According to the Nilson Report, in 2019, global credit card fraud losses reached $28.65 billion. A recent news story has an important reminder for businesses about two costly issues— corporate credit card abuse and fraudulent expense reports. Sometimes their ease of use makes credit cards too tempting for even the most trusted executive, and a lack of oversight allows fraudulent expenses to go undetected.
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Between 2013 and 2019, Thomas Wiechmann, former CFO of Reichel Foods, charged a total of $603,172.96 to company credit cards and kept the reward points for the purchases. In March 2021, he was “discharged for cause” from the Rochester, Minnesota-based company when the company discovered he’d been “abusing his position of trust” and “violating his fiduciary duty.”
According to the eight-page court complaint, ”there were hundreds of charges for entertainment, meals, a custom alarm service, retail stores...charges for hotels, airline tickets, and services such as credit reports.” The Minnesota District Court has charged Wiechmann with four felony counts of theft by swindle. He faces a maximum prison sentence of 20 years, a $100,000 fine, or both.
This episode is not only embarrassing for Reichel Foods, but it also cost them hundreds of thousands of dollars in fraudulent expenses, misallocated credit card points, and, now, the legal fees to prosecute Wiechmann. Looking back, what could they have done to prevent this from happening? The answer is two-part: reduce usage of company credit cards and automate your expense reporting.
The first part is pretty straightforward. Giving even high level executives access to company credit cards increases the likelihood of fraud. The use of company credit cards is inherently risky because:
- Bills are only settled at the end of the month. This delay in reporting and oversight means that expenses are not tracked as they arise and may not be caught until much has been lost.
- Credit cards are frequently lost or stolen, meaning fraud can also be perpetrated by people outside of the organization.
The second way Reichel and other businesses can prevent credit card fraud is to automate their expense reporting. Accounts Payable Invoice Automation (APIA) allows the enhanced visibility of the digitization of your AP workflow to identify bottlenecks in your AP process, which can save you both time and money. In addition to that savings:
- The automation process provides increased access to well-documented, auditable data and comprehensive reporting.
- All actions taken on individual payables are tracked and possess an easily accessible audit trail.
Does the leadership at your organization feel ready to face the public and financial repercussions of credit card fraud? Or would they prefer to avoid the bad publicity, lack of public trust, and the immense cost? If it’s the latter, start to reduce your reliance on corporate credit cards immediately, and contact us to learn more about how APIA can reduce your risk and your costs.