No one likes to think that their employees would commit fraud, but the truth is that nowadays expense fraud schemes are more prevalent than ever. Just look at other major markets like the UK who attribute 14% of all fraud to employee expense fraud (1), or the U.S. who state that employee expense fraud accounts for approximately $2.8 billion lost annually (2).
Now that’s not to say that all employees are committing fraud, or that you should suspect them, but ensuring that you have the right processes in place can be the difference in thousands of dollars saved or lost. Fraudulent activity can be as simple as over exaggerating mileage, or as devious as altering dates and claiming receipts for non-work-related dinners or events. One report noted that employees felt they deserved a reward for business travel (3) and of those who admitted to fraudulent expense activity were reimbursed anywhere from $2,500-$25,000 annually for items unrelated to business (2). Just let that sink in.
When you look at it on a large scale, expense fraud can be a serious detriment to your business’ financial health and there are clearly gaps in the existing expense systems and a need to re-evaluate it.
While it is key to have controls and policies in place to monitor and manage employee expense tracking and usage, it just takes one overlooked step in the reimbursement process to cost your company thousands. This isn’t a matter of not trusting your employees to do their job, but rather providing them with all the tools necessary to run expense management efficiently.
One option favoured by many is the company expense credit card. Sure, it helps track expenses with monthly statements that can be reviewed but you run the risk of employees over-spending their allotted budget amount or using company cards on personal purchases, all of which rely on a “pay later” system. So if your employees over spend, you’re left picking up the pieces at least a month after the transactions have occurred. That delay in identifying misspent funds compounds the loss.
Virtual and prepaid Mastercard and Visa card payment solutions however, offer up an option to accounting departments and expense management teams that helps to streamline the reimbursement process. Working within an expense program dashboard, accounting teams can easily restrict, delegate and load funds to prepaid expense cards and track in real time the cardholder’s activity.
Gone are the days of backtracking, high risk balances, and time-consuming audits and expense reviews.
Virtual and prepaid expense card programs work on a “pay before” system that allows you to take your budget for employee expenses and allocate funds to cards as needed. As expense needs arise, you can load funds to employee cards along with any additional transaction restrictions to ensure that employees only have access to the funds they require and reduce the risk of spending outside of allotted budgets and at inappropriate locations.
Prepaid expense card program restrictions can include Merchant Category Codes (MCC), vendor specific restrictions, and load, transaction and daily spend limits. So, if you have an account executive treating clients to a dinner at say, Joey Restaurant, you can restrict card usage to that specific vendor code, or a set of vendor codes to ensure company money is being spent at the right places at the right time. In addition to purchase controls, the cards have robust reporting on card funding, transactions, and insights into spend patterns. This allows you to monitor suspicious transactions and employee purchases as they occur, requesting receipts as proof when needed.
Take for example, vehicle logistics and fleet management companies, who have been using prepaid Visa cards for years as fleet cards or fuel cards. These cards are commonly used to pay for diesel, vehicle maintenance, and related expenses, and are unique in that they can only be used at specific locations allowing the companies to manage a multitude of expense needs on an often international scale with efficiency.
And yes, while there remains to be an option that is completely fraud-proof, prepaid expense card programs look to help combat expense fraud that stems from backtracking through old receipts and lengthy review processes. Plus, when you work through your expense program dashboard setting budget, allowances, and transaction restrictions, you eliminate the “reimbursement” portion of expenses as you are no longer reimbursing employees for their money spent. Instead, it simply becomes expense management as you delegate company money to employees for business needs.