Credit Card Nightmares: Six Simple Ways to Prevent Employee Credit Card Abuse

As a business owner, you have drive, desire and dreams of something bigger.  Sadly, according to a recent survey by the National Association of Fraud Examiners, you probably also have a higher-than-average risk of being a victim of fraud, with an average loss of $200,000.

Business credit card abuse is a relatively simple (for the employee) and a common avenue for fraud, theft and simple (but costly) mistakes.

Sure, you want to trust your employees.  You run background checks when hiring.  You treat them well, and trust them to help you build a solid company.

But even the most honest employees can be tempted to defraud you when the opportunity arises.  Control the opportunity and you will eliminate a lot of the risk.  Consider these controls:

  1. Personally receive, review and approve the credit card bill.  Sure it takes time and rightly your accountant should be doing this.  Do it yourself anyway.  Its the best 10 minutes you will spend at your company this month.  Even if you don’t catch fraud or errors, it will remind you of all the little places you spend money.
  2. Make sure each card is numbered differently.    A good business credit card account will provide different account numbers for each employee card.  Something goes wrong and you’ll know exactly who to talk to.  NOTE: If you’ve used your personal credit card for business expenses, you’ll have a hard time getting different numbers. Just one more reason NOT to mix up your personal finances with business accounts.
  3. Set spending limits and alerts.  Tell your credit card issuer to notify you by text or email when a purchase above a certain amount is made, or when a single card reaches its limit.
  4. Require pre-approval for big purchases.  As above, a good card company can help you coordinate approvals.  If yours does not, consider setting employee’s spending limits so low that they have to ask you to use your card for more expensive items.
  5. Require receipts.  Every transaction by every employee should be matched to a receipt.  If you insist on this, your bookkeeper or accountant can become the first line of defense for fraud: if there is no receipt for a transaction, sound the alarm!
  6. Minimize the total number of cards. In the smallest businesses, ONE credit card is plenty.  You have the card, you make the purchases.  End of story.

If you need additional ideas on preventing this sort of fraud, your accountant or company finance advisor will have plenty of other ways to control credit card use and spending.  This is a large part of their job and they can help you plug any holes you might have in your fraud prevention procedures.  If you don’t have an accountant, consider hiring one.  FUSE has a great team ready to serve you.  Or, check out the American Institute of Certified Public Accountants for other accountants in your area.

Dedicated to your success,  Daniela

Daniela Baker is a guest blogger and small business credit expert.  She advocates giving employees more and more responsibility in a growing company…but she knows that can also lead to trouble.  By adopting her simple yet effective strategies, you can help make sure credit card abuse isn’t a legacy of your business’ success.


Originally Published

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