Spend reimbursement fraud – the company killer

  • Allan Rwakatungu
  • Friday, June 18, 2021
Spend-fraud

Reimbursement fraud is committed when company team members claim funds for fictitious or inflated expenses. 

This type of fraud is probably the most common of all company fraud. Statistics on reimbursement fraud are nonexistent in Africa, but in the United States it accounts for about 19% of company fraud – this gives you a clear picture of how big it is. 

A lot of companies that suffer from reimbursement fraud try to solve or mitigate this by introducing more processes, more red tape, more sign here and sign there creating more work for everyone in the organization. 

For an organization to thrive it must safeguard itself against fraud – but this does not mean policing your teams every step of the way like they are all criminals. 

It is possible to mitigate reimbursement fraud whilst giving your teams the freedom to spend

1. Company culture 

A first step in mitigating fraud is through company culture. Yes, technology can help but unless an organization has zero-tolerance for fraud and communicates this clearly – efforts will be futile. Team members need to know that if they inflate expenses or claim nonexistent expenses they are stealing from the organization and once caught, the repercussions are nonnegotiable. 

Once the correct culture is in place, the organization can then go about making sure that they make it easy for their teams to expense the business legitimately for company spend. 

2. Reduce process complexity 

Spend management processes in many organizations are complex and require a lot of work to get right. Even when team members want to do the right thing, spend policy is opaque, accountability is very manual and requires a lot of sign-offs leading to several mistakes. 

Technology tools like Xente can be used to automate spend management making reimbursement a breeze. The reduced complexity will reduce expense reimbursement fraud 

3. Disburse expenses in kind 

Company expenses do not always have to be disbursed as cash e.g. Instead of giving transport money if team members need to ride around town for team meetings, give them access to solutions like Uber for business so they can take rides and bill the business directly. If they need to make phone calls or access the internet disburse airtime and data directly. If they need to take upcountry trips, buy fuel or bus tickets. Reduction in cash spend will mitigate reimbursement fraud 

4. Take control – but give freedom. 

Many companies leave it to their teams to understand spend policy and do the right thing. They also introduce a lot of processes and red tape that tries to get control of the process but makes the process so much hard work for those involved. 

This is where technology innovations like Xente shine. Companies can use Xente to have real-time control and visibility of all company spend, and yet provide team members with tools that enable them to spend and account for spending without hustling. 

As an example, with Xente company money can be disbursed to a smart Visa card, and every time money is spent the transaction is automatically approved and reporting happens in real-time (Only outlier transactions that need a second eye are manually approved). Transactions can be posted to backend accounting ERPs avoiding the need for manual entry of receipts. 

Automating the spend control process gives finance and admin control and visibility of company spend and also makes it easy for teams to account for spending – and this curbs reimbursement fraud. 

5. Automate accountability and audit 

 For many companies, accountability and audit is a process best described as a nightmare. It involves digging through paperwork and receipts – and when left unattended to for a long time becomes impossible to match with what is actually in the accounting platform. This will usually not catch fraud cases like fake paperwork or double receipts. 

The best way to do this is the automation of accountability. Team members can be given ways e.g. an app to upload receipts immediately after spend. Using optical character recognition (OCR) technology receipt data can be automatically captured and then artificial intelligence (AI) can be used to weed out outlier receipts for manual approval. 

The technology can also be used to check if receipts are duplicated, probably forged, or within spending policy. 

If integration is done with a company’s accounting ERP, spend data can be automatically posted eliminating the need for manual data entry of receipts. 

The result of this is reduced manual work which means the accountability and audit teams have more time to focus on outlier issues – and this leads to less reimbursement fraud. 

Conclusion

To summarize this article – reimbursement fraud is a big problem for many companies accounting for a large percentage of the total company fraud. It can be mitigated by reducing process complexity (not increasing), disbursing facilitation in kind, rather than cash, taking control of the spending process whilst giving team members freedom to spend, and automating accountability and spend. 

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