4 Reasons Organizations Resist Virtual Cards

July 10, 2018 Lynn Larson

There are at least four reasons why some organizations have not yet adopted Virtual Cards or, more broadly, an electronic accounts payable (EAP) solution. Do any of the following pertain to your organization? Revisit the reasons for their decision and ensure they had the right information first. You might be able to reopen the case.

1. Few Regularly Used Suppliers

A common target for Virtual Card usage is regularly used suppliers. This list might be short for some organizations, thereby a Virtual Card program may not be the best fit. For example, one end-user told me they do not use Virtual Cards because, as a research laboratory, their suppliers were always changing due to their always evolving purchasing needs. They found that traditional Purchasing Cards worked best. This is a valid reason. However, for other organizations, there are few regularly used suppliers because no one has pursued strategic sourcing. Besides not gaining the benefits of a Virtual Card program, they are potentially losing out on cost reductions that can be obtained through negotiated pricing.

2. Too Hard to Convert Suppliers

Your organization might be under the impression—without concrete evidence to support it—that your suppliers will not accept Virtual Cards. Before casting Virtual Cards and other ePayables aside, work with your current Commercial Card provider (or even a provider who is trying to gain your business) to do a “supplier match.” You might be surprised at how many of your suppliers are already accepting Virtual Card payments from other customers. In addition, many providers offer supplier on-boarding services, with or without an extra fee, to make the process easier for you. It pays to explore provider options.

3. The ERP System Cannot Support It

In response to this excuse, I have to ask, “Are you sure?” ERP systems are more robust today than ever before and include many different payment choices (or you might be able to add one). Further, you might be able to apply a default payment type by supplier. To accommodate Virtual Cards, the “payment release” step of the accounts payable process may simply generate another output. Instead of just checks and an ACH file, there would be a Virtual Card file to upload to the provider. Talk with your ERP system vendor to learn more about the capabilities.

4. Organization Resistance to Change

This is the catch-all reason that, unfortunately, often prevails above logic. If decision makers reject a sound, factual business case for Virtual Cards, then there is not a lot you can do until there is a leadership change or shift in organization priorities. Wait for the right time to bring this up again and ensure your business case includes the fraud protection aspects of Virtual Cards/EAP.

Separate the facts from the myths to ensure you are making a sound decision about Virtual Cards and other EAP solutions.

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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…

Topics Every P-Card P&P Manual Should Include

June 19, 2018 Lynn Larson

Even if your Purchasing Card policies and procedures (P&P) manual is current, it could be lacking in other ways, resulting in repeated questions and compliance issues. Have you evaluated the manual’s topics and related content recently? It might be missing key information. Yet, reviewing and updating P&P often fall to the bottom of someone’s to-do list. According to AP Now’s AP Practices Survey Results, fewer than 20% of respondents update their accounts payable P&P at least annually. I assume the same could be true for P-Card P&P. To help you gauge whether you are covering the right material, following are 12 broad topics along with example sub-topics for some.

Primary Topics

1. P-Card Overview

Relay what P-Cards are, why the organization has a program, what P-Cards are used for, etc.

2. Roles and Responsibilities

3. How to Obtain a P-Card

4. Card Security and Limits

Be sure to provide insight on common scams/external frauds and how to combat.

5. Card Usage

This broad category spans many sub-topics, such as:

Allowed and prohibited purchases, including parameters describing “necessary” versus “extravagant” business purchases
Preferred/approved vendors
Placing an order—the P-Card purchase-to-pay (P2P) process
Supporting documentation requirements
Returning an order and receiving credit
Accidental usage for a personal purchase
What constitutes card misuse/abuse

6. Transaction Declines

Explain why this might happen and what to do in response.

7. Transaction Reconcilement and Review

One relevant sub-topic is how cardholders should address a problematic transaction; see the previous blog post for tips.

8. Ongoing Training Requirements

9. Card Expiration and Renewal

10. About Program Auditing

While you do not need to give away any secrets, you do want program participants to know that transactions are monitored.

11. Card Cancellation

12. Reference Materials

Examples include a glossary, user guide for the P-Card technology, relevant forms, etc.

Concluding Thoughts

While it is nearly impossible within the P&P to address every unique situation that could arise, think about what you experience on a regular basis, such as frequently asked questions and common mistakes. Respond to these experiences by planning to make the related content clearer, more prominent, and easier to find. Taking the time to make your P&P more robust can pay off.

Additional Resources

See more content on P-Card policies and procedures from Recharged Education, including a related guide available for purchase for just $29.99.

For more information about AP Now’s AP Practices Survey Results referenced in the introduction above, visit http://www.ap-now.com/products/item142.cfm.

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Internal Fraud to Result in Prison Time

May 22, 2018 Lynn Larson

False mileage reports, false expense reimbursement requests, and personal use of the company card comprise the crimes committed by former Allina Health vice president, David M. Johnson. Following his guilty plea to four counts of theft by swindle, he will be sentenced in June to nearly four years of prison time. I first wrote about this case in February (link provided below), but additional information has since emerged. Keep reading to see what he did and how it was caught more than 10 years after it started. Would your organization have uncovered a fraud like this sooner?

What Happened

It appears Johnson’s embezzlement activity started in 2004 and involved approximately $775,000. The scary part is, it was not uncovered by Allina until 2017 and an investigation ensued. Due to a five-year statute of limitations in Minnesota, his guilty plea “only” pertains to around $417,000. The criminal complaint by Hennepin County in Minnesota provides some interesting details that should serve as warning signs to other organizations.

False Mileage Reports

At one point, Johnson was one of the top two employees receiving the highest mileage reimbursements. As such, Allina informed him of this status and reminded him of the option to use a company car instead; he declined without giving a reason.

Things began to unravel when an employee noticed Johnson’s reports were “disproportionate to other Allina employees.” Subsequent research showed conflicts between Johnson’s calendar and usage of his company ID card (for building and parking ramp access), and his purported trips/external meetings. Further, individuals at the external sites he supposedly visited denied Johnson was there on the dates in question.

False Expense Reimbursement Requests

Johnson conducted various schemes to defraud Allina. One involved submitting copies of personal checks (and false invoices) he claimed to have paid to a particular printing company. He was compensated more than $300,000 over the years. The investigation revealed none of the checks were ever issued to said vendor and, in fact, the printing company had gone out of business in 2000.

Card Fraud

Johnson used his company credit card to make personal purchases of season tickets to multiple sports teams (e.g., Minnesota Vikings). He even convinced the respective organizations to split up the ticket costs into smaller charges in order to circumvent his card limits. I have to wonder who was responsible for reviewing and approving his card transactions! Taking his fraud a step further, he sometimes sold these tickets to colleagues.

Additional Resources

Tips to Glean from the Case

To name just a few:

Periodically audit mileage claims to ensure employees have taken the trips in question.
Enforce a policy concerning when a company car should be used.
Do not reimburse employees for invoices pertaining to non-travel goods and services.
Pay attention to vendor spend. Conduct research when the collective dollar total and/or purchase frequency exceeds certain thresholds.
Ensure appropriate oversight of ALL cardholders’ activity.
Establish an effective auditing strategy for Commercial Cards.