Green and Red Flags: Card Program Visibility & Confidence
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Communicating positive purchasing behavior to employees who purchase goods and services for the organization often remains overlooked by approving managers or the central review team. Focused on red flags with potential for fraud or misuse, communicating the risky behavior takes priority. A follow-up by managers of these risks takes precedence to help reduce or stop a loss of funds. However, green flags, in this case, meaning “good cardholder behavior,” can also benefit the program. Along with the critical red flags, identifying and communicating the green flags will allow your procurement team to advance the transparency of appropriate spending and boost program confidence.
What are Green and Red Flags in Purchasing Cards?
Many organizations provide a commercial card or purchasing card to employees allowing them to make purchases on behalf of the organization. When employees purchase supplies, the documented policies and procedures guide the cardholder to make the best purchasing decisions possible. Green flags in credit card usage refer to spending by cardholders who exhibit positive purchasing behavior, someone who follows and respects your card program’s policies. On the other hand, red flags signal a risk of wasteful spending or potential fraud. Either way, an efficient and successful purchasing card program handles the communication of both flag types.
The Importance of Green Flags
Identifying employees with green flag purchasing behavior does not mean the monitoring ends. Instead, communicating good card activity provides an opportunity to improve morale and visibility to co-workers by showing appreciation and encouraging continued compliance. By looking for and sharing green flags, you are demonstrating to your cardholders that their actions and efforts do not go unnoticed or unappreciated, even when they are compliant.
Communicating green flags to cardholders improves your procurement program for three reasons: For starters, it encourages continued compliance. An employee may start great, following all the rules. Still, after a while, they may begin to feel like no one is paying attention, so they become indifferent, which then can quickly snowball into actions of misuse or committing fraud.
In addition to letting your cardholders know that you notice their positive purchasing behavior, communicating also shows appreciation for their compliance. Positive reinforcement isn’t just for children or dogs. It is for everyone. Employees will see when they have done an excellent job and are recognized and appreciated for doing so. A word of encouragement goes a long way to communicate the card program positively.
The final and arguably the most beneficial result of communicating green flags to your employees is that it lessens the barriers between employees and cardholders. As an approving manager, open communication between you and your cardholders is vital and will naturally need to go beyond just communicating the policies and procedures. For the success and respect of your P-Card program, ensure your cardholders feel comfortable sharing issues they may encounter and can clarify questions with you. Starting to build communication with your cardholders early on by showing awareness of and appreciation for the green flags helps prevent the need for uncomfortable conversations about red flags regarding cardholder fraud.
3 Examples of Green Flags
Gathered from our in-house forensic and data specialists, here are three easy-to-spot examples of green flags to look for when examining cardholder spending. To discover more examples of green flags to look for, download Card Integrity’s new, free, comprehensive eGuide, “Green and Red Flags: Card Program Visibility & Confidence”.
Eager to Learn Cardholders
The first type of green flag to be on the lookout for is cardholders eager to learn and understand the policy and procedures. These cardholders come with questions, more often seen in either new hires or when introducing a new or updated policy, but also can be as simple as an employee asking for clarification about one of the policies later down the line.
Proactive and Honest Cardholders
Another green flag regards the cardholder who takes a proactive approach and honestly admits and corrects a mistake when made. Let’s say an employee accidentally charges a personal purchase to the business card and later realizes the misstep – the cardholder should alert their supervisor and seek to pay back the company. Mistakes happen to us all, but how the errors are fixed and handled afterward differentiates the misuse of funds from outright fraud.
The final green flag concerns the thoroughness of a cardholder’s business reasons. Cardholders who include detailed information about purchases in the memo have the 5 W’s – Who, What, Where, When, and, Why, added to the reason. This extra step provides all the necessary purchase details and removes any ambiguity.
An invoice sent by a provider often does a lot of the work for the cardholder by including a person’s name, address, specific item, the quantity purchased, order date, total with sales tax, invoice number, order number, and customer number. An average cardholder doing the minimum would likely find it sufficient to send just the invoice to their auditor. However, a detailed-oriented cardholder can take the extra step of including a scanned copy of the physical receipt, knowing that the receipt contains the payment method, which does not appear on the invoice. Pairing the receipt with the invoice brings one closer to the actual purchase history.
Giving Kudos for Green Flags
For the invoice example described above, giving kudos can be as simple and quick as responding via email with “Thank you! The invoice and receipt you scanned have all the information we need. Great job!”. Or, for cardholders exhibiting continuous positive purchasing behavior, choose a more exciting and encouraging method of giving kudos, such as giving them a certificate. To download our free certificate template, fill out the form below and start praising your cardholders for a well-done job. We have included both a printable certificate and a digital one.