How To Develop an Effective Employee Credit Card Policy

Employee credit card policies can help set your business up for success.

Mature businessman paying through credit card at hotel reception
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Small and large businesses alike need to minimize expenses related to travel, meals, and other employee expenses in order to keep the company's finances in check. And as a business owner, you wear a lot of hats, so it's not always easy to know the best policies for the proper use of company credit cards by employees. If you have the desire and need to create an effective employee credit card policy, but lack the direction on how to do it, keep reading.

Key Takeaways

  • One of the best ways to cut down unnecessary employee expenses is by creating employee credit card policies.
  • You'll need to communicate credit spending limits, activities considered violations of use, and repercussions for using the card inappropriately.
  • At the end of each month, employees should submit a detailed report of all charges, receipts, and applicable accounting codes.
  • Putting employee credit card policies in place can help you set yourself and your company up for success.

Define Employee Credit Card Responsibilities

If you issue credit cards to your employees, you need to implement rules that govern how your employees can use the credit card. They'll be responsible for following these rules and for keeping the card safe and secure.

Employee credit card policies may include, but are not limited to:

  • Who can use the card
  • Spending limits per card
  • Approved expenses that may be charged to the card
  • Repercussions for inappropriate use of the card

The employees should be held responsible for the security of the card as well as the privacy of any information related to the company.

You need to communicate spending limits, activities considered violations, and repercussions for using the card inappropriately. Employees are responsible for making sure the card is kept in a safe location, that the card account is free from fraudulent activities, and that the card's number is kept private. You may also want to state that the business credit card is only to be used by the employee and not any other individual.

Spell Out Spending Limits

You'll need to establish rules and guidelines that dictate activities or transactions where the credit card should be used, and how much can be spent on the card.

In most cases, the spending should be limited to the needs of specific employees for certain tasks or travels. Each department can have its own spending limits, and they should be added up and synchronized with the department's overall expense budget. For example, you could limit each card's spending to no more than $3,000, but if an increase is needed, an employee can make a case for it with the chief financial officer (if you have one) or you.

Every employee should not exceed this limit, and if one does, they should cover any over-the-limit fees. Lastly, the company's credit cards should never be used for cash advances.

It's wise to inform each employee about the spending limits at the time you issue the company credit card.

Require a Regular Usage Report

You'll need a process to hold employees responsible for the company's credit card usage. At the end of each month, employees should submit a detailed report of all charges, receipts, and applicable accounting codes. Every employee should ensure that they attach the expenditure receipts to the monthly statement before submission to the company for verification purposes.

All these usage reports need to be done on time to avoid late card payments. This will help you monitor your monthly expenditures with ease, and auditing will be simpler.

Clearly State That Cards Are Not for Individual Expenses

It may be wise to be very strict on the usage of the employee credit card, clearly stating that no one is allowed to use it for personal expenses. The definition of personal usage, in this case, is an expense not related to the operation of the business. The company should have specific consequences for any employee who uses the card for their own personal expenses.

Employee credit card purchases and charges should be limited to business-related activities, such as client meals or business supplies.

Review Employee Credit Card Usage

If your business issues employee credit cards, you should conduct a review of each employee's card usage each month. You can include the employee's supervisor, too, and will definitely want someone from the accounting department. The supervisor of the employee should ensure that the usage of the card is limited to what it was meant for. Additionally, the accounting department should verify whether all the receipts and other expenditure documents submitted by the employee are authentic.

You'll also need a policy for how to handle disputed credit card charges, plus a process for how to handle the cancellation of cards for terminated employees.

Every company that uses corporate and employee credit cards should have a clear, effective, and detailed employee credit card policy to head off any misuse of the cards. It can avoid issues or misunderstandings, and prevent bottlenecks in case an employee needs to incur work-related expenses and has no other payment method.

Frequently Asked Questions (FAQs)

What is a credit card policy?

A credit card policy is part of your business' financial and accounting policies. It outlines how a company credit card can be used, such as what expenses can be charged to it, as well as how much can be spent on it. It may also state which employees can have a company credit card.

How does an employee credit card work?

Employee credit cards enable employees to make job-related purchases on a credit card that is linked to a business account. These employees are authorized users of the card, so they can look at the transactions and resolve any issues. Each card has the employee's name on it, and you can usually get a new card for an employee free of charge from your card issuer.

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