Virtual Card reconciliation hurdles

December 6, 2017 Lynn Larson

Paid in full? In a perfect world, suppliers would process Virtual Card transactions within a day or two of receiving the payment notification, thus simplifying your accounts payable operations. In reality, some Virtual Card payment processes get stuck midway; that is, the supplier is slow to act or, worse, does not act at all. Sometimes this aspect is why AP may be lukewarm to Virtual Cards. Given the potential snags, how should your organization treat Virtual Card payments from an accounting perspective? While every organization is unique and may take different approaches, following are suggestions plus tips for easing potential frustrations.

For an overview of Virtual Cards (pull payments) versus buyer-initiated payments (push payments), click here.

Accounting Entries

Again, every organization might be a little different, but the following types of entries could occur:

Upon receipt of goods (e.g., debit an asset account and credit accounts payable)
Following invoice processing, when AP initiates the related Virtual Card payment through its electronic accounts payable (EAP) provider (e.g., debit accounts payable and credit a designated Virtual or Commercial Card payable account to keep these payments separate from other payment types)
When AP pays the EAP provider (e.g., debit the designated payable account and credit cash)

Reconciliation

Chances are, the statement total from the EAP provider does not exactly match the amount in the associated payable account because you are still waiting for one or more suppliers to process Virtual Card transactions. The key is to streamline your reconciliation process. Pay the EAP provider and then focus on the remaining amount in the payable account.

Which pending Virtual Card transaction(s) does the remaining amount represent?
Which pending transactions are associated with Virtual Cards that have expired while waiting for the supplier to act?
What does your EAP provider offer in terms of reporting to help you easily identify pending transactions (Virtual Card payments you have initiated but suppliers have not acted on), including any expired cards?
If needed, does your ERP system offer any reporting to simplify the reconciliation?

To maximize Virtual Card payments, plan ahead for how to prevent and address potential hurdles.

Additional Virtual Card Tips

As you add suppliers to your Virtual Card program, include relevant training.

Work with suppliers to identify who within their organizations will need training.
Train the applicable supplier personnel on the Virtual Card process. See a related blog post on Virtual Card acceptance.
Provide documented instructions for their ongoing reference.

Within your organization:

Determine your Virtual Card expiration date strategy.
Decide if you want to send reminders to suppliers before a Virtual Card expires.
Document procedures for how AP should address Virtual Card payments that suppliers do not process in timely manner. Besides training and communications with suppliers, this might involve extending the card expiration date if possible or reissuing a Virtual Card. While you do not want to wade into the waters of unclaimed property, try to avoid defaulting back to a check payment for the offending supplier, which can derail your Virtual Card program.

Access more content on ePayables/Virtual Cards.

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…

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Defend against holiday temptations.

November 27, 2017 Lynn Larson

’Tis the season to be more vigilant. Is your organization ramping up its internal fraud prevention and detection efforts in case anyone is tempted to finance their personal holiday shopping via a P-Card? Less serious, but still a concern, are cardholders who might think their P-Cards can be used to fund department parties, office holiday décor, and/or employee gifts. Maybe this is allowed at your organization, but most prohibit such purchases. To help prevent P-Card misuse and abuse this holiday season, following are some things your organization can do.

Provide Reminders About Appropriate Card Usage

Communication is key. Remind cardholders and manager-approvers about what is and is not allowed on P-Cards. Focus on potential purchases related to the holidays, such as what is noted in the introduction above, but also include a link to the complete list within your policies and procedures.

If your organization is more lenient, like allowing card use for a holiday lunch, ensure you have very clear rules. For example, state that a P-Card may be used for “one holiday lunch per cost center per year, for which the total cost per person does not exceed $X” and require the cardholder to include an attendee list within their transaction documentation.

This might also be a good time of the year to execute annual refresher training.

Holiday surprises can be great, but not when they are in the form of fraudulent or inappropriate transactions.

Apply Greater Scrutiny of Cardholders and Their Transactions

An effective auditing strategy is necessary at all times, but the holiday season can warrant some extra efforts. Tweak your transaction audit criteria accordingly. The following could be warning signs that something is amiss, but do not jump to conclusions. Anything unusual deserves more research.

A notable increase in spend—whether dollars or transaction volume—by a particular cardholder
A cardholder with little P-Card activity all year suddenly becomes more active
Increased purchases with “retailers,” such as department stores and restaurants
Purchases that do not align with a cardholder’s specific job responsibilities
A spike in weekend purchases or purchases with new suppliers
An epidemic of lost receipts
A cardholder initiates more transaction disputes than usual or reports more external fraud

The last bullet point could lead to the discovery of “friendly fraud.” There is nothing friendly about it, but it is the common term for when a cardholder makes a purchase and then disputes the transaction with the bank. Meanwhile, they have pocketed the purchase.

In addition to strategic auditing, consider increasing the percentage of transactions you randomly audit.

Final Thoughts

The combination of increased communication and thorough auditing will help protect your organization this holiday season. While I believe people are generally good and employees should be trusted, the holidays are a time when temptations can get the best of someone.

Learn more about Purchasing Card controls...

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Is workplace impropriety the elephant in the room?

November 15, 2017 Lynn Larson

First Harvey Weinstein, then Capitol Hill. Fall 2017 has had its fill of news about workplace scandals. While Hollywood and Washington D.C. may seem completely different than our less glamorous jobs, no industry is immune from the type of misconduct we have been hearing about. The stories are sickening. Yet, I also wonder about the incidents that never make headlines—the uncomfortable workplace scenarios for which there is no outright policy violation. What should someone do in these cases, especially when the instigator holds a position of power?

In my first job out of college, my manager’s boss was what I would classify as a creep. He never violated any company policies, but his “innocent” comments—paired with his obvious stares—were telling. He made me uncomfortable, but nothing he did was “reportable.” I absolutely felt my subordinate status, as well as my tender age of 22, so I ignored his behavior and tried to avoid him. My colleagues might have been dealing with the same thing, but no one talked about it. There were only rumors about his preference in hiring peppy, petite females.

Looking back, I wish I had felt more empowered to speak up, to respectfully convey how I felt. However, I imagine he would have stressed his innocence, and I would have walked away feeling stupid and doubting myself. Who knows how speaking up would have impacted my career. Whether a blatant offense or subtle innuendo, those at the receiving end do not always have good options. A recent CNN article about Capitol Hill makes this abundantly clear. In one way or another, victims are faced with consequences, even if they ultimately triumph.

What To Do

Back to my earlier question of what to do. I strive to offer blog posts with action items, but this time I do not have clear answers. We teach children about “stranger danger” and warn teens about online predators. I’m not convinced that there is enough dialogue with young people entering the work force about the improprieties they may encounter and what their options might be. We need to better prepare them because we cannot assume that employer policies and related training, no matter how strong, will protect everyone. I realize that workers of any age can be victims. I’m specifying young people because I believe this is when the education should begin—at the ground level. However, for anyone who experiences workplace discomfort due to another employee (“reportable” or not), the best path may be to consult with HR.

Last, but not least, I have to put in a word for the truly innocent people who are falsely accused. Unfortunately, there will always be a handful of people who take advantage of the system out of spite. I don’t know what else to say. Being careful about the colleagues with whom we associate will not guarantee anything.

Final Thoughts

Commercial Card content will return for the next post. I was compelled to write about workplace misconduct this week because of my own mild experience that came flooding back to me while reading articles on the well-publicized scandals. I cannot imagine the pain that surely comes with greater ordeals.

Security Alert

On a completely different note, LinkedIn accounts are getting hacked. For more information, I published a related article today: https://www.linkedin.com/pulse/linkedin-accounts-getting-hacked-lynn-larson/

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