In every job there are tasks we grow to hate, particularly the repetitious type, and top of the list for many business travellers is filing their expenses. Travel and entertainment out of the office is part and parcel of working life, but keeping track of it can be a real headache.
Whether it’s completing an Excel spreadsheet or matching receipts to the tally on your corporate card and matching both to a faulty memory, expenses are an unengaging mix of boredom and panic. Boredom because you could be doing better things. Panic, because you have to get it right. As the saying goes: “they can always get you on expenses”.
And now more than ever that’s true, as shown by several new surveys. The first, by American Express found that companies are cracking down on travel and expenses (T&E) spending by introducing tighter policies for staff. In the poll, 45 per cent said that their companies’ policies have become “somewhat” or “a lot” tougher over the past two or three years. And many business travellers are taking heed of the new directives. Nearly one-quarter of all respondents said that, compared to two or three years ago, they were “somewhat” or “much” more careful in adhering to their firms’ T&E spending rules, while more than one-third said that in the same period their companies are “somewhat” or “much more careful” in reviewing travellers’ expense reports. Yet for all this, the survey also suggests that padding corporate travel expenses is common.
Most professional investigators and risk managers would agree. Deloitte Forensic polled 125 delegates at the 2004 Asia Pacific Fraud Convention and 82 per cent said they had experienced an increase in corporate fraud in the last year, with 36 per cent saying there had been a major increase. The survey revealed that the three most common types of workplace corruption were intellectual property theft, theft of common property and employee expense fraud.
Of course, whether you think expense padding is fraud depends on whether you are the one doing the claiming, or having to settle the claim. Business Process Outsource provider GlobalExpense found that around 2.5 million employees believe it is acceptable to exaggerate their expense claims at work. Its survey also found that of the UK’s 27.9 million workforce, 27 per cent believe their colleagues sometimes inflate their expense claims, and over a million people have such low regard for their workmates that they think they over-claim all of the time.
“The fact that a quarter of those who claim expenses think that exaggerating their figures is acceptable is quite disturbing,” said Ashley Whittaker, CEO of GlobalExpense. “British industry must tighten up its procedures to prevent such a loss of revenue and a negative culture of petty theft in the workplace.” Employers in the US might want to address this too – a book published there called How to pad your expense reports probably won’t help matters.
But is padding your expenses really fraud? Some seem to think it depends on the amount that you over-claim. GlobalExpense’s survey showed that while 39 per cent of those who inflate their expenses would only do so by up to 10 per cent of the amount, only 8 per cent would be happy to exaggerate by at least 50 per cent.
Ashley Whittaker added: “Taking into account the amounts that individuals claimed they would exaggerate, we can very conservatively estimate that at least £230 million is claimed in inflated expense claims in the UK each year. However, from my time working as an auditor, I suspect the figure is substantially higher.”
So why do people do it? For the money would be the obvious answer, but since very few of these people steal from work in any other way, perhaps it’s something a little more subtle. Steve Flatt from the Psychological Therapies Unit at Liverpool University said: “You could argue that it’s possible to polarise these people into two groups; those that are too lazy to fill them in properly, and so allow inaccuracies to creep in, and those who are meticulous. Of the two, it’s the second who perhaps think about the possibilities that an expense claim offers them for padding.”
It’s the former who make matters worse by dragging their heels when it comes to claiming, though. In the latest Barclaycard Business Travel Survey 2004/5, it was found that 46 per cent of employees take up to a month to claim expenses. What’s worrying is that employers take nearly as long to process them (41 per cent take up to a month). In addition, employers appear to have a lack of control over the way their money is being spent – 63 per cent of employees say they can reclaim expenses without a receipt. Since the average value of a lost receipt is £128, the amounts soon add up.
So how should companies combat this? Said Kristine Olsen of American Express: “The important thing is to have a policy, communicate it, and then enforce it.”
Adrian Leng, who oversees T&E at Citigroup, agrees. He said: “The policy needs to articulate which hotels and airlines employees can use, what the approval process is for getting T&E signed off and what the submission requirements are – if the bill amount is above £25, say, a receipt has to be attached to the expense report, and the time period within which an expense claim has to be submitted. If an employer can communicate these messages, then it’s the beginning of minimising fraud because employees know what is acceptable and what is not.”
It’s a message that Brian Provost, chief operating officer for Gelco, a business service provider specialising in T&E, agrees with.
“You have to distinguish between employees who don’t understand the policy, and those who are fraudulent. We’ve found that most employees don’t understand their company’s policies.”
Leng added: “The whole basis of having a standard out there is to avoid ambiguity and the potential misbehaviour of an employee.” But he added: “The environment of the company is very important. Policies forced down people’s throats might cause resentment and that in turn can cause problems.”
According to the survey by GlobalExpense, the most popular reason for employees hiking up their expense claims is the fact that the company doesn’t cover all their costs. Other reasons include employees thinking they are not being paid enough; the boss being too slow to pay; they don’t like their job; or they don’t like their boss. The younger the person, the more likely they are to believe that exaggerating their expense claim is acceptable.
GlobalExpense’s Whittaker added: “The fact that over one million people don’t know exactly what they can claim for is also worrying. A huge culture change is essential for British businesses to move forward. Employees need to be clearly told what is acceptable and what is not. There is no need for every employee to be treated as untrustworthy – most clearly aren’t. But a sizeable minority are systematically cheating their employers.”
One simple way of minimising fraud is for a company to issue corporate cards. Said Olsen: “A company credit card can take a lot of the hassle out of expenses for employees. It means they are not settling the expenses themselves and then having to look to the company for reimbursement. It stops them from providing the company’s cash flow.”
It also allows the frequent traveller to keep track of all his or her expenditure. “If you rely on receipts alone, there’s always the chance you’ll forget something, but having it all on a card stops them from missing out on being reimbursed.”
American Express encourages use of its cards with a rewards scheme – one for the company itself and another for individual cardholders – while Barclaycard has other benefits such as insurance and access to airport lounges through the Priority Pass programme.
The advantages for companies are clear. The cards allow a company to keep a very detailed record of the business expenditure of its employees, and to spot patterns that may help it with an expense management programme for its frequent travel employees.
Said Olsen: “It automates a lot of the process and means that the spending patterns can be integrated into an expense management tool, then straight into a company’s accounting tool. The rest will be cash transactions, such as taxi fares or perhaps mileage on cars. Cash is the enemy. It’s hard to track, hard to measure and easy to abuse.”
There will never be a 100 per cent accurate method of catching fraud, but in major cities such as New York or London certain expenditures are predictable, and Amex produces figures for companies to give them both a general and relative idea of costs.
Whether companies allow employees to get cash advances on their corporate card plays a part in tracing overall expenditure, since having the card as a single point of capture for both cash advances and card transactions reduces the hassle of having to go to an exchange bureau, and allows the expenses of doing so to be captured by the card.
How employees regard the corporate card – as something which takes away the majority of administration from their expenses claims and makes them feel safe, or as a spy in their pocket – depends on both the individual and the organisation to which they belong. Mike Vallance of Business Barclaycard explained: “For many companies there’s an element of recognition and status for employees to be offered these cards. Some companies positively make it so through the design of the card and the top level spending amount available.”
So which card should you choose? Vallance says it is worth shopping around for the best deal, but cautions on going on price alone.
He said: “Depending on the firm’s particular needs, it’s worth looking closely at the value-added offers that come with a card beyond the card fee.”
As an additional security against fraud, companies can make use of firms such as Concur or Gelco, a business service provider specialising in the area. Gelco’s expense reporting system, ExpenseLink Intelligent Workflow, allows travel managers to identify potential cases of abuse and misuse of funds, the theory being that they can then focus on making sure people comply with expenses policy. The method is automating the expense report process, so that expenses outside company policies are immediately identified.
Gelco’s Provost said: “Employees prefer it. They are paid quickly and it stops them providing the cash flow for their company.”
As a result, Gelco says companies see an increased percentage of T&E going on the corporate card, because employees see it as the easiest way of dealing with expenses. “Most card companies hope for 40 per cent on the card. We know they get a 22 per cent increase of spend on the card when they use additional software such as Gelco’s,” said Provost.
In the end, no one thing will solve expense fraud. As Geoff Cronin, vice-president of solution marketing at Gelco explained: “Fraud detection is a process, not an event. You identify possible fraud opportunities and build a whole cycle to both resolve those opportunities and verify that it isn’t going to happen. An automated process alone can’t do it, so you need a manual check process in there at some point.
Fraud can mean different things to different people. Is it fraud if a business lunch is actually two colleagues talking about work? And what about if they talk about work for the first 10 minutes, then go on to discuss their weekend plans? Increasingly, employees have to give a reason for the lunch and the topic and, depending on the policy, two colleagues wouldn’t count as such.
“In the end, it’s down to the culture of the company,” said Olsen. “In one, what is considered a business meeting wouldn’t be in another. Some companies use T&E as a form of reward, while for others it’s strictly business.”
Still, it’s best to know the official policy before trying to use your expenses in this way. One thing is for sure, companies are scrutinising more closely than ever. ¦
For further information, go to:
www.americanexpress.co.uk
www.deloitte.com
www.globalexpense.com
www.barclaycardbusiness.co.uk
www.concur.com
www.gelco.com
Business travellers confess...
“We had to have a quiet word with one employee who had put in a series of claims for work-related telephone calls while he was out of the office. When we pointed out that they were all to his home number, he claimed that on each occasion he was calling his wife to ask her to get important files from his study!”
Human resources manager, Birmingham
“I’ve put entire ‘affairs’ through my expense accounts. Admittedly, he was initially a client, but it meant I could claim back for everything from hotels to meals to holidays. And I once ran a little scam where I put cigarettes and pashminas through expenses (no one could read the Indian and Thai receipts) and then I’d sell them on to friends.”
Public relations executive, London
“When I used to work in Aberdeen, in Scotland, we had around 8-12 guys arrive at Dyce Airport every Monday morning and then catch a cab (normally four in a cab) from the airport to the office. But when expenses time came they all submitted separate £7 taxi fares, on blank receipts bought for a fiver from the cabbie. When the company finally sussed out that 12 guys arrived at the same time but never shared a taxi, the guys had to make up all kinds of excuses: ‘I always went for breakfast first before going to the office’,’I went to the hotel first’,’I had to stop and book the return flight.’ Eventually the company hired two rental cars to be used to and from the airport.”
Engineer, Southampton
“On my first ever press trip, I was schooled in the ways of the expense claims by the older journalists. We were in Atlanta and went on a massive bar crawl, in a horse-drawn carriage! The final bill came to around $300 which, thanks to some friendly cab drivers, I ended up putting down as several different taxi fares.”
IT journalist, Brighton
“One guy I used to work with spent a weekend in a suite at a top hotel in Hong Kong. He hired a couple of high-class prostitutes, and to cover the cost he put in a false claim for a return flight to Shanghai instead.”
Marketing manager, telecommunications, London
“It’s common practice to add a zero on to a taxi receipt, or to ask for a blank one and make it up. Surely everyone does that, don’t they?”
Trader, London
“We used to run an industry event for premium content providers, you know, the online porn companies and so on. Some of them were into their recreational drugs and would expect us to go and score it for them. We’d end up coming back to the UK several hundred euro short and obviously with no receipts to show for it. Then, one year, we discovered these beer mats in a local bar, which had all the details of the German brewery on them, and then just enough white space on the top for us to write in an amount. We photocopied lots of these and put them through as entertainment receipts and the problem was solved.”
Public relations director, London
“When you come back from the States you always end up out of pocket on receipts because of all the tipping. One company I worked for allowed you to add 10-15 per cent
on top of your total bill to cover this, so we’d just claim this but never bother tipping!”
Recruitment consultant, Winchester
“I claimed on my company’s insurance for a pair of brand new designer glasses that I left in a hotel room when I was on a conference trip. When I got the money back I went and bought a new pair, which to be honest with you, weren’t as expensive, but then a few weeks later I found the original pair in the boot of my car. Whoops!”
Marketing consultant, Brighton
“A guy I used to work with was a bit of a character. On overseas trips we were given a generous cash advance, and then we’d have to produce receipts or give the cash back. He came back from one trip to Bangkok having spent all of the money, but with few receipts to show for it. He claimed he’d been mugged by two ‘drug-crazed prostitutes’ in the hotel elevator. When management made it clear they didn’t believe it, he then wrote a very detailed letter describing every detail of the incident, and also citing other people who were on the same conference who could vouch for him (obviously his mates). In the end, it was his words against theirs, so they had to let it go.”
Tour operator, Sutton
“In an old job, I went in to see my boss to ask for a much-deserved pay rise. She told me that she completely agreed with my reasons but that there was no way her boss would agree to it, so instead she advised me to treat myself and my boyfriend to a nice meal each week, and put it through on expenses. I said that this wasn’t going to help pay my mortgage, but did as she advised anyway. It turned out that everyone else was, so I didn’t see why I should be left out.”
Editor, London
“A client of mine was on a trip in the Middle East and as part of a hosted bedouin event in the desert, he took a short trip on the back of a camel. Unfortunately, halfway through, the camel (incidentally a very old one), keeled over and died. The camel owner insisted that not only did my client pay the cost of the camel ‘hire’ but he also paid for the dead camel, which certainly raised a few eyebrows in the accounts department!”
Civil engineer, Kingston, Surrey
Beverley Fearis
Ten tips to help your employees manage their expenses
1. Review your expenses management regularly to ensure both company and employees are getting the most out of the system
2. Introduce simple everyday processes to save money, remove stress and cut back on wasted staff resources
3. Make staff aware of the role their actions play in the expenses claiming chain
4. Institute refresher training courses or even incentives for prompt expenses submissions
5. Ensure staff include receipts with claims wherever possible — even if the expenses claim was for a bill paid using a company corporate card
6. Have clear spending guidelines and a mutual understanding between company and employees, which will make the whole travel and expenses process more effective
7. In addition, have a clear company policy on travel and entertainment to prevent overspending by employees
8. Find the right corporate card provider. Look at all the benefits that come with that card, not just the price of it
9. Use the card for payments to internet businesses — a safe way to do business, and to pay one-off suppliers. It avoids setting up a new account which can be time-consuming
10. Listen to feedback from employees. They are the ones having to comply with the policy.
Tips provided by Barclaycard Business www.barclaycardbusiness.co.uk
