Credit Card Case Study

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It is impossible to tell if it was by brilliant design or just dumb luck that the credit card processors have found a way to circumvent the internal controls that most organizations use in processing and approving the payment of expenses. Most vendors are not paid until their invoice goes through a number of approvals; the credit card processors just take the fee from the merchants account or withhold the funds from the payment. Most companies just make an entry recording the processing fees; usually it is done on a “it is what it is” basis. The person approving the entry usually does not understand merchant service invoices.

Before you can make write an effective Request for Proposal, you must understand what controls you now have, and what …show more content…

Does someone review and approve the monthly credit card statement (invoice) on a timely basis?

4. Does the review of the monthly invoice include a comparison of interchange rates used on the invoice with the published rates?

5. Does the review of the monthly invoice include a comparison of the markup and fees with the amount in the contract?

6. Are the credit card sales, as shown on the monthly statement, compared to the credit card sales on the books?

7. Have adequate tests been done it ensure that the credit card sales have been charged to the proper interchange category?

8. Have the deposits into the Company 's bank account been compared with amount shown on the processor’s statements as being deposited?

9. Have the computations been tested?

10. Is a summary of the average rate by month prepared and are unusual swings looked into?

The above list requires a number of comparisons be made. Whenever the comparison reveals a discrepancy, appropriate corrective action must be taken.

Control 1- Contract

Every merchant should have a copy of their merchant contract on file. We don’t just mean the two page that refer to a much larger contract. You should have a copy of the entire contract which encloses the other documents that are part of the contract like the Terms of Service and Operating Guide. You may want to download these and keep them in electronic …show more content…

If the processor is free to withdraw money from your account, how do you know that an unscrupulous employee could not do it and divert money to his account?

Control 3- Timely Approval of Monthly Invoice

The monthly statement must be approved on a timely basis. Since this does not go through the normal payment process, some companies overlook this important step. Often a bookkeeper just makes an entry every month to record the fees.

Control 4- Test Interchange Rates

We are assuming you are on interchange plus pricing. If you aren’t, that is a problem that requires some action.

It is important to test the rates use in preparing the statement with the published interchange rates. Processors often misstate rates; the difference between the published rate and rate on the invoice is often processor’s markup. The only way to know the markup is to test the rates.

Control 5- Compare Markup

Obviously, the invoices should agree with the contract; that means that the markup used on the statement should agree with contract. The same is true for the miscellaneous fees on the

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