Imagine going through your monthly account records and discovering that your business has unauthorized transactions. An unauthorized transaction is a transfer, payment,or withdrawal made from your account without your permission. Employees,colleagues, or cybercriminals can make such purchases from your bank account.
If your business uses an accrual accounting system, accrued expenses and accrued billings might be confusing to handle. In the process, you might track spending inaccurately.However, unauthorized withdrawal from your bank account reduces revenue and is detrimental to your business.
So, what causes unauthorized transactions, and how can you prevent them?
Causes of Unauthorized Transactions
Improper Expense Tracking
You’re probably handling several personnel positions in your company and spending too much time on the daunting task of tracking petty cash expenses. But monitoring your accrued expenses will help you know how you manage your money.
Besides, if you don’t track your cash expenditures accurately, daily spending can get out of hand. Unauthorized transactions will crop up, and you might have to deal with fraudulent payments that get lost in the stream of expenses.
Sharing Credit Card
Since you're managing your team while running your business, you might think that you'll reduce accounting time by juggling a credit card between employees. Card sharing might seem convenient, but there are several risks involved:
When you hand over your corporate card, you give your employee purchasing power. That's one less business management process to handle.
But what happens when they buy items for higher than the budgeted price? What if employees purchase goods and services you never envision or even make unauthorized prepaid expenses that 'help' the organization?
You won't be able to run your business within the planned budget and may find out that employees are using profit to make unexpected expenses.
Losing track of expense details:
Who made this purchase? What's the purpose of the transaction, and was it authorized?
It’s vital to have a detailed knowledge of all payments and to know if they align with your company’s budget. When employees share your corporate credit card, you might lose track of expenses and fail to achieve your organization’s financial goals.
5 Ways to Protect Your Business from Unauthorized Purchases
#1 Monitor Accrued Expenses
You may want employees to conduct financial transactions on behalf of the company and get reimbursed later. However, ensure you approve and monitor all accrued expenses.
Also, file and digitize receipts. To make the process easier, encourage employees to take digital receipts or snap evidence of payment and send them to the company's email.
#2 Use Virtual Credit Cards
One way to mitigate the problem of unauthorized card usage is to go virtual. Virtual cards are credit card numbers you auto-generate to make a purchase once. Unlike their physical counterparts, they have the following advantages:
● They have a spending limit
● Since only the primary cardholders issue virtual cards, employees need to take permission before making a purchase.
● It's easy to track expenses and vendor payments if you attach a card number to each expenditure.
● It's easier to automate payments.
● It reduces card theft and fraudulent expenses. There's no physical card to steal, and even if a hacker gets hold of a virtual credit card number, he can only spend the limited amount assigned to it.
When you issue virtual cards for company expenditure, you can have full control of financial transactions.
#3 Supervise Employee Transactions
Lack of proper supervision increases the risk of unauthorized purchases,theft, or fraud. These transactions can get lost in the stream of expenses.It's vital to extensively track all payments in real-time and flag any unusual or suspicious activity for further investigation.
#4 Monitor Business Checks
You'd need to store prenumbered business checks in a secure area. Also, endeavour to write payment details in permanent ink. Alternatively,you can issue cheques from a financial software.
#5 Organize Purchase Orders and Cash Receipts
Consider using purchase orders and cash receipts when you buy goods. You can prenumber them and verify each order, or you assign an employee to handle them. Besides, conducting weekly audits will ensure your finances stay on track.
Financial transactions are vital to any business. They ensure capital growth, smooth production process and rendering of service, and business expansion. Expenses are also essential to making a profit. Without funds, your company will become insolvent. Therefore, it's vital to work within your financial budget.
However, you might notice unauthorized credit card transactions from your account due to improper expense tracking, sharing physical credit cards, and not checking payments.
ZayPay can help you mitigate these problems. The mobile expense management software lets you make micropayments locally and internationally. You can digitize transactions, have a virtual copy of financial documents, and track expenses effortlessly. You'd also be able to use a virtual form of credit cards. ZayPay makes your expense accounting easy to manage.