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Travel & Expense

Suspicious Out-of-Pocket Expenses Signal T&E Misuse and Fraud

on December 11, 2017

It’s not unusual that your travelers need to buy things for the company out of their own pocket. From my last trip, I can think of a handful of out-of-pocket expenses that I incurred. I tipped the bellhop at the airport curbside check-in and at the hotel in cash—they don’t take credit card tips or provide receipts. Between conference seminars, I grabbed a couple of sodas and snacks from a kiosk for my co-worker and me; again, cash only and no receipt. And, although it’s almost 2018, I ended up in one of the last remaining taxis in a large city that does not take credit cards—yes, that still happens.

The first two out-of-pocket expenses were under the threshold for requiring receipts. The cab fare was over it, but the driver gave me a receipt where he wrote in the amount, and I tipped him on top of that.

Travelers sometimes are stuck in these situations where they can’t use the company card or show a receipt. Out-of-pocket expenses are a fact of life for business travel. They also can be a thorn in the side of business travel managers because they are a hotbed for waste, misuse, and fraud.

Travelers may attempt to game the system for their own benefit by overclaiming tips and pocketing the difference. Out-of-pocket expenses often are used to circumvent blocked Merchant Category Codes (MCCs) on corporate cards—think a bottle of Jack Daniel’s and sodas expensed as a meal—or accumulate expenses on personal credit cards to add points for their own uses. Airline tickets are a great example, and are usually indicative of card spend that has been redirected to an employee's own credit card. It’s not always malicious or fraudulent behavior, but it isn’t in the best interests of the company either.

While it’s easy to believe a few dollars here and there won’t hurt, expense fraud and misuse adds up over time. To target suspicious out-of-pocket expenses claims, implement an automated T&E expense report audit solution to monitor 100% of T&E transactions for:

  • Outliers including high out-of-pocket expense claims
  • Patterns of excessive out-of-pocket spend across time
  • Out-of-pocket expense types generally associated with corporate card purchases
  • Circumvention of receipt limit policies related to out of pocket spend
  • One-time and chronic offenderschange emp

The truth is, out-of-pocket expenses should be the exception, not the rule. If you think your travelers’ out-of-pocket expenses are out of control, they probably are. The good news is employees’ behavior will often change when they know their expenses are being watched.

 Rachel Ware is Business Development Manager at Oversight Systems.


Rachel Ware

Rachel Ware is Business Development Manager at Oversight Systems.

change employee t&e spending