You’ve Found Fraud in Your Company. Now What?

A few weeks ago, we heard a story from a small business owner who noticed that an employee was claiming 20 miles to travel a distance that the owner knew was really only 4 miles round trip from the office. Looking back on previous expense reports, the owner discovered that the employee had been claiming this mileage reimbursement for two years, racking up a small but tidy extra sum each paycheck. The owner gave the employee two choices: either pay back the money or consider this his last day. The employee paid back the company and apologized. However, the relationship of trust between the two had been broken and the employee left a year later.

If you’ve identified fraud in your company, you might be asking yourself, “What should I do now?”

First off, you need to determine if it was simply an honest mistake or an attempt to defraud the company. “But I’m sure it was just a mistake. This employee wouldn’t do this to the company.” Chances are, you’re probably right: it was a mistake. But before contacting the employee to get a better understanding of the charge in question, do your research. Do you see other types of suspicious activity on past expense reports? If not, then it’s probably exactly as you first thought: an innocent mistake. Call or email the employee and explain what you’ve found. The expense could be misclassified, it could have been personal, or it could have been a “fat-fingered” mistake. Give people the benefit of the doubt. Being quick to accuse employees of criminal behavior will only upset the employee and potentially damage company morale.

However, if you feel sure that what you’re seeing on the expense report does indeed violate a clearly-defined expense policy, of if the reports or receipts seem shady, alerted or manufactured then consult your human resources department. They’ll need documentation and whatever you have for “proof” so that they can confront the employee.

If you are your own human resources department, you have some decisions to make. Would it be enough for the employee to pay the company back? Should you fire the employee? Should you take legal action? Your course of action will most likely depend on your company culture, the severity of the fraud and the damage done to the company.

Finding expense report fraud can be upsetting. Open lines of communication, clear expense policy guidelines, and a belief that employees really are trying to do their best for the company, will reduce the stress.


Previous posts:


Identifying Expense Fraud in Your Small Business Is Expense Fraud Affecting Your Company? How to Identify Expense Report Fraud


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