“Business expenses” is a comprehensive term to define a company’s revenue being spent in investments, resources, employee salary and benefits, and even employee expense frauds. Even if the company provides a great deal of employee perks, A few of the employees tend to seek more. When they can’t get enough of it, employees look for other options, like theft of cash and confidential information, misuse of company assets, taking away company’s clients, submitting fictitious expenses, and more.
Employee expense frauds is one of the most common reasons for revenue losses in a company. The employers are not aware when employees illegally extract money from the company through unverified expense reports. Initially, it may seem a matter of a few pennies but in the long run, it all sums up to huge losses.
However, if free-form invoices and expense reports are looked through in detail and guidelines are cleared beforehand, such frauds can be controlled effectively.
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Here are 5 ways to mitigate employee expense frauds.
1. Define clear policies for submitting expense reports
Loopholes in employee expense reports are the primary root cause of employee frauds. Employees often manipulate these reports to add mischaracterized, fictitious, overstated, and multiple expenses.
To prevent them, you need to set clear rules for expense reports and ask your employees to strictly abide by those rules. For instance,
- Set a fixed timeline to submit all the expenses after incurring.
- Ask for expense receipts for purchases more than say $20.
- Consider multi-category purchases into specific items like meals, entertainment, etc. so everything gets covered clearly.
2. Employ intelligent systems in place
It applies to both employee expense report systems and receipt data extraction software.
Even if you have a ready handbook for your employees to create an expense report, most of them do not follow it. Hence, train your expense report systems to give automatic alerts to your employees who violate rules while creating reports. For example, the system must be able to spot duplicate transactions and policy violations, and highlight them right away.
Similarly, train your receipt data extraction software to look for any unauthorized entries while extracting data from receipts and processing them for approval. Check if the expenses mentioned are valid to be reimbursed by the company or not. This is known as intelligent document processing, wherein the receipts are contextually assessed and verified before extracting data from them. Such measures can reduce frauds to a significant extent.
3. Make your approval process robust and flawless
Mere OCR-based document scanning won’t be enough for tracking fraudulent expenses. You need to integrate something more reliable to your expense report systems so they spot even the minute discrepancies in the reports.
In such cases, incorporating deep learning and natural language processing algorithms in your expense report systems can help you detect possible anomalies in the reports. NLP algorithms are widely used for understanding a large amount of natural language data, and hence, can interpret the context of receipts easily.
Moreover, you can employ appropriate managers to review and approve expense reports. A double layer of authentication is never a bad option. Ask your managers to be careful while reviewing expense reports and approve only genuine business expenses.
4. Analyze expense report trends to track unusual expenses
Expense report systems should not just represent the amount to be reimbursed. But they should also be able to predict employee behavior by analyzing trends in the expenses. Incorporating intelligent document processing in your expense report systems will help you draw patterns in employee expenses which you can analyze to determine unusual trends.
For example, check if there are more than usual travel expenses mentioned in the report. Or, there can be a sudden increase in the cost of certain business stationery. Employees may mention a larger amount than the actual cost of the item.
This way, you can easily sense frauds in your company. All you need is an intelligent data analytics system to help you determine uncommon expenses.
5. Import employee expenses directly from credit card statements
If you think the manual expense report creation system cannot be trusted at all, one of the easiest ways to prevent employee expense frauds is to directly import expenses from employee credit cards statements.
This way, there will be no room for falsified expense claims and every purchase will be transparent. For this, you need to implement an intelligent document processing system in place that can import accurate expense data from credit cards and verify it before approval.
Moreover, the system is independent of human reviewers, eliminating the chances of typos, errors, and even favoritism.
Improve your expense management system today!
Employee expense frauds are common and before you can notice something fishy, you might have to face hefty revenue losses. Hence before you get into trouble, we suggest you look for a robust receipt data extraction software or incorporate an intelligent expense management system for your company.
KlearStack is one such data extraction software that combines the efficiency of template-less, end-to-end automated, and document decision support technology to intelligently process documents. To know more about how KlearStack can help you mitigate expense frauds, book a free consultation call with us today.