For procurement and finance professionals, monitoring expenses is a critical component of managing budgets. Unfortunately, cardholders can sometimes circumvent transaction limits using several split-transaction strategies. In this blog post, we will discuss the challenges associated with monitoring expenses when cardholders attempt to circumvent transaction limits, violate policy by doing so, and how to best manage these situations.
What is a Transaction Limit?
One of the most common controls set for card program policies is a transaction limit. Transaction limits are the standard maximum amounts assigned and allowable in a single transaction, and they provide automated means for controlling purchases made with company credit cards.
Setting Transaction Limits
Transaction limits act as a barrier, preventing cardholders from spending excessive amounts of money within a designated period to minimize risks for abuse or misuse of your organization’s cards. These internal controls are in place to prevent maverick spending, or worse, fraudulent purchases, from appearing on company credit cards.
Despite implementing controls into your card program, there will likely still be methods that people may employ to bypass the controls that your program has set. One common way cardholders may try to navigate around transaction limits is by splitting a transaction. A split transaction happens when a cardholder breaks apart a transaction into two or more payments to force the dollar amount for the transaction under the transaction limit.
Common Split-Transaction Strategies
The most common strategy cardholders may use when splitting a payment is a same-day, same-vendor split. This is the simplest example of a split payment, where a transaction is broken down into multiple payments on the same day to the same vendor. By performing this split, the transactions that appear in spending data come across as separate purchases.
Less Common Ways to Circumvent Transaction Limits
When monitoring expenses, a manual review of transactions could bring to the surface more of the common split-transaction strategies. However, less common methods for getting around the transaction limit can make finding them a greater challenge. This section covers the tougher strategies to detect, especially when review teams depend on a manual expense review every month.
Split Transactions Across Days
One of the more unique ways a cardholder may attempt to hide a split payment is by splitting a payment across multiple days. By doing so, a cardholder effectively makes the split payment much harder to track because the separate charges likely will not physically appear near each other within your organization’s spending data.
Split Payment Strategy
Another way that cardholders may attempt to hide a split transaction is to involve the help of another cardholder and split the transaction across multiple cards. Like splitting the payment across multiple days, a payment split across different cards becomes much harder to track internally. Not only do you need to spot the potential split payment across spending data, but you are also required to investigate the potential misuse or abuse of your organization’s cards across multiple cardholders. Additionally, potential cardholder collusion may be difficult to investigate on a timely basis.
Monitoring Expenses Challenge: Trying to Find Circumvented Transaction Limits within a Mountain of Data
When cardholders take these extra steps to violate policy, the first-time offense may just occur due to an employee’s misunderstanding of policy. In which case, an easy refresher training on your purchasing policy may do the trick. However, finding spend trends like these could be a warning sign of a cardholder abusing card privileges. Monitoring expenses alongside large amounts of data may slow down your review team and create further challenges in uncovering policy violations, especially when attempting to find patterns like circumvented transaction limits.
Card Integrity Minimizes Risks Associated with Circumvented Transaction Limits
Corporate Cards and Purchasing Cards do an excellent job of keeping logs of data on transactions made by cardholders. This is important because they provide your organization with the relevant information that can be used to track patterns in your spend and help gain greater visibility into how your program’s cards are being used.
With the wealth of data that winds up being generated by your program’s credit cards, it can be quite easy to become overwhelmed and overworked if your organization is not sufficiently equipped with the people and tools to handle the overload of data.
DataWISE from Card Integrity combines state-of-the-art financial data monitoring software with a team of industry experts to provide your organization with a scalable review of 100% of your program’s spend data. DataWISE monitors expenses and includes over 250 different purchasing behavior alerts that we customize to provide your organization with the relevant data it needs to maximize the effectiveness of your card program.
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