Stop Expense Fraud: Effective Strategies to Help Protect Your Bottom Line

Expense fraud can quietly drain money from businesses — sometimes by slipping through the cracks of outdated processes. From falsified receipts to inflated claims, these schemes harm a company’s bottom line and erode trust within organizations. For small and large enterprises, unchecked fraud can lead to financial losses, operational inefficiencies, and reputational harm that can take years to rebuild.

As companies grapple with rising costs and tighter margins, tackling expense fraud has become a priority. This article breaks down the strategies, technologies, and practices businesses can adoptto help identify and prevent fraudulent claims while fostering team transparency and accountability.

What Is Expense Fraud?

Expense fraud occurs when employees intentionally manipulate or falsify expense claims to gain unauthorized reimbursements from their employer. This type of fraud can take various forms, including inflating actual costs, submitting fake receipts, or claiming personal expenses as business-related.

For example, an employee might submit a receipt for a meal that exceeds the company’s per diem limit or use a business card for personal purchases like clothing or entertainment and attempt to pass them off as legitimate business expenses.

While sometimes viewed as minor, this type of misconduct over time can lead to significant financial losses and damage trust between employees and management. 

The Effect of Expense Fraud on Businesses

Addressing fraudulent claims is critical for maintaining trust and smooth operations; here’s what can happen if expense fraud gets out of hand: 

Financial Losses

Expense fraud significantly drains company resources. According to the Association of Certified Fraud Examiners, businesses lose an estimated 5% of their annual revenue to fraud. 

For large organizations with extensive travel and expense budgets, this can equate to millions of dollars annually. Even for smaller companies, repeated fraudulent claims add up quickly and can directly affect profitability.

Operational Disruption

Fraudulent expense claims often require additional scrutiny from finance teams, slowing down operational efficiency. Manual reviews, audits, and follow-ups consume valuable time that could be spent on strategic initiatives. 

Frequent discrepancies also burden employees with lengthy approval processes, creating bottlenecks in day-to-day operations.

Reputational Damage

The fallout from publicly exposed fraud cases can harm a company’s credibility. Clients, partners, and stakeholders may lose trust in the organization’s ability to manage its finances effectively. 

Furthermore, employee morale can decline if fraud incidents reveal internal ethical issues or lax policy enforcement.

4 Common Methods of Expense Fraud

Expense fraud can take various forms, each designed to exploit gaps in a company’s expense management system. Understanding these methods is the first step toward identifying and preventing fraudulent claims.

1. Inflated Expense Claims

One of the most common methods of fraud involves employees exaggerating the actual cost of a legitimate business expense. For instance, an employee may alter a receipt to show a higher amount or claim reimbursement for upgraded services that exceed company policy, such as first-class airfare instead of coach.

2. Personal Expenses

Another frequent issue occurs when employees are vague in claiming or attempting to justify personal purchases as business expenses. Examples include charging meals for friends or family to a corporate card or expensing personal subscriptions as work-related necessities.

3. Fabricated Receipts

Some employees create fake receipts or alter existing ones to support fraudulent claims. This might involve editing digital receipts or submitting handwritten receipts for services that were never provided.

4. Duplicate Claims

Duplicate claims occur when an employee submits the same expense multiple times, either by mistake or with fraudulent intent. For example, an employee may file a digital receipt for reimbursement and later submit a paper copy of the same expense.

By recognizing these patterns, businesses can implement targeted measures to help prevent fraud.

How Technology Can Help Prevent Expense Fraud

Modern technology offers powerful tools to combat expense fraud by improving accuracy, streamlining processes, and identifying fraudulent activity before it causes significant damage. Automated systems and data-driven solutions transform how businesses handle expense claims, making prevention more efficient and reliable.

Automated Expense Management Systems

Automated systems eliminate much of the manual work involved in expense reporting, reducing the chance of human error and intentional fraud. These platforms can enforce policy compliance by flagging expenses outside pre-set rules, such as exceeding per diem allowances or claiming non-reimbursable items.

Artificial Intelligence and Machine Learning

Artificial intelligence (AI) and machine learning (ML) provide businesses with advanced tools to detect patterns and anomalies in expense data. For example, ML algorithms can identify unusual spending behavior, such as repeated transactions at the same vendor or claims for expenses during non-working hours, which may indicate fraudulent activity.

Integrated Travel and Expense Platforms

Platforms that integrate travel bookings and expense reporting create a seamless flow of data, reducing the likelihood of discrepancies. By linking payment tools to expense management systems, companies can control spending in real time, restrict out-of-policy purchases, and track every transaction with detailed logs.

5 Best Practices for Preventing Expense Fraud

Preventing expense fraud requires a combination of strong policies, regular oversight, and a company culture that prioritizes accountability. By implementing targeted strategies like the ones below, businesses can help safeguard their financial resources and maintain trust within their teams.

• Create detailed, transparent expense policies: Establishing well-defined expense policies is the foundation for reducing fraudulent claims.
• Conduct regular audits: Consistent audits help identify suspicious patterns and deter potential fraud.
• Hold trainings: Educating employees and managers about acceptable expense reporting practices and fraud prevention is essential.
• Promote an ethical workplace culture: Fostering an ethical and transparent workplace reduces the likelihood of fraud.
• Leverage technology: Automated systems and real-time reporting tools enhance fraud prevention efforts by streamlining processes and identifying anomalies that human oversight might miss.

By implementing these best practices, organizations can mitigate the risks of expense fraud while fostering a culture of transparency and accountability.

How Navan Helps Prevent Expense Fraud

Navan offers tools to safeguard businesses from expense fraud while streamlining the expense management process. By combining automated systems, integrated payment solutions, and real-time insights, Navan provides an effective defense against fraudulent claims.

Proactive Policy Enforcement

Navan helps finance and accounting teams manage spend smarter with transparent, customizable spend policies built directly into Navan to prevent overspend. By setting tailored spending policies — adjustable by role, trip type, or expense category — businesses can help prevent overspending while reducing the need for manual intervention. Navan highlights flagged or out-of-policy expenses in real time, giving managers actionable insights without disrupting employee workflows.

This proactive approach supports financial governance while empowering employees to make responsible spending decisions. Navan helps organizations save time, maintain accountability, and protect their financial health through automation and visibility.

Automated Receipt Verification

Navan’s automated receipt verification reduces manual effort and minimizes the risk of errors or missed anomalies. Using advanced technology, the platform scans receipts for discrepancies, such as inflated amounts or mismatched details, and flags them for review. 

Integrated Payment Solutions

Companies can link their eligible Visa, Mastercard, or American Express corporate cards with Navan’s expense management tool to manage their spending more effectively. Business expenses are automatically categorized and reconciled, which saves time and reduces the likelihood of manual errors.

Real-Time Reporting and Analytics

Real-time reporting allows businesses to monitor spending patterns as they happen. Navan’s platform identifies out-of-policy spend or deviations from standard practices, which enables managers to take immediate corrective action. This proactive approach helps prevent fraud and promotes accountability across teams.

By leveraging Navan’s technology, businesses can protect their financial resources, maintain operational efficiency, and foster a culture of transparency.

Explore Navan’s expense management platform to learn how these tools can help safeguard your business against expense fraud.