Expense Fraud: Catch it Before it Catches You

4 February 2020  |   11 minutes read

Cat litter.

Scratch card.


No, you haven’t stumbled across someone’s shopping list.

These are all items employees have managed to claim on expenses.

When we surveyed 2,500 British employees for our fraud reporting ebook, 38% admitted committing expense fraud. Most of it is subtle. The most common claims are:

  • Exaggerated mileage (27%)
  • Pub drinks (20%)
  • Office supplies staff keep to themselves (20%)
  • Inflated taxi fares (16%)

That said, it’s a big enough problem that it’s costing British businesses £1.9 billion a year.

So what drives employees to commit expense fraud? And, more importantly, how can you put a stop to it?

Why employees commit expense fraud

Expense fraud is like stealing from your employer. Darlingtons Solicitors’ Head of Litigation Professor David Rosen explains it’s also “a breach of your employment contract, breach of trust, [and] breach of fiduciary duty...

But despite the potential triple whammy of prison, reputational damage, and lost career, 60% of those we surveyed aren’t losing too much sleep. Most justify expense report fraud with one of the following arguments:

  1. They’ve earned the right to do it, because they put in lots of overtime or are away from their family and deserve a treat
  2. The company owes them. 57% of employees in our survey claim they’re out of pocket for work-related expenses. So, they argue, if they exaggerate the occasional claim, it evens out.
  3. Their colleagues are getting away with it, so why shouldn’t they take advantage as well?

More to the point, only 17% of those who commit expense fraud are caught. And in the majority of cases — 30% of the time — it’s ill-judged social media posts that are an employee’s undoing. Receipt anomalies or unusually high expense claims only catch people out 24% of the time.

This can cement the idea that you can get away with business expense fraud as long as you aren’t blatant about it. And the more staff continue to think so, the less guilty they’ll feel.

How to cut expense fraud

Business psychologist Dr Linda Shaw reckons two types of people commit expense fraud:

  • Reckless Ralphs 

Reckless Ralphs tend to be impulsive. They like splashing cash around, and don’t realise the company might not approve

  • Devious Dans

Devious Dans are more subtle. They try their luck adding small amounts whenever they can, whether it’s a box of Krispy Kreme doughnuts or their dry cleaning bill

Despite different spending styles, both share the same problem: they have trouble understanding boundaries. So if you want to stop expense fraud, you have to improve oversight.

The trick is finding a way to do it without being overbearing.

Expense report fraud harms your bottom line. But staff won’t be happy, motivated, or productive if they don’t feel trusted and empowered. And this also harms your bottom line.

Here’s how you can strike a balance.

1. Make your expense policy as clear and straightforward as possible

Netflix’s former Chief Talent Officer Patty McCord once said:

If you create a clear expectation of responsible behaviour, most employees will comply.

Patty McCord – Netflix’s former Chief Talent Officer

Netflix’s expense policy is five words long: “Act in Netflix’s best interest.” Going this minimal won’t necessarily work for your company. That said, it’s worth making your expense policy as simple and straightforward as possible.

If everyone’s clear on what is and isn’t allowed, they can’t claim ignorance or say they misunderstood.

2. Set limits

Trusting people to do the right thing is important. But it doesn’t mean you should give them the keys to the kingdom.

40% of employees we surveyed for our fraudulent spending ebook said they’d spend more responsibly if they had tighter controls. So it’s worth setting spending limits and enforcing them.

Knowing there’s only £500 petty cash to play with, or that the monthly travel and entertainment budget is £2,000, will force your staff to prioritise. Just as work expands to fill the available time, your staff’s spending often increases (and decreases) to fit the budget available.

3. Promote accountability

Does your expense management system leave a lot of room for human error? Or is it so complicated it’s easy for dodgy claims to slip through the cracks?

The less accountable everyone is, the more likely they are to play around with their expense reports.

The opposite is equally true.

32% of employees would be more careful with their spending if their colleagues could see their transactions. Similarly, 30% would be more careful if their boss got notified every time they used the company card. And 19% wouldn’t commit expense reimbursement fraud at all if they knew one of their colleagues had landed in trouble for it.

Put an end to expense fraud, with Soldo

An effective expense management process is key to tackling expense fraud.

But how do you streamline your expense policy, tighten controls, and increase accountability without doubling your workload? Or making staff feel like they’re being micromanaged?

Well, investing in Soldo could be the answer. And here’s why.

Keep everyone on budget with ease

With Soldo, everyone on staff gets their own prepaid card. And each card has a set limit that you decide. So, the intern could get £50 a month, for instance, while the CEO gets £6,000 a month.

This means there’s only so much someone can spend. And because each card is pre-loaded with company money, no-one’s out of pocket and there’s no need for reimbursement.

Stay in control of your expense policy… without breathing down everyone’s necks

By logging onto Soldo’s dashboard, you can control:

  • What individual employees can or cannot buy
  • What types of transactions they can or can’t make — contactless, chip and pin, online, and cash withdrawals (including how much cash they can withdraw)
  • Which countries they can or can’t use their card in

Keep everyone accountable, without drowning in paperwork

With company wallets, you can create one account with multiple users.

This means each team gets a digital wallet where you deposit their petty cash, travel and entertainment budget, and money for other costs. But because everyone has their own card, you can find out who has spent how much and on what at a glance by logging onto the dashboard.

Wrapping up

Employees inflate their expense reports by an average of £117 a month. That’s an unnecessary £1,404 a year hole in your budget.

Investing in a digital expense management platform like Soldo can help you slash these costs, take control of your company’s spending, and keep your employees accountable. All while empowering them to make better choices.

Want more insights on the state of expense fraud in the UK? Read our report about the extent of employee expense fraud and find out how much time and money Soldo could save you with our ROI calculator.

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