Business Expense Fraud And Its True Costs

Everybody does it. But the days of everybody doing it may be short-lived.

The “it” is business expense fraud, which is no innocuous practice. Numbers from a recent Chrome River report peg the impact — and here, only in terms of dollars — at $2.8 billion annually in the United States alone. That tally comes in tandem with a survey of more than 1,000 business travelers about their expensing habits (and these travelers are no strangers to the road, with at least three trips under their belts annually). The results found that a bit over 94 percent of respondents said they do their expense reports in an honest and forthright manner. But the remainder — that roughly 6 percent — comes to represent about 1.1 million businesses travelers.

The profile brings forth an average “fraudster” who fits a few key demographics: in his mid-40s, white, male (hence the “his”), with an average fraudulent tally of roughly $2,500 annually. At the high end? A whopping $25,000 annually.

In an interview with PYMNTS, Chrome River’s Tim Wheatcroft, head of corporate communications, and Bill Hanfrey, partnerships director for Europe, said that the most egregious violations — and where inflation is most easily tacked on to expense reporting — comes within the dining expenses that are charged to a company (including jacked-up tip expenses).

Regardless of the business expense that may be used to hide personal expenses (or just used to raid the corporate coffers), Wheatcroft noted that “a lot of this [fraud] has to do with the technology,” or lack thereof, “that is used to keep track of expenses. More than 70 percent of people we surveyed still use manual processes, such as a traditional Excel spreadsheet.” That leaves room for data manipulation and also for the lack of automated oversight that can help set, monitor and alert travelers to expense limits.

Similarly, said Hanfrey, the corporate expense policy may not be all that well-delineated, with some policies “straightforward” and as brief as two to three pages, with others, especially among larger firms, stretching to as many as 15 pages.

When asked by PYMNTS about a “hard stop” that might prevent a traveler from expensing anything above a certain amount for, say, a meal or items at a hotel, Hanfrey stated that automated systems can be flexible enough so that a line-by-line review can take place, with one suspect item flagged, which allows for other items to be reimbursed as normal (rather than holding up the whole process for cash to be returned to the road warrior). In addition, direct payments can be made to a user’s bank so that reimbursements can be made in as little as one to two days.