Company credit card fraud may be on the rise Gaylord Contreras | usagoldmines.com

In your wallet, you may or may not have a company card. If you do, it’s probably intended for business trips, team lunches or project-related purchases. But there are people out there who are using their corporate cards for less business-motivated buys.

Callum Borchers, a Wall Street Journal columnist, joined “Marketplace” host Kimberly Adams to talk about the types of corporate card fraud that companies see and the impact they can have. An edited transcript of their conversation is below.

Kimberly Adams: So what even got you looking into this?

Callum Borchers: I had done a story earlier this year about companies sort of cracking down on what some of us think of as kind of like small, persnickety company rules. And what came up a lot in those conversations was, “Hey, there’s also big stuff, by the way, including corporate account fraud.” And so I sort of got working on this with the question of, is this going up or down? And the answer is it appears to be going up, although we can’t be certain. The twist on it is that the software detection has gotten so much better, right? This is one of the many side effects of artificial intelligence, and so firms are catching more shenanigans than they did in the past.

Adams: So give us some examples that you heard about as you were doing this reporting of the kind of fraud companies are seeing on these corporate cards.

Borchers: You know, it really runs the gamut from little stuff to big. So, I mean, on the smaller side, it might be, “Hey, I’m gonna put date night on the company credit card and try and pass off this outing with my spouse as a business dinner.” I got a chuckle out of a story about somebody who had been working in an office where they had free coffee every day, and then when he went to work from home, he figured, “Well, I’m still entitled to my free coffee.” So he started expensing his daily Starbucks run, including the mileage from his home to the coffee shop, which I thought was really next level. But then you also get some really outlandish cases, right? Like somebody who tried to expense the purchase of an RV. I was like, “How on earth does that happen?” Well, SAP Concur explained to me this was a case where somebody was going to be on a six-month extended assignment and tried to say, “Well, you know, six months in a hotel room gets kind of expensive. It would actually be more cost effective to just buy me a recreational vehicle.” That one got declined, but it really just shows you the range of things that people will try to slip through on the company dime sometimes.

Adams: And you report that a lot of these people just figure it’s not that big of a deal. But how much of an impact is this having on businesses?

Borchers: Well, the best estimate is that fraud of a range of types can cost businesses 5% of revenue over the course of a year, which is not nothing, right? I mean, that can be real dollars. And of course, a lot of it depends on the scale of the company. Smaller businesses, I think, are really the ones that run the risk. You know, I was thinking of a conversation I had with James Tomes, who has a fire protection company called Telgian. It’s a decent-sized firm now, but he said, “When we were just starting out in the ’90s, you know, we had a fraud case that really was a big problem for us. It was about $50,000, which may not sound like a lot, but for a company our size, it was a big problem,” to the point where he decided to forgo his own salary for several months to try to dig the company out of the hole. And so, you know, his point, his plea, basically, to other small business owners was “Just bite the bullet and get that outside accountant to audit your books. I know you want to save money on that bill, but the cost of the fraud could be even bigger than the accounting tab.”

Adams: So other than having an accounts payable department kind of going through all this and auditing, what sorts of tools and recourse do companies have to fight back against this?

Borchers: Well, the software that they’re using is getting ever more sophisticated, but the bookkeeping tools that every company uses can only go so far. You really need that extra set of eyes to say, “Hey, does this look suspicious?” And try to suss it out. They try to make a game out of it. At SAP, they have unofficial quarterly awards for the auditors who catch the most outlandish expenses. I think one of the things that is interesting now is sort of the real-time nature of trying to catch expense fraud, right? Because typically, it’s really hard to recoup that money if the purchase is already made. These are things that card issuers are offering now as additional features to employers because they’re mindful that this is a really in-demand thing for companies right now. They do not want to be bamboozled, and they feel like they can’t afford to be.

Adams: There was one example you include in your piece about somebody who tried to expense makeup, and her argument was that she has a customer-facing job, and the company didn’t want to pay for that. But how much of this spending is actually speaking to maybe a bit of a disconnect between what employees feel they need to do their job that they feel should be covered expenses, versus what work actually provides?

Borchers: There is sometimes actually a blurry line between what is a personal expense and what’s legitimate business expense. And so sometimes companies’ policies are not super clear, or sometimes they’re just so voluminous that it can be hard for employees to, you know, figure out what is allowable and what is not. Roughly 1 in 10 of these expenses are not compliant when employees submit them. And a lot of that, I’m told, is not because it’s some nefarious attempt to scam the company. It’s often just because people aren’t familiar with what the policies are. What am I allowed to put on the card, and what is over the limit, and what is actually a prohibited category?