A Card Program Best Practice: Aligning Policy with Card Program

Card Program with Policy

Aligning an organization’s purchasing policy with a card program is a vital step toward maintaining the financial health of your business. Card programs are ever-changing and policies should also reflect this change. Updated policies will help an organization to manage contract compliance, credit card security, as well as cardholder purchasing habits. To stay current with how to manage your card program, Card Integrity has developed an extensive list of best practices for your card program. These insights have been compiled from our own data and services. Our list of best practices encompasses Policy, Management, Infrastructure, Audit, Submission, Purchasing, and Training. However, in the following list, we focus on best practices for policy. Specifically, our featured tip focuses on what specific policy rules you should consider including or updating in your P-Card program.

Well-maintained policies for stronger internal controls

Purchasing card programs operate at their best when they provide efficiency and savings to the payment process. To protect the benefits of P-Cards from being lost to noncompliance or fraud, corporations build card policies as one of their strongest internal controls in the payment process. The policies describe the rules and regulations that employees should adhere to and provide guidance when needing to make a business purchase. But if a policy is not maintained, rarely revised, or not clearly communicated, the policy can become outdated and little more than words on paper. A static policy contributes to a lack of control over P-Card spend rather than remaining an effective measure to prevent noncompliance or lost savings.

An excellent card program, whether newly developed or has seen more than a few fiscal years, should carefully and thoroughly review the relevance and clarity of the rules and regulations of a policy. When monitoring P-Card activity, effective rules and regulations are the backbone for a successful card program. The following Card Integrity list of best practices will offer some helpful tips toward an effective and low-risk P-Card program.

What to do about charitable contributions

To begin with, P-Cards, as mentioned by the NAPCP in their historical perspective on commercial cards, had their beginnings in the late 1980’s and were meant for business supplies or MROs – not for charity or other personal spending. Organizations should implement a policy that prohibits charitable contributions. There are two main reasons for why you should not allow charitable contributions on P-Cards: First, donating to charities could misalign with your specific, stated corporate objectives. Secondly, these contributions could become public. If they become public, these contributions might show favoritism towards a certain organization. To ensure proper alignment with your company goals and possible indications of favoritism, prohibit charitable contributions in any form. If charitable donations are key to your business, though not intended for the P-Card, then a card policy can also clearly communicate how the organization handles any payment to charitable organizations or who to contact.

When encountering office parties

Everyone enjoys an office party. However, while these parties might be held for employees, these events are very much personal in nature. Such events should be prohibited on P-Cards. These events include spending on baby/wedding showers, birthday, engagement, or retirement parties. Employees can still have fun in the office by celebrating milestones in their co-workers’ lives. However, they need to be informed about the proper way to pay for such events.

Stop the overspending – Prohibit split transactions

Your company should have written in the policy that split transactions are prohibited. A split transaction occurs when a cardholder separates an item for purchase into two or more transactions. One of the most common reasons splitting is used is to ensure that cardholders don’t go over their spending limit. Cardholders engage in this behavior for many reasons. By engaging in split transactions, the employees might not reach their personal stated spending limit but can cause serious overspending for the company.

How to handle card sharing

Every cardholder should strictly adhere to the guidelines set forth for the use of their specific card, this includes ensuring that you are the only person using your cards. Guidelines can change per cardholder or by department. To name a few, transaction spend limits, per diem rate, or merchant categories can all vary depending on who makes the purchase in your organization.

Personal spending left unnoticed

To be straightforward, if your organization does nothing else in this list, at the very least prohibit any form of personal spending.

Personal purchases are one of those purchase types that either end up getting ignored or easily forgotten about by those responsible for their review. This is a case where what you can’t see can hurt you. Personal spending left unchecked can lead to a culture of “no one is looking, so it must be ok”. This can allow for additional opportunities for employees to engage in expense fraud or payment method misuse.

Personal purchases are a great example of employee misuse that can go undetected from an already busy review team. Specifically, these purchases can go undetected when they are in the form of something that seems completely probable. Ineffective or weak review systems could easily allow such fraudulent expenses to go undetected. This is especially likely if the payment method used matches the payment method assigned to that type of expense category. In such cases as the ones listed above, it’s clear that if the resources to prevent employee fraud and misuse are not properly used by those in charge, such tools have no positive impact. Read more about how personal purchases can hide across different payments methods: Four employee fraud types hide in corporate expenses.

Purchasing limits

When following a policy, cardholders need to know approved purchasing limits and the need for complete commitment to the specified purchasing limits. When cardholders begin to forgo spend limits, serious overspending can occur. This overspending can drastically damage the financial health of the organization. With spend limits, it’s usually less about the products being purchased and more about the price and costs. Ensuring strict adherence to purchasing limits will help to eliminate many forms of overspending.

Adherence to purchasing limits is especially important for the maverick spenders. Maverick spenders can have a detrimental impact on the financial health of an organization. These employees feel that the specific notes in the rules don’t apply to them. The actions of maverick spenders can result in using the wrong vendors, buying at the wrong time, and higher costs. Read more to find out the results of maverick spenders as well as how to prevent such actions in spenders from moving forward: Spending Money without approval – the maverick spender.

Align policy with card program to ensure proper adherence to policies and procedures

Card Integrity’s unique DataWISE service can ensure that all cardholder expenses are in line with your policies and procedures. In addition, Card Integrity’s cardholder training program can create effective training courses based on your specific policies and procedures. Call us today at 630-501-1507 or click HERE to contact us via our online form to find out more information on how our services can help ensure maximum efficiency for your P-Card Program.     

For More Tips, Download Our P-Card Best Practices Guide

Smarter spending begins with the right controls in place. To see more Best Practice tips that you can apply to your P-Card program, complete the form below for access to an in-depth P-Card Program Best Practices Guide. Our detailed guide groups P-Card program best practices into seven distinct categories: 

    – Policy
    – Management
    – Infrastructure
    – Audit
    – Submission
    – Purchasing
    – Training

These tips can help streamline your card program, bring efficiency to the P-Card process all while preparing your card program with scalability and security in mind. Set up your card program for success. Make the most of your P-Cards by downloading our FREE guide today. 

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