We know that expenses fraud exists. We know that wherever there are expenses, there are those looking to exploit them. We know that UK businesses lose in excess of £100 million* each year as a result of employees exaggerating and falsifying claims.

But there is still so much about expenses fraud which remains unknown. We have allowed this to become a hidden problem; something which exists in the murky shadows of our business world.

This is despite expenses being the second highest controllable cost** for the majority of businesses, second only to salary. Rather than tackling the fraud, a business culture has emerged which, all too often, tolerates and legitimises it, which ‘turns a blind eye’. This reluctance to tackle the issue, together with the difficulties in obtaining accurate data, means that authoritative research has remained limited. It’s this lack of knowledge which drives webexpenses to continue the work to improve our understanding of expenses fraud.

Study findings

This guide will analyse the findings of a specially commissioned survey which involved interviews with more than 1,000 expense claiming employees working at companies throughout the UK. The results help to build up a more complete picture of the challenges which face the business world and how we can improve the effectiveness of expense management. This three stage guide will look at:

• Who does it?
• Why they do it?
• How to tackle it?

Who does it?

Building a profile

The headline findings from our research confirmed the scale and widespread nature of expenses fraud within organisations. Covering a range of employee types, from office workers to management executives, the overall number admitting to ‘bending the rules’ was an eye-opening 26 percent.

The scale of the problem means that there really is no such thing as a ‘typical offender’. But what the results do help to show are those areas that appear to be particularly susceptible to expense abuse.

Age range

The research found that workers in the 16-24 age range were the most likely to have submitted false or exaggerated expenses claims. The second highest group was found to be for employees aged 35-44.

These findings match research work by the CIFAS - a government backed organisation to provide support businesses in tackling corporate fraud. Enlisting the help of psychologists, CIFAS came up with two distinctive profiles for typical workplace fraudsters.

The first was a male employee, aged under 25. They characterised them as being opportunists who viewed expense fraud as a way to supplement what they perceived to be a low income. They were also the demographic shown to have the biggest disparity between earnings and lifestyle costs.

The second type they identified tallies with the 35-44 age range found in our research. These were typically male employees in their 40s, in a senior rank but having become frustrated at their role within the business.

This was often associated with employee resentment at missing out on promotions or feeling that they had hit a ‘ceiling’ in terms of career progression.

Industry type

One of the surprising findings of our research was the scale of the disparity in expenses fraud between the different UK industries. Those employees categorised as working in the Arts and Culture industry were significantly more likely to be ‘creative’ with their expenses. The lowest number of expense fiddlers were found in the legal and health sectors. The results suggest a general correlation between roles which creativity and risk taking with higher levels of expenses fraud. In contrast, the roles which require employees to take a more disciplined and regulated approach to their work are less likely to attract people who are liable to commit expenses fraud.

Why they do it?

While studies into expenses fraud tend to focus on the scale of the problem, much less research work has been done when it comes to the reasons and motivations behind the problem. It’s a lack of knowledge about something so fundamental - why do employees do it?

Inadequate monitoring

The main reason suggested by the survey data is simply - because they can. A startling 67 percent of respondents said they had never had any of their expense claims queried or challenged.

Given that one-in-four also admit to having exaggerated or falsified their claims, that represents a huge amount of money being needlessly drained from UK companies.

The lack of monitoring helps to create a cycle of fraud with each fiddled expense liable to embolden the claimant.

Culture of acceptance

Closely associated to the lack of monitoring is a feeling that ‘creative’ expenses are in some way accepted by employers. The results highlight the way expense fraud appears to have rooted itself within UK business culture, with 43 percent saying they felt ‘indifferent’ about fiddling their claims. Just one percent said they felt ‘very guilty’.

Outdated systems

The feedback from respondents creates a picture of organisations with outdated and inadequate expense management - a breeding ground for fraudulent claims. Most telling was the fact that 47 percent of employees said their company had not yet implemented an expense management system.

Unfair expenses policy

When asked for views on the way their employer handled expenses, the overriding message was one of frustration and annoyance. Expense policies were seen as being unfair and stacked in favour of the company’s interests over the worker.

While there will always likely be a certain amount of discontent towards an expense policy, it is the perception of unfairness which is commonly used to justify expenses fraud. It is how employees, who normally consider themselves as law abiding citizens, can ‘legitimise’ the act of fiddling their expenses.

How to tackle it

The survey results have provided a valuable insight into who’s committing expenses fraud and some of the reasons why. They provide some clear pointers as to what organisations need to do if they want to effectively tackle the problem.

Here’s a look at some of the lessons learnt and how they can be used as a guide to ensuring your company is adequately protected against expenses fraud.

Step one: Importance of expenses policy

The survey results show an impressive 90 percent of respondents confirming that their employers had an expenses policy in place. But that still leaves 10 percent of companies who do not. So the starting point for any organisation serious about tackling the problem is putting together an expense policy. The importance of this cannot be overstated. It sets the rules for how your organisation reimburse employees for work related expenses. You can find a comprehensive guide to create a robust expenses policy [here] but the basic rule is to make sure it’s clear, fair and manageable. Employees do no not have to like an expenses policy but they should perceive it as being fundamentally fair. 

Step two: Expenses management system

An expenses policy is only as good as the tools you have to manage and monitor it. In the past this was a slow and inefficient process of spreadsheets, forms and piles of paper receipts. Now, powerful digital systems have revolutionised the way expenses are managed It is a concern, therefore, to find that 70 percent of survey respondents said their company had not yet moved over to a digital solution. A system such as webexpenses has been shown to the most effective way for organisations to regain control of their expenses. Using a powerful cloud-based system, it has been shown to reduce processing time by around 25 percent when compared to traditional paper-based methods. It also allows organisations to make their expense policy a reality with customisable reminders and confirmation screens for users. With employees able to effortlessly convert receipts into a digital form using the smartphone app, the benefits of the system are felt throughout an organisation.

Step three: Monitor and maintain

One of the major advantages of a digital expense management system is the rich set of data it produces - everything from a breakdown of expense categories to the precise details of where and when each claim is made. The automated system takes the emphasis away from the grind of processing expenses and lets finance teams focus more on analysing and monitoring the data. With a greater understanding of the nature of expense fraud, this information can help identify trends and spot potential policy breaches. An important tool in this task is the ability to set alerts when spending limits are hit. It provides a powerful way to monitor the way that changes to expense policy can affect the amount of claims.