Procurement cards (P-Cards) are an attractive way for companies to give employees the flexibility to purchase items they need for work without going through often-arduous formal procurement processes. However, sometimes that flexibility can also open the door to misuse or fraud due to lack of purchasing visibility.
Because P-Cards are meant to reduce the burden for procurement of small-dollar or off-contract items, adding extensive centralized controls could defeat their purpose. However, if visibility into purchasing transactions is limited, or if the organization doesn’t actively monitor spending, the risk of P-Card misuse can become a serious problem.
Extensive use of P-Cards can limit companies’ ability to understand purchasing behavior resulting in missed opportunities for consolidation and real cost savings. This is because P-Card statement data often lacks crucial information that guides organizational spend.
Markers of misuse
Organizations concerned about P-Card fraud can use this type of data to identify suspicious purchases and even use automated analytics to detect anomalous buying patterns. A report by risk management firm ACL identifies several key markers of P-Card fraud, including:
- Non-business merchant codes, vendor names, and keywords
- Transactions made while employees are on vacation
- Duplicate purchases
- Abnormally high P-Card usage compared to others in a similar role
- Split transactions just under an approval threshold
Companies can also combine P-Card data with information from other sources for richer analysis and automate data analytics to look for outliers or patterns over time.
At a basic level, visibility itself can be a powerful tool against P-Card fraud. If employees know that every transaction is immediately visible to procurement administrators, they may be less likely to misuse P-Cards. For Amazon Business customers, all transactions can be seen and reported on from the Amazon Business management console.
Getting down to details
Transaction-level visibility can be an effective tool in preventing P-Card misuse, as well as for identifying savings opportunities. With the right data, companies can track purchasing, identify and investigate anomalies, and build fraud detection capabilities into their risk management systems.
Getting that data can be easier said than done, however. The best-case scenario is obtaining Level 3 data from the purchase process, which includes line item data such as invoice number, item description, quantity, merchant name and address, and so on.
Amazon Business recently worked with Visa to create a solution that appends Level 3 data directly to customer payment card records. Amazon Business customers are using this system to gain in-depth visibility into procurement, as well as to automate reconciliation and accelerate payments for greater budget transparency.
Communication is key
Another important tool in managing P-Card abuse without rigid controls is the use of approval workflows. By designating items, categories or dollar amounts as requiring approval, businesses can set up a dialogue between the purchaser and the procurement department or line of business manager as to why a restricted item is needed, rather than simply blocking it. This approach gives employees more freedom to buy what they need without adding complexity to the process.
At the end of the day, giving employees freedom also means giving them responsibility—and that requires trust. However, that doesn’t have to mean giving up visibility and control. With the right technology, companies can achieve the cost and flexibility benefits of P-Cards with less risk.
Create a free account to find out how Amazon Business can help you gain visibility and control over P-Card usage.