According to a recent study, businesses lose an average of 5% of their annual revenue to expense fraud. That’s a lot of money! Thankfully, Edgewater CPA Group is here to help you mitigate this risk through expert accounting services. So, let’s look at five steps you can take to prevent expense fraud in your business.
1. Understand the Types of Expense Fraud
Common types of expense fraud include false reporting, misappropriation of funds, and fraudulent expenses. False reporting occurs when an employee deliberately misrepresents the purpose of an expense to receive reimbursement. Misappropriation of funds is when an employee uses company funds for personal expenses. Fraudulent expenses are those that are not legitimate business expenses.
2. Implement Internal Prevention Controls
Implementing internal controls is one of the most effective ways to prevent expense fraud. By properly training employees in expense policies and by regularly auditing expenses, companies can deter fraudulent activity. Furthermore, good internal controls can also identify red flags indicating fraud, such as unusual patterns of spending or discrepancies between supporting documentation and actual expenses.
3. Train Employees on How to Identify & Report Fraudulent Activity
Preventing expense fraud is essential to maintaining a healthy bottom line. There are a number of ways to accomplish this, but one of the most important is encouraging employees to identify and report fraudulent activity. Therefore, by teaching employees what to look for, you can ensure that any suspicious activity is dealt with swiftly.
4. Review Expenses Regularly & Investigate Red Flags
Reviewing expenses regularly is great for preventing expense fraud. Expense policies must require employees to submit receipts for all expenses, meaning your entire team needs to keep track of their spending. However, if you suspect fraud, take action immediately. Talk to the employee and conduct an investigation to find out whether or not disciplinary action is necessary.
5. Use Technology to Track & Monitor Expenses
Technology can play a critical role in preventing expense fraud. By tracking and monitoring expenses, businesses can quickly identify unusual or suspicious activity. For example, simple tools, like expense report software, can track employee spending patterns and flag outliers. Additionally, you can use GPS tracking to verify miles and gas expenses.
Contact the CPA Professionals at Edgewater CPA Group
When your business in Carmel, IN, needs accounting services, pick up the phone and call Edgewater CPA Group today! Our team is ready to take over your payroll, tax strategy, and bookkeeping. So, schedule your consultation today by calling (317) 207-9269.