Company credit cards are an important tool for many departments. From employees that entertain clients to employees that travel, using the company credit card is often the ideal way to manage individual expenses. Sometimes a department has a card, managers hold a card for their team, or a specific employee who needs the freedom to make purchases will have their own card.
However, company credit cards are also one of the most notorious leaks of company funds to bad employee decisions. From simple bad budgeting decisions to outright fraud and theft, company credit cards, unfortunately, create undue opportunity and temptation for employees to misuse company funds.
Fortunately, all you need to keep using this convenient method of quick electronic payment for goods, services, and client entertainment is increased accountability. When your employees know that every expense will be examined and recorded according to existing policies, you are far less likely to need an audit in the future. Here are five of the best practices for keeping your company credit card usage on the level.
1) Each Card has One Named Holder
One of the biggest risks with a company credit card is not being able to determine who has made a fraudulent or suspicious charge. This happens most often when a team or whole department shares a single card. This means that anyone with the number, expiration date, and security code can theoretically make an electronic payment. This can happen with or without the team manager’s knowledge or approval.
In fact, department cards can even open you up to past employees who still remember the details. The solution? Assign cards to people, not teams. Each card should have an employee’s names on it and they are solely responsible for how it is used. This way, any charge is linked directly to a person who can be consulted and audited. When they leave, their card is canceled. If a new person needs access, they get a separate card that creates a separate set of financial records.
2) Client Expenses Must Match a Timeline
Paying for client expenses is absolutely necessary for a number of account-based occupations. Your team members who are in charge of client relationships need the ability to take clients out to lunch and otherwise entertain them, and often to pay for their own travel expenses. This means they need a reasonably free hand with expenses, but this also creates the temptation to ‘splurge’ a little on things the company might not approve of.
Personal hotel upgrades, entertaining romantic partners, and inadvisable partying, the key to accountability with this kind of company credit card is a timeline. Make sure your employees who entertain clients can write a clear report of how they entertained the clients and what each expense on the card paid for. If the reports don’t match, an audit is the next step.
3) Clearly Define Employee Expense Perks
Often, companies that provide an employee with a company credit card will also reward them for good performance by offering a few perks. Things that would be abuses of the card in one context are approved work perks when the rewards are earned. This, unfortunately, muddies the waters for accountability. In many situations, an employee might accidentally overstep their bounds because they did not fully understand their reward (or suffered from minor wishful thinking).
To be able to reward your employees and maintain accountability, make sure you are very clear about what company card rewards entail. Define how much leeway you’re willing to extend with forms of electronic payment and, especially for younger employees, what is and is not an appropriate way to spend their reward.[To be Continued in Part 2!]