A Boss's Guide to Stopping Company Credit Card Abuse

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

When it comes to company credit cards, abuses are legendary. Last year, a Georgia Tech employee was sentenced to 32 months in prison for racking up $316,000 in personal purchases -- including a WaveRunner personal watercraft, a $1,900 frozen-drink system, power tools and plenty of electronics -- between 2002 and 2007 on her employer's credit card.

Putting personal expenses on the boss's tab is pretty widespread (though not typically as egregious as to include watercraft and such). Last summer, 34 employees of the U.S. Department of Education came under investigation for $18,256 in inappropriate charges made in fiscal 2006, including payments to clothing retailers and restaurants near their homes or office. And a March 2008 study from the GAO estimated that 41% of purchase card transactions made by federal employees were improper. Most of the red flags were due to improper paperwork or lack of authorization.

What's a boss to do?
If you run a business where your employees have access to company credit or charge cards, your best defense against abuse is to clearly communicate your policy and to diligently keep track of all spending. Here are five ways to keep your employees honest. (If you're an employee, heed the "5 Rules for Using the Company Credit Card" that we spell out in a separate article.):

  1. Vow to review the bills -- and let your staff know it: Scouring receipts and comparing them with credit card bills is a drag -- not only to the person whose job it is to do it, but also on a business's bottom line. Weigh the costs of accounting labor against the price of dishonesty. If you haven't had problems in the past, then you may be able to get by with just one person signing off on expenses. However, recognize that some items may simply be overlooked.
  2. Set deadlines: Require all employees who use the company card to turn in their receipts by a specific date. Too often latecomers are given less scrutiny than those who turn in their expense reports early.
  3. Put the rules on paper: Include company guidelines in the employee handbook. And make sure the rules are detailed (e.g. meals and beverages are allowable, but alcohol is not). The Department of Education auditors noted that nearly 30 employees withdrew more than $17,000 over the limits set by the department to cover travel allowances for meals and incidentals.
  4. Give abusers a heads-up: The company credit card rules should also include what happens to abusers. Depending on the seriousness of the slipup, this can be anything from a wrist-slap to termination.
  5. Apply electronic safeguards: Many corporate cards have single-purchase limits, for example, allowing less than $1,000 in purchases made online. Cards also have filters -- merchant codes that prevent charges at certain retail establishments such as salons, drugstores, or clothing stores. When an employee tries to put a pedicure or Prozac on company plastic, the card will automatically be declined.

 For more Foolishness:

Dayana Yochim has never abused anyone's credit card but her own. Though she admits to cutting in line on Office Cake Day to get a second slice of cheesecake. The Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 847000, ~/Articles/ArticleHandler.aspx, 10/25/2016 6:54:59 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,169.27 -53.76 -0.30%
S&P 500 2,143.16 -8.17 -0.38%
NASD 5,283.40 -26.43 -0.50%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes