Scared Straight: Expense Fraud & 5 Ways to Prevent It

Airfare for a cancelled flight. A $50 travel meal of Ketel and sodas. Pay-per-view movies lumped into the nightly hotel room rate. Expense fraud is easily overlooked due to its seemingly insignificant financial impact relative to other risks a business faces day to day.  When committing expense fraud or turning a blind eye on an incident, it’s easy to believe a few bucks here and there won’t hurt but there is more to consider. Expense fraud affects companies far beyond the financial realm. It deteriorates ethical culture and could evolve into very serious problems if an organization ever undergoes an IRS audit. In fact, companies typically lose 5% of their revenue to fraud each year, resulting in $3.5 trillion projected to be lost globally (Association of Certified Fraud Examiners, “2012 Report to the Nations”).

Without clear and firm guidelines of expense reports, employees are left making assumptions and are more likely to inflate or submit fictitious expenses. Moreover, lack of proper documentation may result in prosecution if the company undergoes a regulatory audit.

Tallie-Expense-Fraud--travel-2014

If you’re worried about this often overlooked threat – we’re here to help. Follow these 5 easy steps and protect your company from falling victim to expense fraud:

1) Establish and enforce detailed policies for expense report submission

Define your company’s set of expense report rules. Some examples include: expense report submission within # of days post transaction; receipt requirement for expenses over $25; hotel receipt itemization coded to its respective category (pay-per-view movies go under “Entertainment,” and room service belong to “meals”), etc. With today’s latest expense report software, you can create custom policies by project and enforce expense dollar limits by category, by day or by item. The more specific the expense policy, the safer you’ll be from questionable reports or rejections, and faulty employee assumptions.

2) Have backup plans in case of an inadvertent internal policy violation

The reality is that exceptions may occur regardless of the clear guidelines. You have the choice to immediately reject the expenses, or have a protocol that specifically deals with situations like this. We recommend the latter, as the first indirectly encourages employees to provide falsified proof in order to make their expenses fly. We recommend an expense report software with out-of-policy options that immediately alert the employee of violations prior to submission – so you don’t have to waste time manually checking.

Example scenario: an employee was running late to a conference and forgot to ask for a receipt for his taxi ride. Considering a receipt is a requirement for ground transportation, what other evidence can this employee supply in place of the missing receipt?

3) Design and carry out proper expense review procedures

An effective expense review flow should involve the project manager or a supervisor, as she is familiar with what expenses are required and can spot suspicious transactions more easily. In addition, it’s ideal to have a secondary review of the expenses by a finance or accounting associate before reimbursing the employees. Rather than focusing on each expense’s necessity, this secondary reviewer identifies any noncompliances with the company’s expense policies and ensures the integrity of supplemental documentation in case of an internal or tax audit. Custom approval routing is a critical expense report software feature to invest in that automates and customizes expense review and approval based on your company’s policy.

4) Utilize data analytics to stay on top of expense reporting trends and reimbursement status

Graphs and charts are handy when it comes to viewing the distribution of expense reimbursements by category/employee/projects, etc. Maintaining a consistent expense reporting practice and staying on top of the reimbursement status also minimizes the chance of delayed or duplicate reimbursements.

5) Investigate when necessary, and remember, it’s all about the “tone at the top.”

The best practice to prevent expense fraud is diligent review, however, some perpetrators might still fall through the crack despite your best efforts. Therefore, it’s crucial to communicate company guidelines and educate the consequences of expense fraud to the employees. Two guidelines we recommend: 1) clearly convey every expense policy violation – small or large – will have consequences; and 2) demonstrate equal treatment across all levels of expense policy violators. After all, copycat behaviors are common at the workplace, and establishing the right “tone at the top” would help foster good ethical culture across the entire organization.

When considering the expense software solution that not only streamlines your company’s workflow but also safeguards you from expense fraud, Tallie successfully does both. A user-friendly mobile app, automatic data import, smart matching and categorization make expense report creation a breeze; while Tallie’s duplicate expense auto-alerts, immediate, “along the way” out-of-policy flags, custom expense limits, and policy-based approval routing will keep expense fraud incidents at bay.

Which of these 5 tips are you and your company following to protect against expense fraud?

Tallie Talk: Demid Potemkin, VP Product Strategy

Demid Tallie Talk Product Strategy

Today we sat down with Tallie team member Demid Potemkin and asked him to share a little bit of his Tallie story with us. In our office, Demid is known for lots of things – VP of Product Strategy, coffee aficionado, blue sky thinker, renaissance man, deep talker (usually over a delicious cup of Sightglass Coffee), the spark. We are big Demid fans and are proud to introduce him to you today.

A Day in the Life of Tallie’s Product Guru:

My role is to guarantee Tallie is the finest answer to our industry’s expense management problems. The world of Product Strategy touches many aspects of the product, from data research all the way down to evaluation and design.

To accurately define the problem and determine the ultimate solution, I’m immersed in the market every day. I strive to understand what the users are looking for, including people creating expense reports, approving expense reports, and processing expense reports. I listen to business owners and accountants and learn about their expense management practices and identify the most time-consuming tasks. I harvest feedback from accountants and accounting departments and grasp the role of an accounting software within the accounting process.

Connecting, listening and learning are the necessary steps to our ultimate goal – to automate the most time-consuming components of the expense management process and provide our customers more time to focus on their customers.

My Favorite Parts of the Tallie Product Design:

The workflow. One of the biggest complaints we receive from accountants is that people never submit expense reports on time and they have to chase people to do so. The old model prevented people from capturing their expenses easily and accurately in real time, requiring significant time for manual entry on the back end.

So we pushed a brand new workflow of expense management where expenses come first, and reports come after. Because you gather expenses as you go along, we switched the workflow around to allow you to capture receipts first, and then creating reports becomes like a “packing” exercise.

Another one would be the tile page (Purchases). The graphical tile view is easy to read – it allows users to quickly glance through a transaction and see what information is missing.

My Proud Tallie Moment:

The name Tallie was my baby. The initial idea was SpringAhead Go, however it was easily mixed up with the original SpringAhead. So I sought out a name that felt friendly and approachable. But for the details of how this name came to be, that’s  a story for another day.

My Pre-Tallie Life:

I’ve had my fair share of career adventures with lots of twists and turns.

I went to school for electrical engineering which established my strong math and science background. After graduation, I dove head first implementing large mainframes and computer solutions in Europe for Fortune 500 companies like HSBC and Barclays, allowing me to get a firm grasp of the financial industry.

My second career was in design, which I fell into by chance when an advertising agency hired me to set up a network between multiple office locations. Thanks to the Internet boom and my tech-savvy reputation in the company, my job evolved into the Director of Interactive. I worked as the liaison between the designers and the engineers on website projects. A few years later, I decided to start my own design company focused on startups and their website design.

SpringAhead, Tallie‘s parent company, was initially a client of mine. As I collaborated with CEO Chris Farrell, we quickly realized that we had very similar passions and he invited me to join the company. I joined, grew the team, evolved my role into product design…and here I am today.

How to Gain Trust in the Industry:

Listen. Really listen. I’ve spent a lot of time with accountants. And I’ve come to realize that the industry has been around for a long time but hasn’t gravitated to one solution because no one has ever asked the accountants what they truly need. Engaging with our channels, including Chris’ network, accountants, and the Product Expert Team, who interact with the customers on a daily basis, allows us to determine the key components of an expense management product.

I’ve learned that these people just want to be heard and that’s indeed a wonderful thing about this industry, otherwise we’d be making decisions in the dark.

Why I Love Working on Team Tallie.

I learn from every member of our team. Because we’re a very small and close knit group, we collaborate cross functionally, freely share our opinions and participate in the decision-making process for every big and small project in our brand. Until Tallie, I never had this type of team dynamic and it’s what I look forward to every day.

If I Had to Eat One Cuisine For the Rest of My Life:

Mediterranean cuisine for the traditional category and California cuisine as the modern spin-off. I know, that was two!

My All Time Favorite Food:

Avocados. I grew up in New Zealand where avocados are everywhere!

Words To Work By:

The philosophy of Tallie focuses on building an engaging team, encourages openly sharing ideas and continuous learning from each other. That’s really why I came onboard to help the team.

I think as we evolve in our careers, we must keep in mind that everything we do is temporary, and we should enjoy and embrace everything we do at any point of time and learn from it.

“Embrace what you have, because you’ll never have it again.”

 

Demid would love to hear from anyone who has great ideas to share. To get in touch with Demid, send an email to info@springahead.com