Why small, suspicious expense claims must be checked

Straight-talking common sense from the front line of management

Q

Rightly or wrongly I’ve always trusted my staff, but recently I noticed that one of the bestperforming members of my team has been submitting some questionable expenses. Examples include lunches without receipts and dubious days out with clients. The person in question is my best sales representative who makes so much money for my business these expenses seem to be a trifling matter. Should I investigate further or let him off the hook?

A

I, too, believe in trusting colleagues. Any business that develops watertight systems, designed to deter the 2pc of employees who are dishonest, will inevitably make life much more difficult for the other 98pc. A paranoid approach to security can get in the way of being a great business. But the freedom you give to colleagues can’t extend to false expense claims. You have a statutory duty to ensure that all expenses are correct and allowable for tax, especially if, like Timpson, you claim to be a Fair Tax business, that aims to make sure the company pays everything required to HM Revenue & Customs.

If the business looks for ways of avoiding tax, it isn’t surprising that its employees do the same.

Over the years we have acquired a number of independent shoe repair and key cutting shops which had allowed some colleagues to claim the cost of travelling from home to work. Others kept tax payments down by failing to put a proportion of the business through the till (which, in the days before credit cards, led to a pile of pound notes, which was partly used to pay out the colleagues’ bonuses).

This type of cash benefit – which some small companies may see as normal practice for business – is clearly against the rules.

I remember visiting one possible acquisition where the shop was so busy, it was impossible to talk to the owner. My estimate of the actual sales was double the amount declared in their accounts.

Every budget statement produces a set of new rules that rogue traders see as a new challenge. Lockdown provided them with a bonanza and we have yet to see the size of the false claims for furlough payments and bounce back loans.

But, back to your star performer who is submitting suspicious expense claims – you simply can’t “let him off the hook”. It is time to talk, but there is no need to shoot yourself in the foot by dismissing your best salesman.

This calls for a tap on the shoulder. Give him the chance to come clean, make him repay the false claim and give a clear warning that it’s “two strikes and you’re out”.

Don’t just restrict the conversation to the expenses claim, perhaps there is an underlying reason why your top salesman needs to claim some extra cash. By asking a few open questions, try to find out whether he is facing problems in his private life.

He is probably just chancing his arm and claiming the extra money because he thinks he can get away with it, but the conversation could reveal a more fundamental problem – an addiction to gambling, a problem with his marriage or simply debts created by living beyond his means and which could spiral out of control.

What started as a conversation about expenses could reveal a problem that he has been hiding for some time. This not only gives you the chance to help him get his life back on track, it will probably help your best salesman to get even better. Having discovered a problem with one expense claim it is time for you to tidy up your procedure.

Start by checking what it says in your employees’ manual. Do you clarify what is an acceptable expense?

We got a big shock many years ago when we fired a sales manager for claiming for a couple of nights out in a strip club. He took us to a tribunal and we were staggered when we lost and he won £40,000 in compensation.

The key point in his favour was that our expenses guide didn’t specifically exclude money spent in a strip club.

Treat this incident as a wake-up call. Cheating on expenses is likely to increase over the next few years.

The increased cost of living will put much more pressure on managers who are keen to maintain their standards and match the lifestyle of the people who live next door.

It is particularly important to make sure that the most senior managers stick to the guidelines. If the top team gets a few prohibited perks, it is more difficult to expect other colleagues to toe the line.