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Travel & Expense

Why Asking for Physical Receipts is Old School…and Won’t Prevent Fraud

on November 25, 2014

Original expense receipt requirements are an old school approach to expense control.  In fact, I saw a recent list of the top five reasons why most companies still require original expense receipts, which details reasons including fraud, audit, discipline, efficiency, and ROI.  Let’s look at each of these reasons:

  • Fraud – the argument here is that, in a digitized world, document manipulation has become too easy and receipts can be manufactured or modified.  Call me crazy, but isn’t document manipulation just as easy for a physical receipt as it is for a digital receipt?  For businesses that use electronic expense management systems like Concur, the best defense against fraud of this type is to mandate the use of a corporate travel card.  This will result in over 80% (in many case over 90%) of the expenses coming through as credit card purchases with the accompanying receipts transmitted automatically into the expense management system.  This eliminates any potential receipt manipulation (although it doesn’t ensure that the transaction is compliant with corporate travel policy).
  • Audit – the perspective here is original receipts are required for internal and external auditors. However, Internal Revenue Service (IRS) Revenue Proclamation 97-22 states that scanned receipts are acceptable as long as they are identical to the originals and contain all of the accurate information that are included in the original receipts.  Electronic expense management systems like Concur Expense do an excellent job of storing electronic receipts, linking them to expense reports for review, and doing so while meeting the requirements of IRS Proclamation 97-22.
  • Discipline – this view is founded on the philosophy that acceptance of digital receipts send a signal that a company favors operational efficiency over fiduciary discipline.  This perspective seems to miss the fiduciary discipline associated with decreasing the space required to store physical receipts and the efficiency in recovering digital receipts when they are required (again, a key function within systems like Concur Expense).
  • Efficiency –The post argues that forcing employees to scan receipts slows the expense process as compared to paper expense systems that ease the burden of attaching receipts by including pre-glued spaces for affixing receipts. I am a Concur Expense user who can testify that it is far easier for me to take a picture of my receipts as soon as I receive them than it is for me to retain receipts and then tape or staple them to a piece of paper.
  • ROI –The post argues a digitized reimbursement environment can only be justified by 2% of global businesses because of the costs related to scanning and automation.  Further, the argument goes, most companies cannot support an argument for going digital other than it being “cool”.  Since most digital expense systems today are software as a service (SaaS) solutions, the cost of adoption is actually very low and the services are priced based on use.

The natural question at this point is, who is promoting the perspective that original receipt retention is good and digitized reimbursement environments only apply to 2% of businesses?  You won’t be surprised to learn that the article is authored by a company who sells binders for employees to affix original receipts. It is not true that the next article was about the evils of voice mail and the greater efficiencies to be realized with pink message slips.

While most of us can agree that these arguments are a little silly and out-of-date, the fact remains that most expense management policies require hard-copy receipts. While receipts are a part of good business and matching receipts to expenses is good practice, their ability to prevent fraud is about as thin at the paper they’re printed on. Fraud in the out of pocket transactions is better identified through data analysis that focuses receipt inspection rather than processes that solely focus on receipt inspection and matching.  Automated monitoring systems like Oversight Insights On Demand are able to identify patterns of behavior indicative of concealment and ghost expenses.

Chris Rossie

Chris Rossie is a blog contributor for Oversight.

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