Expense fraud is a common occurrence in many enterprises and organizations. Owners may be unaware that it’s happening or even be aware that it could be a problem. The practice can cost you dearly, reducing your profitability and hindering future growth.

It occurs when someone manipulates or falsifies costs or expenses for personal gain. The culprit can be employees, vendors or volunteers. It’s done to avoid paying out of pocket or to receive a larger reimbursement. It’s unethical, illegal and a type of financial fraud. All businesses and organizations are at risk.

Common Schemes

Expense fraud occurs at all levels each year. Some of the most common ways it’s committed are:

  • Claiming mileage that isn’t driven
  • Fake receipts for food, gas or lodging
  • Claiming a personal expense as one that’s work-related
  • Submitting duplicate receipts
  • Using company funds for personal expenses, usually in the form of a credit card)

Why People Do It

The most common reasons are for personal or financial gain. Sometimes the individual may not understand a company’s or organization’s procedures or policies. They may also falsify records to demonstrate they’re making quotas or target goals. It may be a form of rebellion against an employer they feel doesn’t value them. Others may simply feel that the company can “afford it.” Reasons aren’t excuses for essentially committing theft.

Talk with Your Accountant

No one can help your company or organization more effectively than your accountant. He/she will track all the expenses associated with your business, detect patterns of behavior, and bring it to your attention. It’s just one way that your accountant helps you efficiently and effectively manage your finances.

It’s essential to have a very specific reimbursement policy in place that spells out the consequences. It’s equally critical that someone is vetting all requests for reimbursement Make sure that the policy is included with the packet of papers that every employee receives when they’re hired.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today (843) 347-0849 and discover why our clients return to Peavy and Associates, PC year after year!