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Employee Purchase Cards, or P-Cards, are work credit cards that allow employees to make smaller, routine purchases. P-Cards can lower operational costs by automating supplier payments and streamlining the overall procurement process, but they can also open the door to new risks like fraud and abuse.
One form of P-Card misuse are split transactions. Split transactions involve breaking up a high-dollar purchase into smaller transactions to circumvent the internal controls limiting maximum dollar amounts for a single card swipe. Using Split transactions employees can evade controls on P-Card spending.
For instance, one company discovered that an employee used split transactions to make small payments over several months to pay for a party cruise with twenty-two guests. The spend totaled nearly $16,000.
It takes an average of 18 months to detect occupational fraud. By that point, most funds are unrecoverable. Companies need to close this gap with the ability to quickly identify and resolve P-Card control failures before they cause damage.
To deter P-Card abuse, it is common to institute preventive controls such as dollar limits on daily and monthly transactions, dollar limits on single transactions, and restriction by merchant category codes (MCCs). These controls reduce the possibility of misuse, but as we have seen, these controls are not enough. Better visibility into split transactions helps companies detect and deter fraud and misuse.
Automated P-Card auditing solutions like Oversight use artificial intelligence (AI) to identify split transactions on a single card or across multiple cards in a few ways:
1. Identifying multiple purchases made from the same vendor on the same date. These can be a strong indicator of split transactions.
2. Screening for round numbers. Most purchases have secondary charges, such as shipping costs, sales tax, and other fees. It is unusual to see P-Card transactions in purchase amounts that are round numbers such as $300, $1,000, etc.
3. Detecting repeat offenders who frequently split purchases and allowing closer review of their P-Card transactions
4. Spotting merchants and MCCs with excessive split purchases and flagging these transactions for further review.
Analyzing split transactions also helps companies determine where spending limits should be adjusted to make legitimate purchases less of a hassle for cardholders. For example, you may notice that IT staff are frequently splitting transactions for necessary computer equipment and decide to raise the maximum spend limit from $1,000 to $1,500 for these cardholders.
By automatically examining 100 percent of your P-Card transactions with Oversight, you can prevent non-compliant spending and minimize risk. Demo Oversight to see how advanced data analytics can detect and resolve split transactions and other suspicious behavior in your P-Card program.