Four Steps Businesses Can Take to Prevent Expense Fraud

Expense fraud remains one of the most overlooked risks to a business' bottom line. From falsified receipts to inflated mileage claims, fraudulent claims can quickly mount up, leading to significant financial losses. According to the Association of Certified Fraud Examiners, UK businesses are losing over ?2 billion every year due to fraudulent expense claims.

According to James Rowell, founder of cloud-based expense management platform Capture Expense, there are four steps businesses can take to tackle expense fraud. What are some of the common types of expense fraud? Expense fraud can take many forms, but among the most frequent is the misuse of corporate credit cards, where employees charge personal expenses - such as groceries or family meals - to company cards, disguising them as legitimate business interests.

Similarly, fake receipts or fabricated invoices can be easily produced and used to falsely claim for reimbursement for travel, hospitality and other services. In some cases, employees may use company funds outright for personal bills, disguising them as legitimate office expenses. Mileage claims can be inflated to boost pay-outs.

Each of these behaviours may seem minor in isolation, but collectively, they can add up to significant financial losses if left unchecked.

1. Set clear and enforceable expense policies

A well-written expense policy is the foundation businesses must set to prevent expense fraud. Businesses must go beyond vague guidelines and instead create clearly defined rules on what can and cannot be claimed. This should include a breakdown of allowable expenses, spending limits by category, and the type of documentation required for reimbursement.

However, a policy is only effective if it's successfully enforced. Finance teams must set up a structured approval process with named approvers who understand their responsibility in reviewing expense submissions. For bolstered protection, businesses should consider implementing layered approval workflows, especially for higher-value expenses.

This will put finance teams in a stronger position to challenge any inconsistencies that may arise.

2. Conduct regular and targeted audits

Regular audits are essential in identifying suspicious patterns or fraudulent activity before it becomes a larger and more costly issue. Rather than wait for the red flags, finance teams should schedule periodic reviews of expense claims, prioritising high-risk areas such as frequent travellers, remote workers, or departments with higher spending thresholds. Audits should go beyond surface-level checks and instead scrutinise duplicate submissions and review receipt details for signs of editing.

By cross-checking claims made outside of business hours, on weekends or during holiday periods, this can help identify inconsistencies.

3. Educate employees on ethical expense practices

Businesses must ensure their policy documents around correct ethical practices are supported by regular, relatable communication, and training. Employees need to understand not only what's expected, but why these rules exist. This can be achieved through training and educational initiatives - whether in person, virtual, or via internal comms.

These sessions should cover what constitutes fraudulent activity, how to submit expenses correctly, and the consequences of dishonesty. This can include disciplinary action, repayment options, or formal warnings. For the training to successfully resonate, it's important that businesses foster a culture of openness and transparency.

Employees should feel comfortable raising questions and there should be anonymous channels to report suspected fraud without fear of backlash.

4. Leverage technology for smarter insights

Leveraging modern expense management software is a powerful tool in the fight against fraud. These platforms streamline the submission process while embedding real-time compliance checks, giving finance teams enhanced visibility and control. Automated approval workflows can instantly flag claims that exceed spending thresholds or fall outside company policy.

Importantly, advanced receipt scanning technology now includes the capability to detect AI-generated or digitally altered receipts, helping to prevent fraudulent claims that attempt to bypass traditional verification methods. By digitalising and verifying all receipts, these solutions significantly reduce the risk of tampering and falsification. Research found that companies that automate their expense management processes experience a 65% decrease in expense report errors.

By removing manual, time-consuming processes, leveraging technology does not replace human oversight - it enhances it.

As a result, finance teams can focus on strategic reviews, deeper and more extensive audits, as well as culture-building, all while remaining compliant.  

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