Expense claim fraud: the risks and how to avoid them

Most workers think it’s OK to bend the company rules on expenses every now and again, according to a survey of European finance leaders and employees. In fact, only 39% of respondents said it’s never OK. Are you one of them?

Another study quoted by Les Echos suggests that 12% of all expense claims submitted in France are potentially fraudulent, with the cost of these claims amounting to €700 per year, per employee. Businesses with fewer than 20 staff are the worst affected (15% of their claims are potentially false) but any business with employees who file expense claims is exposed to the risks of expense fraud.

In this article we examine what those risks are - and how they can be overcome.

Expense claim fraud refers to the act of falsifying or inflating business expenses in order to be reimbursed for a higher sum than was actually spent. It can be - and in many cases is - unintentional. Even so, claiming false expenses remains one of the most widespread forms of financial fraud.

1. Fictitious expense claims: these are claims for items that were never bought (office equipment, hotel breakfasts, taxi rides…) but that might be claimed with a forged receipt.
2. Mischaracterized expense claims: this includes claiming personal expenses as business ones; for example taking a friend out to lunch and pretending the friend was a customer.
3. Overstated expense claims: this occurs, for example, when an employee asks a taxi driver to provide a receipt for an amount greater than the fare, or claims 500 kilometers in mileage for a journey that was really only 200km.

Only a reported 28% of travel and finance decision-makers in a company say that they know what constitutes expense fraud. That figure would almost certainly be far higher if they fully understood the potential consequences.

1. Negative impact on profitability

Paying more than what is due is never going to improve a company’s bottom line. Even when the individual sums are relatively small (and they’re generally designed to be small enough to go unnoticed), they can accumulate fast. Such direct financial costs can seriously undermine a business’ long-term financial health. 

2. A waste of time

Even when done honestly and legally, expenses take time to process: 20 minutes per claim, for an indirect cost of €53. Battling false claims is even more time-intensive, with finance teams spending 17.4 hours per week on average trying to weed out fraud. That’s two working days each week that could be used more productively.

3. Legal repercussions

False claims can easily lead to legal worries. The tax office and collection agencies like France’s URSSAF are at liberty to investigate companies’ expenses and impose sanctions if they don’t comply with the law. Those could take the shape of fines, commercial restrictions or tax penalties.

1. A sackable offense

Submitting a fraudulent expense claim constitutes serious misconduct in the eyes of employment lawyers. Not only can offenders have their employment contract terminated, but they may also lose out on subsequent social security benefits and redundancy rights.

1. A criminal offense

Fraud can lead to legal action, fines and even prison sentences. Even where there might not be criminal proceedings, an offender’s employer may take civil action that results in recovery of any loss of business earnings plus fees for interest and damages.

Just under half of European employees surveyed by Opinium in 2021 thought it acceptable to over-claim on a yearly basis, for an average of €125 per false claim. Some 16% believe false claims are acceptable because their company doesn’t take them seriously. Does their company even have an expense policy? 63% didn’t know.

A lack of clarity seems, therefore, to be a factor.

Confusion over expenses can work both ways: many employees don’t bother to claim back some expenses because they see the process as too complicated. But this is not a good excuse for employers to keep the waters muddy.

A sound expense policy should lay out exactly which expenses can be claimed back and under what circumstances. It should also make clear how to submit a claim and which supporting documents must be provided.

Once that policy has been drafted, it needs to be easily accessible for all employees.

A positive atmosphere in the workplace is likely to reduce expense fraud. Or, to put it another way, employees who feel they’re treated unfairly are much more likely to file false claims to get back what they feel they’re owed. Around a fifth (19%), for example, claim they might fiddle their expenses to make up for overtime that wasn’t paid. Another 17% claimed it as compensation for excessive time spent travelling for business.

Regular random checks are essential in the fight against expense fraud. They can be carried out manually, by checking receipts against the claimed amounts. Simply knowing that such checks happen can dissuade many staff from trying their luck.

Using expense management software is a more efficient way of keeping expense claims above board. Digital solutions, such as those provided by Qonto, make submitting and approving claims less of a drag, and can automatically detect anomalies and suspect claims.

With automated software, there’s no need to spend 20 minutes submitting an expense claim. In fact, this technology can cut the expense processing time by four and eliminate those manual errors along the way.

Available on mobile so you can claim expenses when you’re on the move, expense management software saves employees and finance teams time and energy in the following ways:

• It makes it easier to enter expense details.
• It allows approvers to manage claims as and when they’re submitted.
• It cuts out duplicating data in accounting and payroll.
• It allows for automatic checks, payment limits and expense permissions.
• It can be managed in a few taps of your finger.

Adopting an automated approach to spend management will give you greater control over your business finances and make it easier for your employees to claim back what they’re owed. With Qonto, they just need to take a smartphone photo of a receipt, upload it to the app and let our algorithms do the rest. They get a claim approved and reimbursed quickly (as long as it’s valid), and the finance team gets to centralize all the data in one intuitive platform.

It means less paperwork, less fraud and more time to focus on what makes a business truly grow.