Best practices for employee credit card management

Geoff Williams
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Geoff Williams
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Best practices for employee credit card management

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If you plan on lending out business credit cards to your employees, you may understandably be a little squeamish; however, if you follow some basic best practices, your employees will probably use their employee cards without any problems.

What do’s and don’ts should your staff follow? Ultimately, that’s up to you, but we’ll go through some smart practices that you may want to make part of your company’s policies.

Do: Understand how corporate credit cards for employees work

This might feel like an obvious statement, but the idea of employee credit cards could be complicated for anyone unfamiliar with business credit cards. In order to issue your employees an employee credit card, you must first open a business credit card that allows authorized users. In other words, your business credit card belongs to you and your business, and the available credit should be considered part of your business’s funds. If you issue any of your employees authorized user access, you’re simply authorizing them to use the account with a card that has been issued to them. If the employee maxes out the account, this could have implications for your business credit score; not your employees’ personal credit score.

That may not sound like a great selling point, but allowing employees to be authorized users can be helpful for a lot of reasons, namely efficiency. For instance, if you have an employee on a business trip or with a client, and they have work-related expenses, they can spend the company’s money instead of their own, and you won’t need to reimburse them later. Also, if you have a rewards-earning card, any rewards spending your employee does with the card adds to your overall rewards pot.

Don’t: Give all of your employees a business credit card

This is a judgment call, but “don’t think you need to give everyone in the company a business card,” says Shelle Santana, an assistant professor of marketing at Bentley University in Waltham, Mass., whose research includes the psychology of money.

“Instead, think about who should have a company credit card. Who are the individuals that incur expenses on behalf of the company as part of their job? Often these are executives, salespeople and purchasing managers,” Santana says.

Do: Make sure your employees keep business receipts

You may feel that it’s overkill to require your employees to keep every paper receipt for every single expense. After all, a business credit card keeps a digital record of what everybody purchases. But often, those records aren’t very specific, which is why receipts can be handy. If an employee runs into an office supply store, you may want to see exactly what cost them $30 (did they buy a lot of printing paper or soda and candy?).

In any case, employees should be turning in some receipts to you or your accounting department; the IRS requires businesses to keep receipts for business expenses worth $75 or over.

Don’t: Employees shouldn’t make personal purchases with their business credit card

We all know this, but things happen. Maybe somebody will mix up their cards and end up buying some groceries with their business credit card, for instance. But that’s where a written policy can make it clear that if an employee does mix up personal expenses with their business purchases, they’ll need to compensate their employer as soon as possible.

You certainly want to try to keep business and personal expenses separate. For example, while you’ll want to talk to your tax advisor about this, your business should be able to deduct your business credit card’s annual fee, if you have one, as a business expense. Same with finance charges for expenses you carry. But you can’t do that with a consumer credit card, and if your business credit card account has a bunch of personal expenses, it starts to become indistinguishable from a consumer credit card, and your tax professional may advise you to not make those deductions.

Do: When it comes to business credit cards for employees, set spending limits

Obvious, but it’s easy to imagine some business owners assuming that their employees will be financially responsible. And maybe so, but setting limits, Santana says, may help prevent unnecessary spending and keep expenses within budget.

“Without a spending limit, unnecessary charges could add up and cost you,” she says.

Really, you should develop a clear written policy of how to use an employee credit card before your employees start using one, says Avneet Kaur, a CFO and co-founder of Core Family Office, a tax strategy and investment firm in Los Angeles.

“This should outline acceptable uses of the card, spending limits if applicable and consequences for misuse. If you neglect a written policy, it’s likely there will be misunderstandings and possible misuse of the card,” Kaur says.

Also, keep in mind that you may want to give higher spending thresholds to senior team members. Your new junior staff member may be deserving of an employee credit card but not need the same spending cap as an executive vice president.

You should probably set these limits with your employees in writing, up front, but be aware that some credit cards also offer the ability to manually set spending limits for authorized users, too, just in case.

Don’t: Forget to close the employee’s account if they leave your company

Employees sometimes come and go. You especially don’t want to have a disgruntled employee wandering around the world with your business’s credit card and perhaps in the mood to revenge spend.

Fortunately, it isn’t hard to remove an authorized user from your account; just follow the instructions with your credit card. It’s usually as simple as logging into your account and selecting “manage authorized users.” There you should have the option to add or remove new users.

Do: If the credit card is lost or stolen, the employee should report it immediately

This should be in your written policy. You may want the employee to tell the employer or whoever is in charge of the financial office first, so they can make the call, or you may want them to call the credit card issuer and give them the news, so they can shut down the card, first.

Whatever you do, make it clear to your employee that if the business credit card is stolen or lost, their fear shouldn’t be what happens if they tell you, but what will happen if they don’t.

After all, if your employee reports the loss or theft of a business credit card before somebody else uses it, the company won’t be held financially responsible for any losses. If they don’t report it before somebody makes unauthorized purchases, the most the business will be out is $50, and often, credit card companies, trying to make everybody happy, won’t charge consumers or business owners anything when they’re a victim of credit card theft.

But the employee must report it within 60 days, or the company could be on the hook for any unauthorized charges.

Don’t: Accuse your employee of misusing a business credit card without hardcore proof

You wouldn’t do that, but it’s worth the reminder that we live in a litigious society. Regardless, it’s not going to be a good look for you if you accuse your employee of credit card theft and it turns out that whatever you thought was fraud, wasn’t.

Do: Encourage your employees to use card benefits

Allowing your employees to benefit from the benefits of an employee credit card can be a nice perk and a low-cost way of making working for your company even better. For instance, if your corporate credit card allows authorized users to have premium travel benefits, like upgrading a hotel room or accessing upscale airport lounges, suddenly a dreaded business trip might be something your employees look forward to.

Don’t: Forget to review your business credit card charges each month

You can review them every day, but at least do it once a month, suggests Dawn-Marie Joseph, founder of the company, Estate Planning & Preservation, in Williamston, Mich. Joseph has had two employees as authorized users of her business’s credit card for twenty years now, and she says that it has worked out great.

Still, she says that when it comes to employee credit cards, “As the business owner, it’s critical you review the charges on the credit card each month. When it comes down to the financial end, you will always be responsible for the charges as the primary cardholder.”

author
Geoff Williams
CardRatings Contributor

Geoff is a freelance journalist and has been since the 1990s. He specializes in personal finance and small business issues and has seen his work published with numerous news outlets including The Wall Street Journal, CNNMoney.com, Reuters, The Washington Post and Consumer Reports. He also...Read more

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