Business News
The business travel expenses boom
Most of you at some stage will have rummaged through your pockets and ransacked the car for your petrol receipt from that business trip down south or that extortionate parking ticket to attend a conference in the city at some point, so you will probably not be surprised to hear that one third of the UK’s total spend on expense claims fall under business travel.
What has come to light is the systematic and often long-term abuse of the privilege, often by senior employees and revered members of the business community among the many hundreds fiddling their receipts. To name a couple, a partner in law firm, Hogan Lovell’s put false travel claims in spanning 30 years and amounting to nearly £1m, and in politics, Lord Taylor Warwick fiddled more than £11,000 worth of business travel expenses. The partner has since been dismissed (is that it?) and Lord Warwick has swapped his finest suits for his jail issue jumpsuit!
Whilst they have paid some sort of price, it begs the question as to why checks were not in place to prevent such greed, and particularly in a less than golden age for the country’s finances.
Business travel covers expenses claimed over mileage, flights, trains and taxis, and involves big spends for companies. GlobalExpense research shows that approximately 3.8 million UK employees cost UK businesses £3.5 billion in 2010 alone on business travel claims, and this is still lower than in previous years due to the recession, a 13% decrease since 2009. With an increase imminent from 2011 onwards, businesses need to make sure that the increase is justified and manageable in line with state of the economy to discourage bigger claims and less careful spending.
Businesses must now look at how to monitor claims coming in, which could mean looking to implement new procedures on scrutinising large volumes of claims of varying degree and employees, working out which are fraudulent, inaccurate or simply not completed as per company policy. They must also consider the individuals making large claims, which prove detrimental to the company and how to vet these with justification.
Below are examples of how these claims may be made in Business Travel Expenses in 2011;
1. Business travel claim - £46
2. Taxi fare - £23
3. Train ticket - £43
4. Economy class flight - £201
5. Business class flight - £2,231
6. Travel expense-claiming employee - £907
Airfares, whilst not the most popular claim (around 9% of those making business travel claims in the UK), are particularly costly and should be carefully monitored for fraudulent activity, ensuring that the flights booked are in line with your company policy (business class is NOT always necessary!). It was calculated that British organisations pay more than £870 million for flights every year.
Mileage is a particularly popular claim, and also the most likely to fall under inaccuracies and fraudulent activity due to the nature of the claim (often only a petrol receipt or mileage clock on your car is needed to put through). HMRC also have complex requirements in place for company mileage claims, and so inaccuracies can be frequent for the ill advised. Employees will often give claim to expenses without receipts, with 41% doing so in 2010, which brought to light a £120million deficit from HMRC in un-recovered funds for not complying with the requirement to provide support by receipt.
In addition, a substantial 22% of expense claimers questioned in a recent YouGov report said they were more likely to exaggerate their mileage expense claim and that a third of people felt it acceptable to ‘fudge’ their fuel costs when they felt the mileage paid by the employer did not cost the cover of the actual car and fuel costs.
It’s clear that Business Travel Expenses are an attraction for fraudsters, with many ways to add a few zeros and falsify documentation, with 5* hotels and first class travel the big draw for those keen and tricky enough to get round the systems. Out of a total of £10 billion paid out in expenses in 2010, £1 billion is estimated to have been paid out to employees NOT complying to company expense policies, which has highlighted that companies need to be extra vigilant in who, what and how they process through business travel expense claims in order not to feel the pinch later on.
With the forecast being an increase in claims over the coming year, business will need to keep a keen eye for those coming through inaccurate and not compliant to policy, and of course those that are downright fraudulent. To do this, regular audits should be in place, communication clearly rolled out to employees on what is acceptable and fair in claiming for business travel and the repercussions for anything otherwise. Had this been done sooner, then maybe Lord Warwick and his dodgy counterparts may have thought twice before the pound signs flickered in their eyes.
