How to help prevent company credit card misuse

Commercial credit cards are helpful tools that allow employees to conveniently make business-related purchases. However, with this privilege comes the responsibility and expectation that employees use these cards ethically and within the guidelines set by your organization. While most employees will use these credit cards without issue, even one instance of misuse could cause financial trouble and present risk.

Implementing a strong expense policy, spending controls, and a consistent expense report review process can all help your company identify suspicious activity and prevent employee misuse.

Commercial credit card expense policy best practices

Developing a comprehensive expense policy is crucial to establishing a strong foundation for preventing credit card misuse.

Best practices for what to include in your company’s expense policy include clear guidelines, training and education, and regular policy reviews.

Consider including the following elements in your company’s commercial credit card expense policy:

1. Explanation of how to use the card and an overview of its benefits.
2. Credit card issuance guidelines, including employee eligibility, the process to request a card, and credit limit and spending controls.
3. Guidance on card usage, including approved and non-approved purchases and cash advances.
4. Explanation of requirements for using commercial cards for purchases, including a policy stating employees will not be reimbursed for work-related purchases made with their personal credit cards.
5. The procedure for reporting a stolen or lost credit card.
6. Defined consequences of misuse, including up to termination.

Use commercial credit card controls to help prevent misuse

Too often companies refrain from setting strict credit card controls to avoid dealing with situations where employees’ cards are denied. However, it’s far better to face employee questions and complaints after a card is declined than to not catch an incident of employee misuse.

“Commercial credit cards today include sophisticated controls to reduce employee misuse. These limitations better allow businesses to control spending on these cards and keep expenses in check,” says Mussio. Limits set by your company are enforced every time a card is used, which helps save time and expenses. Spending controls could be matched to individual roles so you can restrict cardholder groups, or you can create custom groupings for merchant type controls.

Help manage spending and reduce misuse with these commercial card control measures:

• Transaction limits: Assign individual or cardholder group spending limits based on job roles and responsibilities. These can include:
  • The amount of a single purchase.
  • The amount spent each day.
  • The number of transactions allowed each day.
  • The amount spent each month.
  • The number of transactions allowed each month.
  • The days and/or hours allowed for transactions to occur.
• Merchant category limits: Limit the type of merchant groups, ranges, and codes where the corporate credit card can be used. For example, you can limit transactions to travel merchants for plane tickets, car rentals, or hotels.
• Receipt requirements: Require employees to submit receipts, including a scanned image or copy of the receipt, for expenses made with their corporate credit card to ensure transparency and accountability. You could require receipts for all expenses or only those over a set dollar amount.

Watch out for red flags when reviewing expense reports

Vigilant expense report monitoring and reviewing can help identify potential employee misuse. You should regularly run expense reports to check employees’ spending.

As you do, look out for these four red flags:

1. Excessive or unusually high expenses outside the employee’s normal scope of work.
2. Repeated charges with the same merchants.
3. Missing or incomplete expense documentation.
4. Expenses split into multiple smaller transactions to bypass spending limits.

“Basically, you’re looking for huge purchases that shouldn’t be taking place at such a high velocity or significant activity with specific cardholders outside of what you’d typically expect,” says Mussio.

What to do if you suspect employee misuse

Your organization should have a well-defined plan to respond to company credit card misuse, so if misuse is suspected, you can move quickly. Handle the situation with care and follow proper protocol as outlined in your expense policy to protect your company.

1. Gather evidence, including expense reports, receipts, and supporting documentation.
2. Determine the type of employee misuse. If the misuse was accidental (e.g. accidentally pulled their corporate card out of their wallet at time of purchase for a personal transaction), reinforce your expense policy with your employee. If the misuse was purposeful, continue to Step 3.
3. Close the credit card immediately if your investigation demonstrates suspicious activity.
4. Take appropriate disciplinary action under company policies and the expense policy. Depending on the frequency or severity of the misuse, this could include termination.
5. Check with your card issuer on any type of employee misuse liability coverage programs that your card(s) may be eligible for.
6. Work with the individual on a repayment plan.
7. If a repayment plan fails, file a police report for theft against the individual.

Implementing a strong expense policy and setting guidelines for corporate card use can go a long way in preventing employee misuse. For help developing or updating your own policy, or to learn more about prevention measures, contact your relationship manager.