TL;DR

• Expense fraud rarely looks obvious. It hides in everyday transactions that feel routine and low-risk
• The earlier you spot inconsistencies, the easier they are to fix and the less they cost your business
• Most expense fraud follows predictable patterns that finance teams can learn to recognize
• Prevention works best when controls are built into the spend process, not layered on afterward
• Tools like Extend help teams move from reactive reviews to proactive, real-time oversight

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Expense fraud is one of those problems most businesses don’t think they have — until they do. Over the years, working closely with finance and operations teams, I’ve seen this play out again and again. Fraud almost never starts with a big, intentional act. It starts with small exceptions. A charge that doesn’t quite line up with policy. A receipt that’s missing details but gets approved anyway. A reimbursement that feels “close enough,” so no one pushes back.

As companies grow, this gets harder to manage; expense volume increases, teams move faster, and reviews become more rushed. Manual checks that once worked start to break under the weight of scale. And without clear guardrails or real-time visibility, even disciplined teams end up leaning too heavily on trust and after-the-fact reviews.

The good news is that expense fraud isn’t hard to uncover once you know where to look. With the right mindset, clearer processes, and better controls built into how spend happens, managers and finance teams can catch issues early and prevent them from becoming bigger problems.

How to identify the most common types of expense fraud

Once you’ve reviewed enough expense reports, you start to notice that issues tend to surface in the same places. Certain categories are just easier to stretch, harder to verify, or historically reviewed with less scrutiny.

These are the most common types of expense fraud managers and finance teams encounter—and the first place to focus your attention.

1. Personal purchases disguised as business expenses 

This is the most frequent issue managers and finance teams wrestle with. You’ll see invoices for “client entertainment” that look eerily similar week after week. A $60 meal here, a software subscription there — all tagged with friendly but generic descriptions like “team offsite” or “operational tools.”

In many cases, the charge was simply a mistake. A personal expense hit the company card, or a receipt was submitted without thinking twice. The problem is what happens next. At times, employees might let it slide, assuming it’s not a big deal. And when the first one goes through without question, it makes the next charge easier to justify.

On their own, none of these look fraudulent. But when you start seeing them cluster, especially from a single person or department, it’s worth asking two simple questions: “Does this truly map back to business needs?”, ”Does that transaction really make sense?”. That’s where patterns begin to tell stories. 

2. Duplicate, altered, or inflated receipts 

Manipulating receipts is far more common than most teams think, and thats proof of an active fraud. You may start seeing duplicate submissions (sometimes across two team members), adjusted totals, or receipts that don’t match the card activity dates or amounts. And now, with the advent of AI tools that can generate extremely convincing fake receipts, this problem is evolving faster than most manual review processes can keep up. 

In fact, industry data shows AI-generated receipts are starting to make up a measurable portion of falsified submissions, challenging traditional detection methods that rely solely on visual cues. So if your process still depends on receipts submitted as static PDFs or photos with no structured verification, you’re leaving yourself open to this sort of subtle abuse.

3. Mileage and travel reimbursement misuse 

Mileage claims and travel reimbursements are another favorite channel for small-scale fraud because the verification feels subjective. Did they really drive 250 miles for that meeting? Why was their “business trip” itinerary canceled, but the hotel still charged?

These aren’t always malicious; sometimes policies aren’t clear, or travel plans change. But gray areas can also be exploited. A common example is with airfare. An employee might book a flight that’s technically in policy, yet later use the company card to pay for an upgrade. Because the original ticket looks compliant, the out-of-policy upgrade is much easier to miss. 

When you see inflated mileage claims or lots of out-of-policy travel upgrades slip through week after week, it’s a red flag. And the issue is that most review processes only catch these things after the fact, if at all. Without clear benchmarks or automated checks, verification truly becomes a guessing game.

4. Suspicious or fabricated vendor charges

This can look like unfamiliar vendors, misspelled merchant names, or ambiguous service descriptions. In a worst-case scenario, the vendor might not even exist at all—it’s a shell company someone set up to claim reimbursements.

You don’t have to assume malice right away. But when a vendor doesn’t clearly map to your business operations, it deserves scrutiny. If the vendor is not known, the service/product doesn't align with business needs, or doesn’t make sense within the context of the employee’s role, it’s worth digging deeper. 

How to spot red flags in everyday spending

One of the biggest mistakes managers and teams make is reviewing expenses one by one, in isolation. Fraud, or even just ongoing misuse, rarely shows up as a single, obvious transaction. It shows up in behavior. And once you start reviewing through that lens, certain signals become much easier to spot.

Here are the red flags I encourage finance teams to watch for in day-to-day spending.

• Inconsistent timing and submission patterns: Pay attention not just to what is submitted, but when. If expenses are consistently submitted late at night, right before reporting deadlines, or long after the purchase occurred, that could be a sign that someone is trying to avoid scrutiny or relying on the assumption that rushed reviews won’t catch details. Timing alone doesn’t mean something is wrong. But when the same pattern shows up repeatedly, it’s worth asking why.

• Repeated small transactions: This is where a lot of budget leakage happens. Small, routine charges often get a free pass because they don’t feel worth the time to question and might be under the amount threshold that requires a receipt. A $25 meal. A $40 subscription. A few “miscellaneous” expenses each month. Individually, they seem harmless. Over time, they add up. And because they rarely trigger manual review thresholds, they’re often where misuse goes unnoticed the longest. If your process only slows down for large expenses, you’re likely missing the real risk.

• Receipts that don’t match transaction data: Receipts and card transactions should tell the same story. When merchant names, dates, or totals don’t align, that’s a clear signal to dig deeper. The harder it is to reconcile receipts against actual spend, the easier it becomes for discrepancies to slip through.

• Expenses that technically “fit” but feel off: Some of the hardest issues to catch are expenses that comply with policy on paper but don’t make sense in practice. A marketing expense submitted by someone outside the marketing team. Travel charges from a role that rarely travels. A uber ride during the day after a trip happens. Software subscriptions that don’t clearly tie back to business needs.

This is where context matters most. And it’s also where many review processes fall short. Systems should make it easy to evaluate expenses against role, budget, and historical behavior — not force reviewers to rely on gut instinct alone.

How to distinguish legitimate expenses from fraudulent activity 

One thing I always remind finance teams is this: not every irregular expense is fraud. People make mistakes, policies aren’t always perfectly clear, and sometimes an expense just looks unusual because the context isn’t obvious at first glance. The goal here isn’t to over-police your team, but to create clarity for reviewers and employees alike.

Here’s what I’ve found actually helps separate honest mistakes from real issues.

• Compare expenses against roles, budgets, and categories. If something falls outside those norms, it deserves a closer look.
• Verify vendors consistently. Legitimate vendors are easy to validate; they have a clear purpose, a consistent name, and a connection to your business operations. When a vendor is hard to verify, vague, or unfamiliar, there’s your answer.
• Make managers responsible for their team expenses. Managers are closer to their team members than the finance team.  They have the context and can more easily spot anomalies. Empower managers with the tools they need to review and approve the team expenses. 
• Look at patterns over time. When the same type of anomaly shows up again and again from the same source, it’s no longer a mistake. Patterns reveal intent far more reliably than any single transaction ever will.
• Use clear categories and predefined guidelines. The clearer your expense categories and policies are, the less room there is for interpretation.

Practical ways to prevent expense fraud before it starts

If there’s one thing you take away from this blog post, it’s that the best time to prevent expense fraud isn’t during an audit, it’s before any money leaves the door.

Audits are necessary, but they’re reactive by nature. By the time you’re reviewing reports, the damage is already done. The goal should be to reduce the number of questionable expenses that ever make it that far.

Here are a few practical ways to start doing that.

1. Set clear, practical expense policies

Your expense policy shouldn’t feel like a legal document - at least an employee-version should be easily scannable, tailored to employees’ key needs, and at the employees’ finger tip. If employees have to guess what’s allowed and what isn’t, enforcement becomes inconsistent and frustrating on both sides. Clear policies remove that guesswork. They make expectations obvious and decisions easier for everyone involved.

2. Require pre-approvals and enforce spending limits

Pre-approvals and spending limits are some of the most effective controls you can put in place. They remove judgment calls from the review process and shift control to the moment spend happens. When teams know limits upfront, there’s far less room for misuse. This is where modern payment tools, like virtual cards, will be critical since they allow you to set spending limits, define usage, and control spend without slowing your team down. 

3. Audit consistently, not aggressively

Audits don’t need to be heavy-handed to be effective. Routine reviews and occasional spot checks reinforce accountability without creating friction. Consistency matters more than intensity. When teams know reviews are part of the process — not a reaction to problems — behavior adjusts accordingly.

4. Build transparency into the process

Transparency is one of the most underrated fraud deterrents. When employees understand how spending is tracked, reviewed, and approved, there’s less temptation to test the boundaries. Clear visibility creates shared accountability and reinforces trust. The more transparent the process is, the less oversight it actually requires.

Extend’s advantage

At Extend, we think about fraud prevention differently. It’s not just about stopping bad spend. It’s about reducing the number of gray areas where problems can hide in the first place, whether that spend happens on a company card, a virtual card, or out of pocket.

Virtual cards play an important role in that. They let teams control spend before it happens by setting limits, defining where and how a card can be used, and tying purchases directly to specific vendors or purposes. That alone eliminates a lot of the guesswork and cleanup finance teams are used to dealing with later.

But the reality is, not every transaction will happen on a virtual card. And fraud doesn’t disappear just because spend takes a different path.

That’s why Extend brings all spend into one place. Card transactions — virtual or physical — and out-of-pocket expenses are captured in real time, automatically categorized, and paired with receipts and policy checks. Approval workflows are built directly into the process, so managers review expenses with full context, not weeks after the fact. Not to mention, everything flows cleanly into accounting systems like QuickBooks and NetSuite, reducing manual reconciliation and last-minute surprises at close.

That combination is what makes fraud harder to commit and easier to catch. Fewer blind spots. Fewer exceptions. And far less cleanup after the fact.

Reduce expense fraud risk with Extend 

Expense fraud is rarely about bad employees. More often, it’s the result of processes that haven’t kept up with how teams actually spend today.

When policies are clear, oversight is consistent, and the right controls are built into everyday workflows, fraud becomes much easier to spot — and much harder to justify. Just as importantly, teams don’t feel slowed down or second-guessed in the process.

That’s the balance finance and operations leaders should be aiming for: stronger controls without added friction.

Extend helps teams get there by combining real-time visibility, built-in approvals, and automated expense management in one platform. The result is better protection for your budgets, cleaner books at close, and confidence that spend is being handled the right way — as the business continues to move forward.

Seeing it in action is the easiest place to start.