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Financial Crisis Series: The Credit Issue

Remember when the two things that crowded your mail box were catalogs and credit card offers? Have you noticed how few card offers there are these days? I'm sure all those trees are happy, but for the rest of us it's proof of what we already knew - the credit crisis has affected us as well.

We've been hearing it from our customers and reading about it in the papers - businesses are moving to a cash model to pay for regular expenses. They want to conserve their credit line for important things like emergency repairs for equipment or an upgrade that will make them more competitive.

The big question is - how do you make this happen?
If you're a small company, with less than 100 employees, you are at the highest risk to fraud and abuse (http://www.acfe.com/resources/view.asp?ArticleID=9), and must take additional steps to protect yourself. So, moving to a cash (or same as cash) system may seem unwise, because these are inherently riskier forms of payment (http://www.afponline.org/pub/pdf/2008PaymentsFraudandContolSurvey.pdf).

As someone who works for a prepaid business card company, I know that prepaid cards can help bridge the gap between controlling payments and a cash based system. Here's how it works: in advance of purchases you load the card with funds. In the PEX Card system, you can decide what merchant categories are allowed, how much is on the card, as well as a daily spending limit. You can also cancel or block card usage at any time. The PEX Visa Prepaid Card can be used wherever Visa debit cards are accepted, so making purchases is convenient. When purchases are made, you can see them posted in real time. Additional features to keep your company safe from fraud and abuse, include separation of company funds and card funds, ability to remove excess funds from cards, as well as no access to cash advances or ATMs.

If you do use an actual cash or check model, you need to set up regular controls and audits to ensure that your system is the least susceptible to fraud as possible. We suggest hiring a certified fraud examiner to audit your current process and suggest places for improvement or additional control mechanisms. We also suggest that payment paths are separated, so that one person is not responsible for everything from request to payment. And lastly, when employees go on vacation, be sure to review their work - especially those in financial positions. If someone refuses to go on vacation - insist they do. It is often the people who seem to be the most dedicated that are your biggest threat.

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