An Occupational Fraud Case Study

A reader of Allison Green’s “Ask a Manager” column illustrates how even trusted employees might misuse the funds of small businesses. It is important for business owners to watch for occupational fraud and to double-check their employees’ work, especially for employees who have access to the company’s bank account, money, checks or credit accounts. With strong theft prevention measures, the fraud risk can be mitigated.

A reader of Allison Green’s column wrote her and asked how he should handle his situation. Over the course of a few years, he paid almost $20,000 in personal expenses with his company’s traditional credit card. The man said that his job function changed from an in-office job to one that would require him to drive all over town. His supervisor told him that he would need to buy a car within one week, or he would lose his job.

Failing to check credit card expenditures led to occupational fraud

The supervisor told him that the company credit card could not be used for personal expenses but that the card was not checked as long as the bill was paid in full every month. The employee then paid a deposit to buy a car using the card. When the engine went bad a month later, he used the card again to pay a deposit on a second car. After that car was totaled in an accident, he used the card to pay a deposit on a third car. The man said that his girlfriend was unemployed, so he also used the credit card to pay basic living expenses during that time. Despite paying $2,000 per month towards the card’s balance, he had racked up a rolling balance of around $20,000. The employee was asking Allison Green what he should do because he was worried about losing his job.

Clearly defined policies for business expense cards

One problem that is apparent from the man’s story is that companies that have credit cards need to explicitly spell out what they can and cannot be used to purchase. Occupational fraud is unfortunate because it can easily be prevented like in the man’s case. Companies should also take care before allowing employees to use traditional business credit cards. Some employees who are desperate for money find the temptation of traditional cards to be overwhelming. The fraud risk can be minimized when companies take steps to prevent fraud.

Ways to prevent occupational fraud

If you have employees who have access to your company’s money and accounts, it is very important that you make certain to know how they are using them. Maintaining a record of employee purchases can be vital for preventing occupational fraud. You should never allow employees to access your business’s money without a good tracking mechanism in place, and you should not make the mistake of trusting your workers with your money.

Help reduce the risk fraud with Bento for Business

One good way to help reduce the risk of fraud is to choose business debit cards from Bento for Business. Bento for Business has an “A+” rating from the Better Business Bureau, and funds held within Bento are FDIC insured to at least $250,000 through The Bancorp Bank; Member FDIC. With these highly secure cards, you can control the type of spending that each employee is allowed to do with his or her individual card.

For instance, an employee like the man in this story who is required to travel for his work could have his card restricted to making gas purchases only. Bento for Business provides a dashboard interface that you can check at any time to see exactly what has been spent. Through this SSL-encrypted interface you receive a comprehensive list of all of the purchases that are made with the cards, and you control the spending limits. Start your free 60-day trial today or call us at 866.220.8455 to learn more.