Many businesses use company credit cards as an easy way for employees to pay for work-related expenses like travel or office supplies. Employees can quickly get what they need without going through a cumbersome expense reimbursement process.
Here are just some of the benefits of using company credit cards:
The cards are easy to use.
Employees don't have to go out of pocket for company expenses.
Companies have complete transparency into spending.
Companies get the benefit of rewards and rebates associated with the cards.
Credit card benefits like travel insurance are available for users.
Credit card account administration:
Once a credit card is issued to an employee, the only real control over spending is a preset spending limit. Any charges made up to that point are approved at the point of sale regardless of whether they are actual company expenses. It doesn't take a criminal master mind to see the potential for fraudulent card use.
Regular monitoring of transactions is imperative. Employees need to know that you're watching all card charges. It's very easy to grab the wrong card and mistakenly pay for dinner with a company card. If the charge is irregular and questioned quickly, you set a tone for employee compliance with company spending policies.
Set a company policy requiring receipts for card charges. From a control perspective, all charges should be documented with a receipt. If that is not practical, establish a threshold amount for receipts. For example, a receipt is required for any charge over $50. If a receipt isn't provided, that charge is deducted from the employee's paycheck. It only takes one time for that message to get through.
Now that you have all those receipts, think of all the joy you'll bring to your accounting department...
All transactions need to be matched to receipts per your policy.
Transactions should be entered into your accounting system. Can this be automated? Is each card a separate account, or are all cards combined into one account?
These are very big questions to answer before employees start making charges. You need to decide if complete transparency and reporting for each user's transactions is worth the effort.
If so, it means having a separate account for each card holder and a way to enter or upload every transaction for each card. The more cards you have, the more work this is. However, this level of detail makes card abuses easy to spot.
There are several companies that offer card administration and spend management programs. They are helpful, but may not be the best solution for everyone. If, for whatever reason, your company isn't a good fit for one of these programs, you need to manage all aspects of credit card administration internally.
Finally, you need to reconcile your credit cards every month just like you reconcile your bank statement. It's the only way to ensure that you have every transaction recorded for accurate monthly reporting. Depending on how you set up your cards in the accounting system, this might be reconciliations for each individual card or one big reconciliation for the monthly statement.
Company credit cards can add much needed flexibility for your employees. It's important to set spending policies and require receipts from users. Monitor charges frequently and reconcile your credit card statement monthly to ensure accurate financial reporting. NexTier has helped many companies set up credit card programs. Give us a call. We're happy to help!