Many organisations use corporate credit cards which provide the card holders with a convenient way of conducting business. Rather than not issuing corporate credits cards in fear of fraud, policies and procedures can be put in place that can reduce the likelihood of fraud occurring.
The risk is that someone misuses their corporate credit card by using it to pay personal expenses and then either claiming the invoice is work related or altering the invoice to make it appear to be business related.
Methods to Mitigate the Risk
Corporate credit cards can easily be misused in the hands of the wrong person. Potential fraud can be minimised by taking some extra steps. These include:
- Have a written policy on the distribution and use of corporate credit cards. Employees who are provided with corporate credit cards should be required to sign the Corporate Credit Card Policy to acknowledge their understanding of what is required of them to hold the corporate credit card.
- Determine who actually needs corporate credit cards and obtain credit cards only for those people. If people only have an infrequent need to use a corporate credit card, they could utilise their own credit card or cash and have the cost reimbursed with the appropriate documentation.
- Set spending limits per person and not just have the same limit for everyone. By setting limits per individuals’ requirements, the organisation limits the maximum amount of fraud that can be perpetrated using the credit cards. As an example, it may be determined that the Chief Executive Officer only requires $2,000 per month, while a Purchasing Manager may require $10,000 per month. An organisation should not be afraid to set such limits.
- Corporate credit cards should only be used for business expenditure. What constitutes inappropriate use should be clearly set out.
- All expenses charged to corporate credit cards need to be supported with appropriate documents such as invoices.
- Be aware of peak risk periods. Consider this example. It is ‘back to school time’. An employee usually computers for the organisation. However, at the start of the school year the employee adds a laptop that never makes it to the organisation but instead ‘falls into’ their childs school bags.
- The cardholder should sign off on monthly credit card statements that all expenditure is for business purposes only. This can be done by the cardholder signing either a form attached to the statement or a stamp placed on the credit card statement that states words to the effect: - “All expenses charged on this statement are business related and are not personal in nature.”
- Do not allow cash withdrawals to be made on corporate credit cards including over the counter withdrawals at the bank or at an automatic teller machine. If a person is traveling overseas and needs cash for local currency, provide them with cash separately and require them to acquit the cash provided.
- Credit card statements should be approved for payment by an appropriate person after the cardholder has substantiated all expenses with appropriate documentation and verified that all expenditure is business related.
- When an employee resigns, an exit checklist should include the return of a corporate credit card.