If you have employees, then you have occupational fraud, according to the Association of Certified Fraud Examiners. In their new global report, they estimate a $7.1B loss per year, based on 2,690 cases analyzed. They estimate the average organization loses five percent of its annual revenue to internal fraud.
The corporate spending matrix is growing in complexity and organizations are struggling to stay on top of it. Small and mid-size businesses have even less controls in place when it comes to catching fraud. SAP Concur found that these organizations experience higher rates of duplicate invoices compared to enterprises—an average of one duplicate in every 58 invoices versus one in 86 for enterprises. The majority of people don’t intend to commit fraud. But sometimes, they accidentally enter a dinner receipt twice on their expense report.
The perpetrator of fraud might be surprising. The most trusted and tenured employees typically know where all the holes in the system are, although that does not immediately correlate to fraudulent inten¬tion. If these employees are not subjected to as many reviews due to their tenure, and they don’t have effective anti-fraud controls put into place, businesses might be naively putting themselves at risk. The vast majority of fraud perpetrators are first-timers.
Not all fraud is detected or reported, and businesses only relying on detection strategies to catch fraud activity may have already lost the fight. If the money is gone, they’ll most likely not recover it; and even if they do get the money back, they’ll likely have spent a lot of time and money trying to do so. Fraud also creates numerous detrimental effects to an organization outside of monetary loss, including loss of reputation and legal ramifications.
The bottom line is that if you have employees, you have fraud risk. And if you are not leveraging the right technology to prevent and monitor fraud, you are losing money.
Using technology to combat fraud
Successfully catching mistakes like double expensing, and more importantly, making it easier to avoid these mistakes, enables businesses to highlight the actual incidences of fraud within an organization. Instead of tracking down an employee who haphazardly charged twice for cab fare, they can focus on the real issues.
Businesses need to be proactive to prevent fraud and encourage compliance amongst employees. The most successful fraud and compliance risk management strategies combine technology and policy, regardless of business size. Fraud is inevitable - yet with proper planning and prevention, companies can detect and manage it properly. “Red flags” can be found by companies who have a good understanding and controls in place to manage employee spend across an enterprise. Studies have found that organizations with anti-fraud safeguards detected fraud up to 50% more quickly.
For starters, automating travel, expense and invoice processes gives finance leaders greater visibility into spend. Technology, particularly automation, elevates expense management. Using automated expense software like SAP Concur not only streamlines the process, but also increases visibility into employee expenses. Having much-needed data at a finance team’s fingertips allows them to better forecast and augment their reporting, reducing the chance of surprises and unaccounted for costs.
Taking it a step further and including mobile solutions into expense management makes capturing expenses that much easier for employees. With more business taking place on the road, it makes sense to give employees access to expense reporting from their smartphone. Something as simple as being able to capture images of receipts goes a long way in keeping documentation from getting lost. Not to mention, mobility allows the finance team more insight into real-time expense data.
Nevertheless, a comprehensive, easy-to-understand policy is as important as technology. Together, savvy small and mid-sized businesses that integrate technology into an overarching and strategic fraud reduction strategy will enjoy the benefits of increased compliance and substantial cost savings.