Why mandate card use for T&E?

Results from AP Now’s 2016 T&E Survey reveal some things I did not expect. Namely, nearly 20% of respondents’ organizations do not offer Corporate Cards or any type of Commercial Card to their employees for business travel expenses. Besides the obvious issues of making employees pay out of pocket up front for some or all expenses, this arrangement can increase the risk of T&E fraud. The same is true when Corporate Cards are available, but not required. To explore this topic further, following are observations from an executive whose organization does not offer cards for travel purposes, as well as additional statistics from AP Now.

Organization without a Card Program

The executive with whom I spoke (“James”) works for a national company that uses a well-known travel technology system, so it is surprising that their approach to payments is so outdated. They are not alone. According to AP Now’s study, organizations of all types and sizes are among those without a card program for travel expenses; this designation is not limited to small companies.

Fraud Potential

James admits that an employee could easily commit fraud. For example, an employee could submit a reimbursement request for airfare:

  • soon after making the purchase to avoid a financial burden in conjunction with paying their personal credit card bill, and
  • again after the trip is complete

Catching the fraud is up to the approving manager, who might not remember the initial reimbursement request, as the timing gap is likely weeks, if not months. In regard to airfare in particular, a best practice is to use a Ghost Card or Virtual Card (or similar) for these purchases.

Mary Schaeffer, AP Now, points out another fraud example. An employee could book a trip (airfare, conference, etc.), pay for it out of pocket, and request reimbursement. Meanwhile, he or she could cancel the trip and pocket the money. If the employee used a company card (with corporate liability), the refund would automatically go to the company. In addition, Commercial Cards of all types provide visibility of employee expenses, making fraud easier to catch.

Another Drawback

In the category of “obvious issues,” James shared a recent example of an employee who had to take a business trip, but did not have a personal credit card or the funds to pay up front. The employee’s manager had to use her personal card to pay for some of the employee’s travel expenses. His company also had to create a cash advance for the employee—even though they do not have a cash advance program—so the employee could pay for meals and incidentals. Inefficient, to say the least.

One option for infrequent or one-time travelers is Declining Balance Cards; learn more

I asked James why his company does not have Corporate Cards. While he is not part of the financial management team, he guessed that they do not want to deal with managing a card program. He added they lack the staff/expertise and have other priorities to address. I can’t help but wonder about the savings they are missing and the potential fraud that might be occurring. 

Take a bite out of T&E fraud and the inefficiencies of cash advances by requiring the use of a company card.

Take a bite out of T&E fraud and the inefficiencies of cash advances by requiring the use of a company card.

More from the AP Now 2016 T&E Survey

Among the 80% of survey respondents with card programs, only 41% insist on card usage. As shown below, larger companies are most likely to require cards. Within this “insist on card usage” group:

  • 53% do not offer cash advances, which helps reinforce a card mandate
  • 36% make cash advances an exception
  • 9% still do cash advances regularly

Finally, there are organizations who truly make employees pay out of pocket: 7% of respondents’ organizations do not offer cash advances or a company credit card. This just isn’t right.  

When it comes to T&E expenses, consider how/where your organization can improve, making things easier on business travelers as well as AP.


About the Author

Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With more than 15 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more

Subscribe to the Blog

Receive notice of new blog posts.