B2B Payments

Corporate FinTech Urges Business Owners To Wake Up To Expense Fraud Threat

Fraud is a threat that business owners often assume comes from outside the enterprise. That’s a misconception, however, and corporate FinTechs are now looking to raise awareness that a company’s expense report and reimbursement processes are prime areas for its own employees to commit fraud.

Research published this week from corporate travel and expense management firm SAP Concur warned that most survey respondents admitted that mileage-related expenses – for example, mileage of a taxi ride – are not cross-checked when expense reports are approved. SAP Concur surveyed employees in the U.K. responsible for authorizing expense claims at their firms, and found that despite these professionals’ failure to query mileage claims, 77 percent say they are confident in the accuracy of mileage recorded by workers.

Last year, employees expensed $222 million in the U.K. on mileage-related spend. Despite the high value of this type of expense, half of survey respondents said they analyze mileage claims “from time to time,” while only 20 percent analyze these claims frequently.

“Millions are spent on reimbursing travelers’ mileage expenses every year – and yet it would seem that businesses are taking what can at best be described as a relaxed approach when it comes to ensuring they’ve got the right checks and balances in place,” said SAP Concur Managing Director of SMB, U.K. and France, Dafydd Llewellyn, in a statement. “This throws up two potential issues. Firstly, and rather obviously, they are losing cash like a leaky bucket and secondly, mileage could be acting as a ticking duty of care time bomb.”

Concerns that employees are inflating their mileage to claim back more from their employers than they should may not be unfounded. Nor is it only the U.K. market where these concerns exist.

Separate research from Chrome River published earlier this year estimated corporate travel expense fraud to total $1.9 billion every year in the U.S., U.K. and Australia. The findings caught the attention of the National Society of Accountants for Cooperatives last month, highlighting Chrome River’s findings that while one-quarter of respondents have been caught committing expense fraud, the problem could be higher without the proper checks in place.

Analysts in Chrome River’s report pointed to the Association of Certified Fraud Examiners’ research, which estimates that expense fraud makes up 17 percent of all business fraud.

“The best thing a company can do to protect itself is make it easier for employees to do the right thing, such as implementing an automated expense management solution that can, for example, alert employees if they are trying to submit the receipt twice,” said Chrome River Co-founder and CEO Alan Rich in a statement when the research was published in May. “This type of gentle reminder can often be all that’s needed for employees to remain honest throughout the expense submission process.”

Concerns over T&E fraud surfaced once again earlier this month when expense report auditing solution AppZen announced the rollout of Insights, a feature within its Expense Audit offering that automates review of travel receipts.

In its announcement of the new solution, AppZen pointed to research from another T&E company, Certify, which found that nearly 43 percent of managers are forced to manually check line-item details on receipts to ensure that employee expenses are in-policy.

In a blog post, AppZen also pointed to its own research, which found that line items for amounts between $100 and $500 were flagged nearly 25 percent of the time – more than any other dollar amount category – by its technology.

“Our data also shows that AppZen historically flags around 10 percent (though that number goes down as we impact behavior) of line items for review across all audits,” the company said. “So if one out of 10 submitted items is potentially fraudulent, and the average amount of each instance is almost $100, that translates to millions in T&E leakage annually, especially for larger corporations.”

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