Prevent Commercial Card Fraud and Streamline Your Business
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Commercial credit cards are among the fastest-growing card segments in recent years. Much of their increasing popularity is due to the value they offer businesses, which extends beyond traditional credit card perks.
“Many commercial card customers view the buyer rebates offered by card issuers as a top benefit for usage, but I believe that the ability to establish some controls around purchasing and gaining visibility into supplier spend can be more valuable,” says Andrew Bartolini, chief research officer at Ardent Partners, a research and advisory firm specializing in supply management.
Commercial cards can help midsized businesses streamline purchases, track expenses and minimize stress during tax season. But like any payment system, commercial cards come with the risk of fraud.
When determining whether or not commercial credit cards make sense for your company, consider the following benefits and risks:
Enterprise spend is often defined as the money an enterprise spends on goods, services and in some industries, capital items. In some instances, moving spend under a card program can lead to reduced processing times and other efficiencies, Bartolini says.
“Enterprises are not making direct vendor payments, rather just one per month to the card issuer,” Bartolini says. That aggregation saves time, as companies are no longer writing a check and managing an invoice for every transaction.
The benefits from streamlining purchases, Bartolini says, also include: transaction cost savings, increased spend visibility, better control over spend, and a better opportunity to negotiate supplier discounts and achieve buyer-earned rebates.
Improved expense tracking
Commercial cards help create a central depot for tracking business travel and entertainment, as well as procurement expenses. Instead of dealing with numerous invoices and employees’ personal credit cards, this aggregation makes it easier and faster to analyze where company money is going—and who is spending it.
Easier tax filings
Because commercial cards allow you to document transactions and aggregate expenses, they can make filing taxes easier. One of many additional tax benefits, Bartolini says, is that, “different statutory authorities require expense documentation for things like business travel and dinners that may or may not align with the enterprise’s policy on expense reimbursement. Cards make it easier to manage this, as you’re less reliant on individual travelers to provide receipts.”
The risk of credit card fraud
The biggest concern companies face with commercial cards is fraud, Bartolini says.
While that might be unnerving, internal procedures can go a long way to combat misuse.
“Having strong controls and clear communication around corporate card usage can go a long way towards minimizing this risk,” Bartolini says.
Companies should be proactive by setting limits for transaction value, merchant category and who gets cards in the first place. Expenses should be audited on a regular basis as well, Bartolini says.
“Avoiding employee fraud is important for all enterprises, but [small and medium-sized businesses] in particular since these companies often operate with tighter margins and less working capital,” Bartolini says.
Commercial cards also help solve the problem they create by making this monitoring easier.
“The reality is that the potential for fraud is probably lower when a company has a well-run card program because a commercial card program provides visibility and an audit trail for all purchases made using the cards,” Bartolini says.
By investing in commercial cards for your business—and implementing a process to monitor their use—your company can enjoy the benefits of streamlined transactions and better controls to protect against fraud.
This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
In your business, every time someone physically handles a check or cash, it increases the opportunity for fraud. To mitigate this risk, consider collecting money electronically — a safer, cheaper, faster and easier way to collect.