Best practices for preventing travel expense fraud in corporate travel

Companies regularly incur expenses for corporate travel and for regular business expenses. These expenses are a key part of a successful business, whether that be for day-to-day operations, or part of advancing a company’s strategic goals through business travel. Tracking, managing and auditing those expenses is fundamental to avoid potential loss. 

This is why corporate travel expense fraud is something that all businesses need to keep an eye out for. Why? Because it can considerably cut into your company’s profit and reputation. We’ll look at what travel expense fraud is and some key tips for preventing it. 

The employee generally reserves (or someone reserves for them) and then pays with a virtual payment, with a personal credit card or a company card. Depending on the system your company uses to book business trips, whether it be a travel management platform or individual OTAs or corporate travel agencies, settlement of expenses might be different.  Once the employee submits expense reports, their employer will reimburse them via a bank transfer or directly in their next paycheck. 

What you need to know about travel expense fraud: The risks

The threat of travel expense fraud is always a possibility, whether it be forged receipts, personal expenses being reported as business expenses, or when someone reports the same reimbursement requests more than once. Let’s look at some of the associated risks.

Financial Impact

Fraudulent expense claims can lead to significant losses for a company. Even those seemingly minute fraudulent claims can slowly add up, eating into overall budget and profitability.

Reputation

Expense fraud can undermine trust from other employees, clients, partners or investors. People want to work with reliable companies and companies who are regularly cheated may be seen as less serious and be flagged as questionable. 

Compliance and legal issues 

It is a legal requirement to maintain accurate financial records, and if companies aren’t careful, expense fraud can create discrepancies resulting in legal and regulatory issues.

Employee morale 

Fairness, integrity and transparency are important values for anyone working at a company, and when employees see that their colleagues are committing fraud and getting away with it, it can decrease their morale and maybe even reduce productivity. 

Operational efficiency

Detecting and dealing with expense fraud requires time and resources. By preventing fraud, companies can focus their efforts on more productive activities that actually increase their bottom line. 

Most common kinds of travel expense fraud

Just like data fraud, it’s easier to prevent it than to mitigate the effects of it after the fact. It’s important to identify areas that are more prone to fraud like: conference registrations, business meals, hotels, transportation, and mileage claims.

Here are some of the most common expense scams that businesses need to keep their eyes out for: 

Multiple reimbursement requests from several travelers for the same expense Expenses in amounts just under approval or receipt maximums Identical expenses requested by multiple employees Purchasing items that can easily be returned after reimbursement

Red flags

Look out for red flags like reimbursement requests for canceled trips, or multiple reimbursement requests for the same trip. You may also look out for abnormal travel patterns, those traveling to too many places in a short period of time. It is recommended for business owners and finance departments to look out for identical expenses being claimed by multiple employees, which may indicate collaboration in fraudulent activities.

Best practices for preventing expense fraud

Have a robust T&E policy

One of the best ways of preventing expense fraud is having a clear and comprehensive travel and expense policy, which ensures approved expenses are clearly lined out, and all employees know what their benefits are. Regularly review and update policies to reflect changes, inflation and make sure the policies are up-to-date. 

Have clear expense submission procedures

Ensure policies are clear so that original and detailed receipts are laid out, and employees are clear what they need to do in order to submit an expense claim. Be sure you have clear processes for submission of original, detailed receipts for all expense claims. 

Two-step approval process

Enforce multi-layer approval workflows to minimize unauthorized claims. This means that before a flight, hotel, and rental car are booked, you have approval flows in place to make sure those expenses are justified. Once approved, travelers can then proceed to book. When travelers are on the road they can upload receipts, keep track of them and upload to an expense report to get approval. And with an automated platform, expenses are easily approved or denied.

Regular Audits

Conduct annual travel and expense reimbursement audits to detect and prevent fraud. This will help keep everything in line and reduce the risk of fraud.

Employee Training and Awareness

Implement regular training programs to educate employees about expense fraud and prevention techniques. Foster a culture where compliance with expense policies is expected and rewarded.

Summing up what you need to know about preventing travel expense fraud

Preventing expense fraud is crucial to ensure effective use of resources, trust and compliance, and the ability to foster a fair and positive work environment. We’ve looked at some of the best practices, risks and signs that can help you determine whether your company is experiencing expense fraud. Working with a T&E management platform can help you have a closer watch on your travel and expenses.

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