they will be able to control it.

Employees would only do what you give them the chance to do — if you have a practice where expense reports are not verified thoroughly, employees will not think twice about slipping in illegitimate expenses, whereas if your process demands every expense report to go through a stringent validation process, committing fraud would be a lot more difficult for them.

So fundamentally, it is the practices, policies, systems, and tools that you use that gives rise to the scope for fraud. So first, the outlook has to change — understand where the source of the problem lies, and attack it.

While these are not a standard, the following are some of the factors that lead to fraud:

  • Lack of visibility
  • Lack of accountability among stakeholders
  • Lack of clarity in processes
  • Longer processing times which lead to fraud being uncovered much after it has been committed
  • Inaccurate data entries – intentional or otherwise
  • Lack of or inconsistent organizational expense policy

So to control fraud, one must start remedying these problems.

In the remainder of this post, we will talk more about how to eliminate these issues and make an organization free from fraud.

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Adopting expense software is the remedy that can have the biggest impact on expense fraud. It can single-handedly eliminate many of the above-listed issues, including lack of visibility and longer processing times.

Since the whole process is divided into steps, and either the stakeholder or the software takes on the responsibility of completing the task, there’s the assurance that someone is accountable for the completion of tasks.

Take approvals for example. Once an expense report has been approved, the same has to be notified to the next stakeholder so that further processing can be carried out on the report. However, the approver often neglects to do so, either forgetting it or thinking that it is not his or her responsibility. As a result, the expense report is sitting idle even when it is ready for processing.

When you have a software that understands when an expense report has been approved, it takes on the accountability of informing the other stakeholders so that processing can be done. Further, it should also send reminders to ensure that processing is done in time.

In corporate settings where people are quick to blame others but shy from taking accountability, a software application like this is a must to keep things running smoothly.

Another thing that a software does is to centralize operations, which means that actions are much more visible and transparent. Gone are the days when expense reports filled in by employees from a division are buried in paperwork and not available for effective scrutiny — all the filed expense reports must be available in the repository to perform duplicate validations or audits. Also, an expense fraud tracking software will enable you to control access and make it available to the right stakeholders, which means that senior managers will be able to validate expense reports of their juniors and staffs whenever they need to.


There is the transformation of the process with ensures that things move at a much quicker pace compared to traditional processes. There should be no actual paper-pushing involved — the entire process must be digitized, and reports should move from one step to another in a software application in a standardized and streamlined manner. The expense fraud tracking software must also automate processes, which enables users to complete their tasks in a fraction of the time it usually takes them to do it.

From data entry to approvals, many manual tasks must be automated and employees will need to spend very little time and effort on expense reporting.

These type of software improves service delivery among the stakeholders, which, in a process like expense reporting where multiple stakeholders have to collaborate, will be very helpful in ensuring that the process runs along without obstacles or bottlenecks.

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A Clear Policy

Technology can help with many things, but it is not the only thing that is helpful in eliminating fraud. Combined with technology, having an effective expense policy that clearly lists out all things expense management within the organization is quite essential.

Many times, fraud happens, and organizations cannot even take action since there is no policy that says which is a legitimate expense or which one is not. A lot of ambiguity exists in the process, and this allows employees to cut corners and skirt the rules in preparing and submitting expense reports.

The policy should list out the different aspects of expense management — the relationships among the different stakeholders, the flow of the process, the approvers and other supervisors, the accountability of all the stakeholders, the expense limits, the types of expense deemed legitimate and those that aren’t, the rewards and penalties for completing tasks, and so on.

The travel and expense policy is the most important document in expense reporting, responsible for the structure and effect of the process.

But then, the mere act of creating an effective policy is meaningless in controlling fraud if it is not conveyed to employees or not enforced effectively.

In both of these cases, a software will be of big help.

A software can, in fact, be programmed to follow the policy, which means that it will automatically keep away out-of-policy entries, and ensure that expense reports cannot be altered. If someone does try to submit a report without policy entries, the software should refuse submission, and ask for corrections in the report. Many of the fields in the expense report can also be pre-filled, which would ensure both speed and accuracy in expense reporting.

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To Sum It Up

There are many other things that you can do to tackle expense fraud in your organisation; however, many of them use a combination of the above-listed points. Using a software is inherently the best method as it stores all the data generated in the course of the process, and going back to verify and audit the reports becomes easier. However, if you do not have the man power to manage the software used to combat fraud, it might be worth considering an external company like Fraud Watch International. Hiring an external company will allow you to rely on them to manage your services and data to ensure you and your customers won’t be subdued to a form of fraud.

In all, fraud is one of those elements that have an avoidable adverse effect on the bottom line, and organizations should do everything they can to prevent it.


About The Writer

This guest blog post was written by James Maron, an author at Sutisoft Inc. He shares his views on SaaS and Cloud-based business management solutions.

Note: This article has been edited for style and substance.

If you’ll like to submit guest blog posts like this to, please read the guidelines listed here.