How to manage company credit cards
Managing employee expenses can be challenging for many companies. Keeping track of every receipt and expense report for your employees' travel costs, office supplies and other purchases can be timeconsuming. This is why many business owners use employee credit cards. Not only can it help streamline expense management, but it offers a number of other benefits to both the employer and the employees.
In this article, we'll go over benefits of using employee credit cards at your company, as well as some best practices for starting that process.
What is a company credit card and why are they important?
A company or business card is a credit card issued to a business which allows individual employees to make purchases using the company's credit line. You may also hear it referred to as a corporate card. The only purchases an employee should be making with the company card are business expenses that are clearly defined in the company's credit card policy. Typically, these include things like business travel, client meetings and office supplies.
Company cards allow businesses to streamline their expenses into one centralized statement and track spending closely.
Just like any credit card, the company must pay off the balance of every employee card in full at the end of each billing cycle or interest will accrue on any remaining balances.
Best practices to manage company credit cards
Getting your company set up to use company credit cards requires some thoughtful planning. Below are some best practices for successfully managing this process.
Create a company credit card policy
Providing employees with a clear policy for using their card is helpful to both parties. You'll want to define the rules and regulations, eligibility, responsibility of the employee, spending limits, required documentation and the consequences for violations.
Make clear distinctions between corporate and personal expenses
You'll want to explicitly define what is a business expense and what is not. Don't leave any question or doubt in the minds of your employees as to what they can use the card for. Anything outside of that list must be considered a personal expense and not eligible for company card use.
Set a budget
Setting a departmental budget can be a wise way to manage employee credit card spend. Once the budget is set, communicate what share of that budget each employee cardholder is allowed to use. This will help ensure the company credit limit is not maxed out by collective purchases across departments.
Customize spending limits
Most business credit cards allow you to set customized spending limits for each employee. This means that you can decide the amount to which each employee has access to based on any factors you would like. This could include the employee's title, job function or department.
Track employee spending
An advantage of having company cards is transparency. You're able to track and monitor spending on each card, ensuring that everyone is staying on budget and following the policy.
Benefits of using company credit cards
Using company credit cards can have several benefits, including:
- Earn rewards. Typically, rewards earned on employee credit cards are awarded to the primary cardholder (the business). This means that all your employee's eligible purchases earn rewards. However, this isn't the case for all cards. Some allow individual employees to keep the rewards as part of their compensation or an incentive program. You'll want to understand the terms and conditions of the card and rewards program you're considering. Either way, credit card rewards can usually be redeemed for travel or cash back and offer a valuable advantage over other financing options.
- Build your credit score. Consistent, responsible account activity over time may impact the credit score of both the business and the individual employees using them. This also means that the business may be able to secure desirable terms for any future loans they need.
- Eliminate your reimbursement process. When your employees have company cards, it may remove the need for a cumbersome reimbursement process since they won't need to put business expenses on their personal cards.
- Streamline your accounting. Detailed expense reports that can be synced with accounting software simplify the accounting reconciliation process and save your team time and manual work.
- Maximize business perks. Some business credit cards extend perks to your employees' cards. This may include travel insurance, travel reimbursement, extended warranties and more.
When managed responsibly, using company credit cards can be a win-win for employers and employees. The company may find efficiencies in expense management and accounting, while employees may find it easier to make purchases without the hassle of reimbursements.
Most importantly, you'll need to put a clear policy in place so everyone understands the rules and limitations of using their company card.
At Chase, you can compare several business credit cards and choose which best fits the needs of your business.