Daily Biz Solutions

Guest Post by Ally Tobias

The benefits of issuing a company credit card to your employees, is first, the lack of having to deal with petty cash on a regular basis, and using their own funds. Anyone who has had to balance and maintain a petty cash account can tell you, it’s a nuisance. And not very accurate, my boss would continually dip into the petty cash file for lunch money, or to tip the delivery guy. By the end of the month, you’re out of balance, and those little expenses never got a receipt, nor did you get the write off.

Company credit cards are great for accounting purposes. Those little statements you receive at the end of the year help greatly in organizing deductions and keeping track of monies spent within the business, and best of all, you get the deductions without having to track them via petty cash, or personal expense accounts.

Employees probably will misuse company credit cards from time to time, and sometimes these discrepancies are never noticed. Most risks include, personal use of credit cards; Clients and employees conspiring to misuse a company credit card; Employees using the cards personal ID number to withdraw cash; Employees falsifying receipts, or destroying and damaging – even altering expense receipts. And last but not least, an employee quitting and never returning the card.

TIPS TO KEEP YOUR COMPANY CREDIT CARDS SAFE:

1. The decision starts with whether to issue a business or corporate credit card as they differ in how they affect your company, your employees and what your business needs require. Business credit cards are used more in small businesses. Larger companies, i.e. corporations generally issue the corporate cards.

2. Small business credit cards are usually issued in the name of the business, or the business principal, and it is your responsibility to pay that bill. Larger corporate credit cards are issued in the name of the corporation, and in American business, a corporation is an entity, and therefore responsible for payment as well.

3. Some company credit cards can be issued in the employee’s names as well. However, the employee’s credit rating will affect the interest rates, and credit limits. The benefit to this though, is that if a company credit card is misused, the responsibility to pay for that misuse lies in the hands of the employee. Using this method is safer for a company, but a lot more detailed recordkeeping is required. Expense sheets must be filled out completely, along with credit card statements, viable receipts and timely payment must be made in an effort to avoid late fees, or credit rating of your employee. Emphasizing timely expense report filings should avoid this problem.

4. Following the detailed policies of the structured business card, or corporate card is key to avoiding risks involving employees. Most company or corporate credit cards can be tailored to suit the needs required, i.e., travel, company or office supplies, client entertainment and much more along with expectations. A policy should be put in place immediately upon receipt of the cards regarding employee use, reimbursement procedures, and whether the card should be kept in a lockbox in the office, or carried by the employee, etc.

5. As a basic rule, your company should introduce policy and procedures to all employees allowed credit card use, including company expectations and how credit cards will be managed, how receipts should be turned in, filling out expense sheets, and should also include training and outline strict repercussions should the employee misuse the card.

6. Credit limits should be calculated as indicated by previous expenditures of employees, and should not be over what are the normal employee’s monthly expenses. Limitations as to what can be put on the card should be specified in the business credit card procedures, and also the records that are required to be kept by the credit card user.

6. Record keeping, and regular audits should take place including balancing the credit card receipts with statements, and checking that the receipts are legitimate, and not falsified or for something other than what is on the statement. Checking with the credit card company, or the company where the expense occurred can easily verify legitimacy.

7. Complete records of who is allocated to use the company credit card, and who is not, what the credit limits are for each employee, and what their usual monthly expenses are. Check off lists should be instigated to ensure the nightly, weekly or monthly return of the credit card, and should be part of Human Resources as well to ensure the return of the card if the employee leaves the company.

Making certain that the employees realize that the credit card is issued to the position they are filling within the company, and not to them personally should be emphasized.

Credit cards for employees are a credit risk, however, according to studies completed on this topic, for employees who frequently work in the field, the benefits outweigh the risks in the long run. When asking employees to foot the bill in the field, your risking credibility for the company. Employees tend to be less likely to take a client to dinner if the cost is theirs prior to being reimbursed. And if their job is client relations, this could hurt business.

American Express is an excellent company to do business with in a corporate/employee or business/employee situation. They are the most widely used credit card for this purpose. This company extends only a specific amount of credit per card, and the balances must be paid monthly, lessening confusion and risks. Although any credit card companies allow you to pay the balance monthly, A.E. requires it, and therefore reduces the risks of misuse.

About the Author

Ally is part of the team that manages Home Loan Finder, a free home equity loan and variable home loans comparison service in Australia. Before joining HLF, she was a Media Planner with McCann Worldgroup Philippines, Inc., with award-winning executions, including the Levi’s 501 “Live Unbuttoned” global campaign.