How to Tackle Expense Report Fraud

Tackle Expense Report Fraud - The Entrepreneur's CFO
Chris DeMaio, Manager - Outsourced Accounting Services

by Chris DeMaio, Manager

A touchy subject.

Fraud. It’s no one’s favorite subject. Especially when it involves your employees.

Put plainly, if your company provides expense reimbursements then your company has risk of fraud. Expense report fraud is a touchy yet important issue to address. Being a company that prides itself on building a transparent culture, we understand why that can be uncomfortable. That being said, one of the many ways to protect yourself from risk is to ensure you have appropriate internal controls in place.

Expense report fraud? There’s an app for that.

Here’s the 1,2,3 (and 4!) on how to build some internal controls around expense reporting with your employees or contractors:

  1. Provide company-issued credit cards. (Or don’t. But we highly recommend you do.)

Once upon a time, providing company-issued credit cards might have been more headache than their worth. With new technology, however, (see #2) those days are behind us. Besides other obvious reasons, providing a corporate card allows a company to more closely track employee spending and the exact amounts being charged. It prevents opportunity for personal and business expenditures to be mixed on the same card and with proper controls in place will ultimately save you time and worry.

Related Read: The business meal expense deduction lives on post Tax Cuts and Jobs Act (TCJA). Read more to understand the deductibility requirements.

  1. Get an expense reporting tool.

It’s likely no surprise that a cloud accounting service might suggest using technology to tackle expense report fraud. Ditch the accordion folder for an expense reporting tool. Hands-down, our favorite for streamlining expense reporting is, Expensify. The pros of adapting Expensify greatly outweigh the learning curve:

✓ Expensify will sync with many accounting systems including QuickBooks Online.

✓ It offers smart scanning of receipts allowing users to snap a photo of their bill and then auto-populates the fields. This increases efficiency and lowers the risk of lost receipts while allowing for review and audit to happen easily online in a timely fashion.

✓ Expensify’s Concierge feature automatically flags altered receipts and ignores duplicate receipts reducing the risk of reimbursing someone twice for the same expense.

✓ And now here is where Expensify really shines: when it syncs with your accounting system, it can automatically code expenses from both receipts and credit card statements to the correct expense account. This is a two-fold time saver for both your company and your employees. No more tracking down employees to code it themselves. No more missing receipts at month-end. No more submitting and coding monthly reports. It’s been taken care of on-the-go.

✓ Finally, by enabling Domain Control, (see #3) your credit card reconciliations have practically been completed before you even receive your statement! That’s what you call real-time bookkeeping!

  1. Turn on Domain Control in Expensify.

Domain Control is a “centralized company card management” aka beefed-up company card system that allows you to ensure your employees and Expensify users (identified using their emails at your domain name) are following your expense policy workflow.

Advanced reporting, automated workflows and company card monitoring lowers the opportunity for undetected fraudulent activity. Domain Control also allows you to import your commercial cards and connect bank feeds, connecting those feeds to your respective users which streamlines the reconciliation process.

Expense Report Fraud - Expensify - Domain Control
Expense Report Fraud - Expensify - Import Card

Expensify confirms the statement amount, identifies any outstanding expenses missing from an employee’s statement, and processes the reconciliation in a timely manner.

Here’s an example. Businesses with a number of people reporting expenses will know this particular kind of situation can slip through the cracks more easily than you might think: say your employee happened to upload an expense for reimbursement that had already been charged to the company card (whether intentionally or by mistake), the Concierge feature will flag the duplicate receipt and boom! Your internal controls are already tighter than most company expense workflows. Plus, you’ve prevented the headache of having to track down the employee to recoup the extra reimbursement.

4. Create a comprehensive expense policy.

While Expensify can help mitigate your risk, it’s important to still have an approver looking over all expenses being reported. Enact a policy that addresses the best-practice use of your corporate credit cards and Expensify. Then set policy controls, pre-approvals and compliance monitoring tools to further reduce expense report fraud. Remember to include any exceptions like missing receipts to help prevent any hiccups with your automated workflow.

Related Read: A good expense policy offers many benefits. It will help with training, process, budgeting and forecasting and reduce confusion. Use these tips we have compiled for when it comes time for you to draft an expense policy.

Implementing these steps greatly enhances the ability for the approver to look at those items that have been identified for further investigation (whether they are mistakes or intentional) without having to comb through every item on a report.  This also allows the approver to focus more on the overall submission and whether expense levels are reasonable and appropriate.

As a cloud CFO team, we’re not strangers to enlisting technological solutions to improve business operations so get in touch with us if you’d like to learn more about how to best set up your expense policy workflows. While you can never eliminate all chances of expense report fraud, by updating that “trusted” but not-so “trustworthy” accordion folder to a twenty-first century tool, you can certainly limit your risk.

Get the Granite Scoop

Subscribe to have all the icy cool details delivered directly to your inbox.

Read more of our blog posts…

Now that we’re part of one of Chicago’s most prestigious CPA firms, Ostrow Reisin Berk & Abrams, Ltd, you’ll also find us online at  With our ORBA colleagues, we’re positioned to offer you an expanded array of state-of-the-art services.