In an increasingly globalised world, with business travel spend projected to reach heights of $318 billion in 2016, fraud potential is at an all-time high. With opportunities to profit through various expense reimbursement fraud schemes, some are able to turn their reimbursements into significant sources of income. However, new advancements in travel expense management technology combined with proper internal controls can help businesses reduce fraud and control their travel costs. So exactly what type of fraud schemes are occurring in businesses and how can we curtail them with smart applications of technology?
Per-diems or daily allowances, a common denominator used in expense forms, originally stemmed from the difficulty associated with managing receipts and filling out expense forms. Rather than having highly skilled people, spending time and resource on paperwork, businesses just pay them a set sum per day for travel.
This in turn, could become a nice source of profit for even the most ethical of business travellers. For example, if an employee is given a per-diem of £75, they may go to a conference that includes meals and conference fees, meaning that with no associated cost to pay for, the employee still takes the £75 home. Over a four-day conference, this amounts to a costly £300.
As technology makes it much simpler for employees to manage receipts and complete expense reports, the use of per-diems, and the potential to profit from them, is steadily declining.
Historically, padding mileage reimbursement has been known as one of the most common ways to raise expense fraud cash. Through the use of paper log books, it’s extremely hard to validate that the mileage claimed was actually put on the car and furthermore, most businesses don’t spend the time and effort – leaving the door wide open for fraudsters to pad by a little or worse, a lot. For example, an employee might write that they drove from Manchester to London.
However, they might claim mileage from north Manchester to south London (244 miles) when they actually drove from south Manchester to north London (215 miles). Make that a round trip and there is a difference of nearly 60 imaginary miles. With new expense report apps that have GPS tracking capabilities, employees can tell their smartphone when they are starting and ending a trip and it will record the actual mileage based on the distance travelled.
Technology reduces the opportunity for fraud, however businesses must reinforce the technology with a policy of only accepting mileage submissions that use GPS tracking. If employees forget to turn it on, they simply don’t get reimbursed.
Another method for organisations to lessen the load of expense reporting has been to only ask for receipts over a certain amount, creating abundant amounts of opportunity for employees to put forward fake expenses under a certain limit. For example, imagine a no-receipt limit for breakfast is £15. If an employee stays for a week at a hotel, eats the daily free breakfast and then submits a reimbursement for £15 every day, the employee makes a quick £70 in five days.
Nowadays, it takes at most ten seconds to take a photo of a receipt before uploading it to an expense report using a smartphone. Moreover, through the use of expense apps, voice technology can be used to create receipts in an expense report even quicker. Alongside this, businesses using these types of smart expense apps can see a reduction in expenses if they lower their no-receipt tolerance even further.
Developments in expert report technology have made receipt management so simple that it’s highly practicable for organisations to ask their employee to take at most ten seconds to let them know where company money is being spent.
Unused airline tickets
Travel booking technology is beginning to tackle the management of unused airline tickets, a method that has previously been used by employees as a means to get themselves a free ticket.
An opportunity like this arises when an employee books and expenses air travel for an upcoming trip, which then gets cancelled and rescheduled for a later date and time. That said employee then books and expenses another ticket, when they could just pay a small fee and use the initial ticket. Consequently the employee now has a free airline trip at the expense of the company.
Previously there has been no method for businesses to keep track of this, but advancements in technology means that nowadays they can see where air travel is being spent. Whilst there isn’t a way to manage transferring a ticket back to a company for somebody else to use, organisations are aware of who has what ticket and can automatically apply for unused tickets to be used next time that particular employee travels.
Last-minute flight bookings
Last minute airline bookings have always offered potential for fraud. Specifically, knowledgeable travellers understand that they are different grades of fares dependent on where a ticket has been obtained. The closer to a travel date that a ticket is bought, the more it costs, with the more expensive tickets being easier to upgrade.
In 2015, airlines made significant change to their loyalty programme, making the potential for fraud here even more likely. Most major airlines no longer decide frequent flier miles by the number of totals miles flown but instead now figure these out by looking at how much money is being spent on the actual ticket. Thus, opening the door for opportunists to obtain upgrades and rewards through last minute bookings.
Now there are a few new ways in which expense report technology is able to tackle this. Embedded analytics is one method which can extract information from the ‘day purchased’ and ‘day travelled’ fields on reports and identify where there is a pattern of persistent late bookings being made.
Additionally, technology has made approval workflows much smoother, so that is now practical to require pre-trip approval. Before an employee can book a flight, they need to deliver an anticipated amount for the trip. Whilst there will also be genuine explanations for last minute bookings, a combination of technology and policy can assist businesses in identifying fraudulent requests.
Fraudsters are endlessly imaginative, but opportunities in travel and expense reimbursement are becoming fewer and further between. Anyone looking for quick profits and lucrative perks from fraud will have to look elsewhere if their organisations employ smart expense report technology.
Donna Wilczek is VP, Strategy & Product Marketing at Coupa