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Company owners need to be especially cautious in preventing employee theft when their operations involve the use of small business expense reports. According to the Association of Certified Fraud Examiners (ACFE), expense account fraud by employees was estimated at an alarming $600 billion in 2002! While many types of occupational frauds have been declining since 2008, the ACFE reports that incidents of expense reimbursement fraud are climbing.
How Small Business Expense Reports Help Prevent Fraud
The IRS doesn’t only require a detail report of expenses for its own protection—keeping comprehensive records is important for the business owner’s sake, too! Your company should have a very strong internal control system in place to track the activities of all expense accounts. The policies for expense reporting and reimbursement need to be clearly written and easily accessible for all employees who are involved. These policies should include:
- What is and is not an expense that is eligible for reimbursement
- The set schedule for expense account reports to be submitted
- The requirements for receipts to confirm the expenses that were laid out
Require your employees to adhere to standardized procedures for reporting and verifying the legitimacy of the expenses that they submit. By holding all of your employees to a company-wide standard, you leave less room for deception to slip through the cracks. The procedures you require of your employees can include a review process for all expense reports, comparing annual costs, and comparing actual mileage of distances traveled to submitted mileage expenses.
Hiring new employees is something that should be done very carefully. Perform comprehensive background and reference checks for all potential hires before making any job offers. When you go the extra mile to find quality staff, you put yourself at a much lower risk for becoming a victim of fraud.
Although expense accounts can become a black hole for loss if not carefully monitored, don’t allow that fear to cause you to be stingy. With the competitive nature of today’s business world, it’s important for companies to allot a considerable amount of their resources to entertaining and accommodating clients and partners to maintain strong working relationships.
