How Can I Stop Employees From Misusing Their Expense Accounts?

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Table of Contents

• 1. Set Up Clear Expense Policies
• 2. Draft a Comprehensive Employment Agreement
• 3. Enforce Your Policies
• Key Takeaways 
• Frequently Asked Questions

There are many moving parts involved in running a business, and keeping track of employee expenses is one such vital part. Most employees will not deliberately abuse expense accounts. However, your expense reporting system is one of the most streamlined ways for employees to defraud your business. To help you address this issue, this article will explore practical steps and policies you can implement to reduce the risk of your employees misusing their expense accounts.

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1. Set Up Clear Expense Policies

Your business should have a number of policies in place that will minimise the risk of employees misusing their expense accounts.

Personal Funds Use

You should first consider putting in place a detailed workplace policy on collecting and submitting receipts. For example, the policy may state that employees should use their own funds to make purchases and can submit invoices to the business for reimbursement. This will allow you to monitor and validate purchases from your employees.

You can use apps and online systems to streamline the process. Subsequently, employees simply need to take a photo of the receipt and upload it with the details of the expense. A good example is Xero, a common platform that allows employees to submit expense claims easily.

Business Funds Use

Where employees are using your business’ funds to pay for expenses, you should take advantage of fuel cards and corporate accounts to manage and track your employee usage.

If you provide employees with corporate credit cards, you should choose a card with an appropriate limit and ensure your employees know what specific circumstances enable them to use the cards. For example, you may choose to specify a cap for meal expenses. 

Travel and Per Diem Allowances

When it comes to your travel and per diem policy, you may choose to have pre-approved limits for certain expenses. These may include:

• limitations on breakfast, lunch or dinner;
• a cap on what an employee can spend on client events; and
• use of specific types of flights, hotels or rental cars.

You should ensure the allowances or limitations you impose are in accordance with any modern award applicable to your employees.

Additionally, employees who do not comply with these limitations should only be reimbursed up to the stated limits. If you have different limits for different employees, have their manager or team leader approve their expenses. 

2. Draft a Comprehensive Employment Agreement

Your employment agreement sets out your employee’s obligations upon joining your business. These should include acting ethically and putting the business’s needs first. A well-drafted employment agreement will also set out the relationship between the employment agreement and your workplace policies.

Although workplace policies do not form part of your employment agreement, each employee should abide by them as they are updated or added to by you. Ensuring your employment agreements make clear reference to accompanying policies, as outlined in an employee handbook, for example, will ensure your employees read and agree to such policies. 

To ensure new employees are across business policies, you may annex an employee handbook to the employment contract and have the employee sign that they have read and understood the policies included.

3. Enforce Your Policies

Policies are only useful to a business if employees are aware of them and if you enforce them. Therefore, you must educate your employees on your workplace policies and clearly explain that if they do not follow the proper processes and rules, they may not be reimbursed. 

You may also consider taking disciplinary action against an employee for policy breaches. Depending on the degree of misconduct, you may:

• remove access to business funds;
• give them an informal warning;
• provide them with a formal written warning; or
• terminate their employment for serious misconduct if the breach is severe (e.g. committing fraud or spending thousands of dollars over the limit).

Equally important to having an expense policy in place is to have a disciplinary policy in place. You should involve the employee in any investigatory exercise and provide them with an opportunity to defend themselves if it is found that they are misusing business funds. There might be a reasonable explanation as to why the funds appear to be misused, making it important that you only dismiss an employee with good reason.

Ultimately, prevention is much better than a cure when it comes to enforcing expense policies. Therefore, ensuring that you have documented and practical protections in place for your business is important. Setting up and enforcing clear guidelines will also make expectations clear to employees and reduce the risk of misuse.

Key Takeaways 

Key ways you can stop your employees from misusing their expense accounts are to:

• set up clear expense policies;
• draft a comprehensive employment contract; and
• ensure you enforce your policies. 

If you need assistance drafting or updating your policies or dealing with an employee who has misused their expense accounts, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions