For all the convenience and security that corporate credit cards offer, there are still some apparent risks regarding expense control strategies aimed at managing expenses in a card program. Performing a regular expense review is one of the best steps to take to improve spend visibility and manage costs. However, successfully and consistently completing an in-depth expense audit is becoming more challenging for growing card programs.
Card integrity’s Senior Partner, Doug Hindsley, recently sat down to discuss what’s going on in the corporate card industry right now, how it affects organizations, and some actionable steps to take to overcome these challenges.
Even if you aren’t seeing all three of these obstacles in your specific organization or department, odds are you may resonate with at least one. Additionally, these insights can help your department remain several steps ahead when it comes to optimizing your card program, maintaining compliance, and generating more cost savings.
Manual expense reviews are a common way for organizations to validate procurement, travel, and fleet expenses. However, these longtime practices don’t always mean it’s safer or more convenient.
Manually reviewing expenses with no back-up support system leaves your organization exposed to human error and even internal mismanagement.
“Most businesses need checks and balances especially when it comes to your expense review methods,” says Hindsley, who recommends having someone who is an independent reviewer establish in-depth monthly spend reports.
For example, the same person performing an expense audit should not also be holding a corporate card since this could create a conflict of interest. The same can be said if the one conducting an expense review is put in an awkward position by having to raise the red flag on some activity from their superior when reviewing their card expenses and receipt submissions.
“To protect against potential collusion in the company, having a third-party expert to go through your expenses could be beneficial to auditors and add an extra layer of protection and accountability for employees,” adds Hindsley.
Paper and manual processes can also slow things down or even require too much staff effort and attention to maintain. Not to mention, many organizations are getting shaken up by sudden and longer-term staff shortages.
“In light of today’s staffing challenges, you’re losing knowledge when people leave,” says Hindsley. “When an employee leaves, they take their processes and experience with them and if you’re doing everything manually, you just have to start over.”
Even if you have the staff right now, having someone try to do everything manually may not be the most realistic approach depending on the size of your card program. Essentially, you’d leave it up to one or a few people to use a series of hand reports and mental logic to ensure card spend is compliant and identify any patterns or areas for improvement.
Given these bold risks that naturally come with manual expense review processes, it’s safe to say that working with an independent professional or considering an expense review service is the way to go. When you work with someone outside of the company, they have no personal gain in hiding or fabricating data and findings.
Plus, your finance and procurement teams can utilize helpful tools like machine learning and automation to quickly but thoroughly review 100% of your monthly spend instead of just looking at a sample of the data. Further, you’ll get more visibility of key trends, spending patterns and more through the data which can lead to more actionable results.
This is a much better option compared to using all your resources and capacity to simply gathering the spend data in the first place.
Let’s say you’re aware of the potential drawbacks of relying solely on manual expense auditing processes. Perhaps there’s been talk of developing in-house expense monitoring tools that could help improve your systems and lead to more visibility.
Instead of trying to reinvent the wheel in this particular area, Hindsley recommends that most businesses stick to their core competencies and hire out for everything else.
“If creating internal tools to track and analyze expense data is outside your company’s core competencies, I’d advise against it,” says Hindsley. “When you hire someone who carries an expertise, it’s usually much more affordable and efficient to get the services or product rather than trying to create it from scratch yourself.”
It’s essential also to note that in trying to do everything yourself, if the person who creates the system leaves the company, their knowledge and foundation could be lost, sending you back to square one. As a result, this isn’t always a supportable or repeatable process to manage and update long-term.
“At Card Integrity, we have the analytics engine to find a lot of anomalies and patterns, along with a team that has purchasing, audit, and finance backgrounds so we’re able to marry the accuracy of tech with a human and customization component,” says Hindsley. “Our DataWISE service utilizes machine learning and identifies expectations while our forensic experts are able to continually communicate with our customers and make sure we’re honing our data to find the right information.”
Building an entire IT system to capture important expense data metrics would be extremely costly. Instead, choose the more economical route by researching credible companies and services to which you can outsource this valuable task.
Shop around for quotes on services and tools and be sure to request a hands-on demo so you can see exactly how the system will work for your unique needs. This can help you narrow down the best fit for your organization’s goals.
Fraud is the intentional misuse of your corporate card and several examples include:
Those who commit this type of fraud often have to put time and energy into coming up with a creative way to get away with it. Any level of fraud is not good news, but if there are blind spots in your expense control methods and fraud goes undetected, it can cost the organization tons of money over time.
Being able to spot fraudulent charges and even prevent fraud from occurring in the first place is crucial.
“We have seen everything from divorce attorney fees and nose rings to groceries and clothing purchases with corporate cards when doing an in-depth expense review,” says Hindsley.
Hindsley also recalled a time when Card Integrity helped a client whose employee tried to hide the fact that he bought more than $30,000 of gift cards through Home Depot, an approved supplier for the company.
“The receipts had been altered, but we’re able to see expenses and spend patterns from hundreds of perspectives each month,” said Hindsley. “So, we use what we discover to improve our technology, so it becomes even more efficient in tracking down fraud quickly.”
Card misuse is another issue that could take direct money away from the organization even if the mistake was made unintentionally. Misuse is when an employee does not understand how to use their card the right way, so they end up misusing it and making unapproved purchases.
It’s not malicious, but still, an issue that needs to be addressed. Misuse is accidental and could even be duplicate invoice payments, a systematic error, or even manual entry errors from an internal standpoint.
Stay on top of fraud by performing regular internal expense reviews at least once per month. Strengthen your internal controls by using the data collected from those reviews to determine patterns and gain insights. You can also offer cardholder training to employees annually to help them stay on top of rules and purchase guidelines to prevent further card misuse.
Consider partnering up with Card Integrity to overcome these common obstacles hindering your expense control strategies. With DataWISE, our flagship program, finance and procurement teams would receive access to a thorough and accurate expense review with customized reporting targeting the areas you’re most interested in. Additionally, we provide critical insights by identifying more than 250 spend behaviors to help you improve your internal controls.
As a third-party service, we believe in partnering with our clients and delivering customized solutions to help you with expense control strategies to meet your goals. If you need cardholder training assistance, we can create a customized online course for your employees through our TrainingWISE service. This helps cardholders stay updated on all your latest policies to ensure compliance.
Click here to sign up for a free training demo to see more of what Card Integrity has to offer.
