Do You Do a Credit Check on Card Applicants?

Should you give a card to an employee with a poor credit history? This was a question someone asked me recently because his company was undecided about how to proceed. More on that below, including my opinion and related recommendations, but I also welcome diverse comments on the matter. Ultimately, every organization should be prepared to address this issue.

The Situation

The person who approached me works in the financial services industry. His company was interested in giving a Commercial Card (P-Card) to an executive assistant whose job responsibilities included making purchases and paying bills. However, when a routine credit check revealed the employee had a poor credit history, it sparked internal debate among senior management. Some thought the assistant should have a card, but with extra controls, such as low spend limits. Others disagreed with card issuance altogether. (It is unknown whether the credit check occurred before, or some time after, this person was hired). On a separate note, the employee had a clear criminal background check.

My Opinion

As I expressed to the person who contacted me, having a poor credit history does not mean a person will commit fraud. Nor does a clean credit check indicate a person will not commit fraud.

Since the employee in question was already hired and the job role involved procure-to-pay (P2P) duties, then she should have a card like anyone else in her same position. The caveat to my opinion is that this company, like every card-using organization, should be following Purchasing Card control best practices. Beyond that, I would be inclined to audit this employee’s card activity more often (if audits occur manually). Having an automated auditing solution would naturally address this. It is also important to remember that Commercial Cards have the added protection of liability waivers.

Conversely, by not giving the employee a card or by issuing a card with restricted usage, the company would need some sort of alternative process to cover her P2P responsibilities.

As demonstrated by the countless news stories on internal fraud, the real problem is organizations that are lax about controls and oversight, especially concerning long-time employees.

Related Resource

Report to the Nations on Occupational Fraud and Abuse by the Association of Certified Fraud Examiners (ACFE), which includes a section on perpetrators.

What Else to Do

Credit checks are common, but has your organization defined the following details?

  • When will credit checks occur—pre-employment only or at certain intervals?

  • Which applicants/employees are subject to the process?

  • What type of results warrant specific action? For example, what would prevent someone from being hired and/or being issued a card?

While some situations will not fit into a neat box, establishing general parameters can help guide organization decision making. 

Would you give a Commercial Card to an employee with poor credit history?

Would you give a Commercial Card to an employee with poor credit history?

Educational Opportunities Related to Fraud Prevention

  1. Sign up to participate (no charge) in the AP Fraud Prevention Week by AP Now, October 7–11, 2019. Visit AP Now for details.

  2. Encourage your auditors to register for the October virtual workshop on Purchasing Card audits, sponsored by The Institute of Internal Auditors/Public Sector™ Audit Center. For details, including registration, visit The IIA website.



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About the Author

Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more

A New Fraud Tactic and What You Can Do to Prevent It

New fraud tactics continue to emerge, as described below, and our defense strategies might fail unless we stay informed about what can happen. To discern between fraudulent and legitimate business communications, some people rely on verifying an email address. That is, they hover over the sender name and look for anything slightly off that would indicate a fraudster. Others feel comfortable with a request if it comes via phone versus email. These actions are not enough. AP Now issued a warning today about how criminals have stepped up their efforts, but there are things your organization can do to prevent becoming a victim.

The Fraud

As shared by AP Now, cyber criminals have used artificial intelligence (AI) and voice technology to impersonate a UK business owner, resulting in the fraudulent transfer of almost a quarter of a million dollars. Would your organization fall for something like this?

Prevention Tips

  1. As AP Now stresses, pick up the phone and verify the request using a phone number already on record. Alternatively, go to the organization’s website, get the main number and call. This should be done even if the caller ID associated with the transfer request seems to confirm the legitimacy of the call. Why? It is possible to spoof the number. While making a verification phone call is extra work, it could spare your organization a lot of pain.

  2. Update your internal controls as necessary. Besides telling employees to make a phone call to verify a request, ensure the written procedures specify this protective action.

  3. Anyone with the ability to spend or commit your organization’s money, such as accounts payable and cardholders, must stay educated about fraud tactics. Continuously share any examples you read about, discuss fraud within department meetings, and mandate annual training for employees.  

Educational Opportunities

The above is one of many issues that will be addressed during AP Now’s How to Recognize New Frauds during AP Fraud Prevention Week October 7–11, 2019. Visit AP Now to learn more.

In addition to what AP Now is doing, I will be delivering a virtual workshop on Purchasing Card audits, aimed at auditors, for The Institute of Internal Auditors/Public Sector™ Audit Center beginning October 16. For details, including registration, visit The IIA website.

Personal Experience

Speaking of fraudulent communications, I could have easily become a victim last week. I received an email reply from a company that I was doing business with. The sender’s email address was a correct match and the email content included my past communications with this company. The only odd part was that the sender included a zip file attachment, asking me to open to view details about our upcoming meeting. This did not seem right to me, so I called the phone number I had for this company. The employee confirmed her email had been hacked. Opening the zip file would have unleashed trouble for my computer. Always independently verify anything that seems odd.



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About the Author

Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more

Survey Shows Sluggish Card Mandate for T&E

There are many cons to not mandating card usage for employees’ travel and entertainment (T&E) expenses. Yet, new survey results from AP Now reveal only 43% of card-using organizations have such a mandate. In 2016, it was 41%, so the needle has hardly moved in the right direction. What does your travel policy say on this topic? If you are among those that make Commercial Card usage optional, or if you require employees to use their own cards, you should reconsider. Take a look at the list of cons below and share with your internal decision makers. Some of them might be resistant to a policy change because they want to earn rewards associated with their personal cards. However, lack of a mandate could be costing your organization.

Source of above statistics: AP Now’s Accounts Payable in 2020 Survey, www.ap-now.com


Cons to Not Mandating Card Use for T&E

Fraud Risk

I have previously written about the types of games employees can play for their own financial gain when requesting reimbursement for out-of-pocket travel expenses. Two examples are:

  • Submitting the same expense more than once; for example, after making an airfare reservation and again after the trip is complete

  • Altering a receipt to receive more back than what is truly owed

In addition, while not outright fraud, an employee may take more business trips than what is necessary in order to earn more rewards through their personal cards.

All of the above amount to financial hits to your organization.

Lack of Visibility into Expenses

When employees use their own cards, you cannot view or verify their expenses. This hampers fraud prevention and detection efforts. Further, lack of visibility means your organization cannot easily identify expenses ideal for strategic sourcing initiatives.

Tedious Expense Reimbursement Process

Instead of making one monthly payment to the card issuer, accounts payable (AP) has to make separate payments to each employee. Depending on your organization size and the number of business travelers/trips, this could amount to hundreds of payments each month. A card mandate could save your organization time and money.

Losing Out on Potential Rebate 

Commercial Card programs of all types are often eligible to earn revenue sharing incentives (i.e., rebates). When there is not a mandate to use the cards, spend is not maximized. If you have a card program today, work with your card issuer to estimate what your rebate could be if all travel expenses shifted to the cards.

Employee Hardship

Finally, when a company card is not available at all, it can be a real problem for any employees who do not have the means to pay for their travel expenses up front. It creates an embarrassing situation for them and more work for your organization to find a solution.

Related Resources

Lack of a mandate for Commercial Card usage for travel expenses can cause numerous headaches for your organization, including financial hits.

Lack of a mandate for Commercial Card usage for travel expenses can cause numerous headaches for your organization, including financial hits.



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About the Author

Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more