Protect Your Business From Employee Fraud
Eric Sikola is General Manager of ExpenseCloud.
For business owners, we all like to think that our employees are as committed to the overall success of the company as we are. If you’re lucky enough to find those who share your passion, it can be a beautiful thing. However, there will always be those employees for whom it’s “just a job.” And, unfortunately, you may encounter some who will intentionally try to sabotage the business.
Employee theft and fraud is a major drain on U.S. businesses. In fact, according to recent data, some $50 million is stolen annually by employees, with some 75 percent of employees admitting to stealing on at least one occasion from their employer. Most frightening, about one-third of business bankruptcies are the result of employee theft.
To be fair, not all theft or fraud is intentional. Sometimes it’s the result of employees simply not knowing how to handle expense reimbursement properly or sheer accident. Fortunately, there are many steps you can take to protect your business from theft and fraud — intentional or otherwise. In addition to a system of checks and balances and regular audits, here are six simple changes you can implement right now to mitigate the risk and protect your bottom line.
Establish expense policies that include systems for flagging possible policy violations, such as receipts exceeding a certain dollar amount. By setting thresholds and requiring expenses in excess of those limits to have a second review, you can eliminate the risk that these high-dollar expenses will slip through the cracks.
Require itemized receipts for billing categories that are subject to easy deception, such as meals or lodging, to avoid picking up the tab for a night of straight imbibing or a lovers’ weekend getaway. Every establishment will provide itemized receipts and employees with nothing to hide should have no problem including them with the expense report.
Request that names of attendees at a business meal or entertainment function are listed on expense reports. Even if you never do call them and verify the event, the fact that you could will be enough to keep employees on the up-and-up. Plus, it gives you an opportunity to compare the cost of the entertainment with measurable results.
Implement a corporate card program that sets value limits for expense categories against which employers can compare receipt amounts. Instead of a blank check, setting limits helps guide employees in making reasonable choices (caviar or flounder?) and helps the company better plan for expenses.
Require that physical addresses of starting location and final destination be identified in mileage reports. Simply stating “Chicago” leaves a lot of room for interpretation — employees could drive around town running personal errands all day and include that mileage in the expense report.
- Replace Excel or paper-based expense reporting processes with an automated platform that combines all of the above functions in a single, simple, foolproof system. Automating the entire process not only makes expense entry and approval more accurate and less prone to error or fraud, but it also makes the administrative process itself faster, easier and more efficient.
While thwarting fraud is a primary driver in implementing these policies and procedures, employees may bristle at the insinuation that they are or have been dishonest. When deploying these steps, present it as a system designed to make their jobs easier and more efficient, rather than a move to check up on them. By focusing on the benefits for employees, deployment of an automated expense system that dramatically reduces the risk of fraud will be much smoother with less resistance and fewer complaints.
The views expressed are those of the author and do not necessarily reflect the views of BusinessNewsDaily.