How to Prevent Per Diem and Expense Report Fraud

Employee expense report fraud is one of the most prevalent dangers to a company’s assets. Even per diem claims have recently come under scrutiny because of several high-profile fraud allegations. How can a company protect itself in the face of a projected $3.5 trillion global loss to fraud each year?

Tallie has written in the past about how to prevent expense report fraud:

We’ve also developed a comprehensive guide to finding expense reporting software that can, among other things, automate your compliance review. Download it here.

But we wanted to revisit this topic on the Tallie Blog to not only share how we can help prevent reimbursement fraud, but per diem abuse as well.

Preventing Per Diem & Expense Report Fraud

What is per diem?

Per diem (meaning “for each day”) allows companies to give a pre-set amount of funds to their employees in advance, rather than reimbursing actual employee expenses for things like meals and lodging.

For example, a $200 per diem would mean that an employee receives $200 to spend on travel expenses that day. By contrast, under an expense reimbursement system, that employee might spend $180.46 on a ticket, submit the amount on their expense report, and be reimbursed for the exact total.

When is per diem a good thing?

As an employee, per diem allows you the freedom to choose how you want to spend the per diem allowance. Let’s say you’re a pretty heavy sleeper, but you can’t stomach the idea of visiting a conference in Maine without trying a lobster dinner. You might choose to stay in a crowded budget motel, leaving more money to put towards your big meal. Of course, some companies specify how much of a per diem can be spent on meals as opposed to lodging or other incidental expenses, so be sure to read the rules before ordering the surf ‘n turf!

As an employer, per diems mean no surprises when the expense report comes in. If you know that your employees will receive X amount of money on X amount of travel days this year, these costs can simply be budgeted in advance. And since your employee has a set maximum for a meal budget, they are less likely to set you back for the cost of a $50 steak or $200 in room service. Any expenditures over the allocated per diem amount must be covered by the employee.

What are the dangers of per diem?

Because hotel and restaurant rates vary based on location, it can be difficult to ensure that the same pre-set amount will be appropriate for every trip. While the GSA provides yearly per diem rates for individual counties in the United States, seasonal prices fluctuate dramatically for both lodging and transportation.

For example, a reasonable rate for traveling in New York City the Saturday before New Year’s Eve is much higher than that for a Wednesday in March.  Some businesses choose to establish on-season and off-season per diem rates for different locations, but these must be constantly checked and updated to remain effective.

Per diems may also inadvertently encourage risky or unethical behavior from your employees. On the one hand, a fixed allowance might motivate your team be frugal with company funds. On the other hand, an employee who wants to pocket any leftover cash from their lodging allowance might choose to stay in a dangerous part of town in order to maximize their payout. Another might ask for per diem to pay for meals at a conference in which lunch and dinner were included with her ticket. The latter is known as “double-dipping,” and may also manifest as employees collecting per diem and then submitting an expense report for reimbursement. Someone might also try to claim that visiting two conferences in separate towns on the same day qualifies for 2x the per diem, while another might leave at 4:00 in the afternoon and ask to be reimbursed for a full day’s worth of meals.

Oftentimes, whether in business or government, receipts are not required to justify per diem use. Without records to show how that money was (or wasn’t) spent, it’s very difficult to prove whether or not food- and lodging-specific funds are being spent appropriately.

Per diems are commonly used by government agencies to provide incentives for legislators to take part in optional committees, events, and special sessions. But a state lawmaker from Pennsylvania is currently in hot water over potential per diem fraud, facing allegations that he deliberately took advantage of the state’s per diem program. Critics cite the fact that even though the House had only 81 days in session, Rep. Sainato logged and received per diems for 192 days on the job. A New Mexico representative was also recently accused of double-dipping her meal expenses–in addition to collecting her per diem, she allegedly sought reimbursement for meals from the state’s funds as well as from her campaign account.

The truth is, whether your company deals in per diems or reimbursable expenses, any system that doesn’t require documentation in the form of receipts is at risk for fraud. But there is good news: with the right system in place, expense abuse can be prevented before it starts.

How can I prevent per diem or expense report fraud?

To set up per diems in Tallie, you must first create a new expense category. Then enter your amount into “Fixed Rate” and map it to the service item or expense account you wish to operate as per diem. Some companies choose to provide a set amount of dollars per day regardless of expense type, while others choose to get more specific. For example, you could choose to set up one new category as “Per Diem – Food” and use a rule to reimburse up to X amount of dollars per employee. You could then set up another as “Per Diem – Lodging,” good for up to Y amount of dollars, and so on. Here we’ve entered $71, the GSA’s required minimum for meal per diems in San Francisco.

Tallie blog expense report per diem

To help prevent abuse, Tallie allows administrators to create policies for each individual expense category, including per diems. If you opt to require receipts for any and all per diem expenses, our smart fraud detection will automatically flag reports that do not provide the appropriate documentation.

Tallie blog expense report per diem

To prevent double-dipping, Tallie can also detect and alert you to potential duplicates, so that the same receipt can not be used to justify multiple meals or hotel stays. By taking advantage of Tallie’s detailed, customized expense report policies, your company can reap the benefits of a per diem system while minimizing the risk.

Only you know whether per diem or expense reimbursement is right for your company. Our job at Tallie is to make sure whatever system you’ve created runs smoothly, efficiently, and safely. For help configuring our features for your chosen accounting system, contact our Product Expert team at support@usetallie.com or 888-874-1118 Ext 2.

Auto-pilot your expense reports FREE for 14 days! Sign up for a fully-functional free trial – no credit card or commitment required. You can also request a walkthrough from a trained expert. Contact our team to schedule your free Tallie product demo at any time.

Making Life Even Easier for Tallie Administrators

The current pandemic has made effective expense management even more critical for all organizations. Understanding the status of unapproved expenses is vital for finance teams and accountants to effectively forecast cash flow, which is essential for organizations to thrive in this challenging economic environment.

That’s why we’re excited to announce the launch of Tallie Administrator Overview, which is available immediately to all Tallie customers as part of their subscription. Tallie Administrator Overview offers a panoramic view into the status of all expenses in the system, even if they haven’t yet been submitted by end-users or approved by managers. 

The solution gives expense administrators straightforward insights into how much employees are spending, and also enables them to understand the status of every employee’s expenses, without having to switch user views. 

Not only can administrators view expenses at each stage, they will also have the ability to remind users to submit expenses, push unsubmitted reports to the approval process, or approve on the managers’ behalf. This ability reduces the potential for organizations to be caught off-guard by large unsubmitted expenses, and the overall insight that Tallie Administrator Overview provides makes it easier for administrators to have a holistic view of all outstanding employee spend, enabling more effective and efficient financial forecasting.

Key features of Tallie Administrator Overview include:

  • Remind users of pending unsubmitted reports and remind approvers to review submitted reports.
  • Submit unfinished expense reports for approval.
  • Approve expense reports on behalf of your assigned approvers
  • Easily sort through expense reports of all states with a variety of criteria, including submission date, amount and approval date.
  • Click on any user’s submitted or unsubmitted expense report to view all transactions.

We’re confident that this new solution will be a big help to all Tallie customers, both as we navigate the current financial climate and as we move forward. To learn more about Tallie Administrator Overview, create a 14-Day Free Trial today!

Reaffirming Our Commitment to Tallie Customers

When Emburse brought together six market-leading expense solutions back in January, we were committed not just to maintaining each of those solutions, but also to continuing to invest in innovation across our portfolio. 

As the global pandemic has caused major disruption to the economy, the need for organizations of all sizes to effectively track and control spend has never been more critical to their survival. With that, we’re doubling down on this commitment to bring new capabilities to Tallie even more quickly. Being part of Emburse enables us to continue this innovation, even at a time when other organizations are reducing investment in new products.


Tallie already debuted premium services and support at the end of 2019, offering rapid response turnarounds as a subscription service. Very soon, we are launching Tallie Administrator Overview – a powerful new tool that gives administrators deep insight into an organization’s outstanding expenses, enabling them to manage spend and forecast cash even more effectively.  
 

Additionally, over the course of 2020, we plan to offer even more enhancements to Tallie as we bring together the best capabilities from each of the core expense solutions across Emburse, in service to our collaborative success. This includes a launch of an expense report audit service, a travel-booking platform to prepare you for return-to-business, and continued enhancements to Tallie’s receipt processing.  We also invite you to offer us feedback on ways we can make Tallie even better. Please feel free to leave any suggestions at ideas.tallie.com.
 

Tallie is a vital part of the Emburse family and will continue to be for years to come. We’re thankful for your ongoing support as we navigate the current business environment and humanize work for our 4.5 million users around the world.

Best,
Eric Friedrichsen
CEO
Emburse

Alcohol & Reimbursable Expenses: What’s Extravagant vs. Ordinary & Necessary?

What is alcohol’s role in the modern business world? Is alcohol able to be included in business expenses?

The relationship with alcohol, historically, is complicated. Alcohol as a beverage has been around for ages, with some of the earliest documentation dating back to 7000 BCE. That means that humans have been consuming alcohol for over 9,000 years! Now, the relationship between alcohol and societies has seen its ups and downs. Some could argue that a lot of greatness came from the convergence around alcohol, like the building of nations and the works of Ernest Hemingway and Edgar Allan Poe. While others could argue to the destruction it can cause, like the tens of thousands of deaths every year that are due to alcohol related incidents.

This article walks through the tricky relationship between alcohol and reimbursable business expenses. 

Alcohol and Business Expenses

Alcohol is in business. Now, by no means should alcohol consumption be pressured upon anyone, but it’s something that is very commonplace in society. A 9,000 year old habit won’t die easily.

Is Alcohol a Reimbursable Expense?

The short answer is yes, alcohol is a reimbursable business expense, per the IRS. According to Publication 463 by the IRS, a business-related meal expense “include(s) amounts spent for food, beverages, taxes, and related tips.”

The longer answer: The terminology used by the IRS on this topic is actually quite vague, and leaves a lot to the individual auditor’s opinion in terms of alcohol expenses that keep your business expenses compliant. Never in the publication does the IRS state a specific quantity or dollar amount as “the line.” So, it’s hard to say exactly what is ordinary and necessary versus lavish and extravagant when it comes to expensing alcoholic beverages.

When discussing this topic with Tallie’s CEO, Chris Farrell, we both agreed that taking Richard Branson for a business meal and expensing a $500 bottle of wine for the three of us would probably get the “OK” from the IRS. But, doing the same for an average client would likely not pass. This would suggest the qualification of “ordinary and necessary” is largely scenario-based.

Now consider taking a client to dinner and drinks, then expensing $100. The IRS probably won’t bat an eye. But, if you spend $500 on that same client, the expense might not pass. In this case, the qualification of “ordinary and necessary” is dollar based.

But, what if you buy multiple drinks for $50 or, in the same scenario, buy a single bottle of wine for $100. In this situation, the pass/fail will probably fall on the quantity of alcohol.

Confusing, right?

Now picture your own scenario. Are your alcoholic expenses judged on scenario, price, or quantity? Not only are the guidelines nondescript, but now there are three separate “options” for which your expense on alcohol can be deemed lavish or ordinary.

Expensing alcohol is an extremely tricky process and there’s no black and white cut-out for you to reference. So when drinking alcohol on a business work trip or client dinner, remember this: when in doubt, don’t expense it or speak with your finance team.

Have you experienced a situation that involved expensing alcohol? Leave your questions and stories in the comments below!

We’ll Continue to Be Here for You

At Tallie — and across Emburse — our customers are at the heart of all we do. We’ve been paying close attention to the coronavirus (COVID-19) situation and remain vigilant and proactive in our approach and response. In challenging times like these, there is no higher priority than the health and safety of our employees, and minimizing impact to our customers, partners, and business. 
 

We have taken a number of precautionary measures to protect our employees in all of our locations. In addition, we have a business continuity plan in place that is designed to minimize any disruption to our business, and in particular the support we deliver for our customers and partners.
 

Fortunately, we have not experienced any business impacts or degradations to customer service due to COVID-19. As a cloud solution provider, our software is delivered through leading hosting companies, using multiple hosting locations around the world. In addition, our internal systems are all provided by top-tier SaaS vendors. Our customer service teams are located in multiple locations around the world, and we are able to conduct remote work through a variety of online communication (including phone systems) and collaboration tools. We will continue to use our tools to provide ongoing support in the event of any disruption.
 

Keeping our operations up and running is critical. We are confident in our ability to respond to the challenges that COVID-19 may present, and we will work hard to ensure that our customers and partners continue to enjoy the same high level of service and support they’ve come to expect from us. 
 

Speaking on behalf of our global team, we appreciate your trust and confidence as we navigate through this time of uncertainty together. If you have any questions, please submit them to questions@emburse.com. Any further updates will be posted on our Emburse LinkedIn page so we encourage you to follow this page. 
 

Stay healthy and safe,

Eric Friedrichsen
Chief Executive Officer

Six Major Global Expense and AP Automation Brands Become One; Emburse Appoints Eric Friedrichsen as CEO

Accelerated innovation across tailored solutions to benefit over 4.5 million business travelers across 120 countries

Los Angeles and Portland, ME — JAN. 16, 2020: Six leading expense and AP automation companies have come together to form Emburse, a single unified entity, naming industry veteran Eric Friedrichsen as chief executive officer.

Emburse brings together Abacus, Captio, Certify, Chrome River, Nexonia, and Tallie, which offer tailored, highly-configurable solutions for organizations ranging from start-ups to global enterprises. The company employs 750 people worldwide, serving more than 4.5 million users at 14,000 customers in 120 countries.

“We are so much stronger as one company,” said Eric Friedrichsen, CEO of Emburse. “With significant scale and disruptive technology, we’re redefining how organizations view travel and expense management and AP automation. We will continue to actively support and will increase our rate of innovation on each of our six core expense solutions which are uniquely tailored for specific industries, company sizes, and geographies. Coming together, we are now also able to share key technologies – such as real-time expenses, sophisticated data capture and extraction, and deep integrations with corporate cards — across the different solutions. No one else in the industry has the ability to innovate as fast with such a customer-centric approach.”

He continued, “Emburse’s vision is to humanize work and automate everywhere we can, using technologies such as machine learning. This will enable organizations to make faster, smarter decisions, empower business travelers to recapture lost nights and weekends spent doing tedious expense management, and help make our users’ lives — and their businesses — better.”

Eric has spent nearly 30 years driving growth for some of the world’s largest software companies. Prior to Emburse, Eric was global head of commercial, SMB and growth markets for Marketo, a division of Adobe. Before Marketo, he was SVP and general manager for SAP’s North American mid-market and ecosystems division. Previously, he spent eight years in leadership positions at SAP Concur, in addition to roles at Business Objects and Information Builders.

“I am extremely excited to work arm-in-arm with Nord Samuelson, who has been president of the organization since May 2019, and has a deep track record of operational excellence across multiple high-growth technology organizations. Nord and the executive leadership team are some of the best in the industry and I am honored to work with them,” Friedrichsen concluded.

For more details on Emburse and its solutions, visit www.emburse.com.

About Emburse
Emburse humanizes work by empowering business travelers, finance professionals and CFOs to eliminate manual, time-consuming tasks so they can focus on what matters most.

Emburse brings together some of the world’s most powerful and trusted expense and AP automation brands, including Abacus, Captio, Certify, Chrome River, Nexonia and Tallie. The company’s innovative solutions, which are uniquely tailored for specific industries, company sizes, and geographies, are trusted by more than 4.5 million users in more than 120 countries. Over 14,000 customers, from start-ups to global enterprises, including Boot Barn, Grant Thornton, Telefónica, Lufthansa Systems, and Toyota rely on Emburse to to make faster, smarter decisions, empower business travelers to recapture lost nights and weekends spent doing tedious expense management, and help make users’ lives — and their businesses — better.

For more information on Emburse, visit emburse.com, call 877-EMBURSE, or follow the organization’s social channels at @emburse.