What is the best policy for business expense cards?
I want to open a separate expense account and give access to my sales team. Before I do so, I want to be very clear on what is considered a business expense versus a personal indulgence. Are there rules I should set, price limits...
Thanks for any input.
Typically anything that can be deducted on your taxes as a business expense is something they should be able to charge on the card and anything that is not deductible should not be allowed.
You need to write up a guideline of what limits they can charge. For instance you could say motel rooms are allowed up to $ 100.00 and anything over that amount needs your prior approval. Lunches up to $ 15.00. and so on. In some businesses wining and dining a customer is an important part of doing business. In some it may not or may be taking a customer to lunch at Denny's. You need to tailor your guidelines to your business. You also need to review or have someone review each card statement to make sure no one is abusing your guidelines. It is important to watch the expenses. Some people with an expense account go crazy. Back in the days before cell phones I once traveled with a guy who rented a room at the Holiday Inn to make 20 minutes worth of phone calls.
Hi Fran - I would generally set rules on what is a business expense. The big ones are always telephone, travel, auto expenses, meals and entertainment. But there is some logic to it - if you already reimburse for mileage, don't say you'll pay for fuel costs etc. Lunches or dinners are reasonable, but if you're taking 13 people out for a night on the town or a golf excursion, prior approval would be required. Remember, everything needs to have business justification. Or an audit might cause you a big headache.
Also might be a good policy to require big expenses get prior approval. When I worked for the big firms, expenses like air travel had to be booked through one person. And policy was that anything over a few hundred dollars required approval of the partner in charge of the client or it was denied until you did have approval.
Hopefully that helps. Let us know if we can help any further.
Generally common sense prevails.
It depends on how you have structured the business, for most sales people you would already have a fuel card for petrol and repair. (can't have your reps stranded.)
This means that the balance is just business expenses.
Again the limits you set will depend on the business and the expected level of engagement.
If its interstate travel, including hotels, you can easily set a range which is acceptable.
If it's for local entertainment with clients, again you can set guidelines including pre approval, which can also be easily set on a case by case.
A phone call / text / email or plan can easily be approved.
The thing is not to make it to tight, and to allow for flexibility, just so long as it can be justified and receipts and or reports are attached, so that they can be shown to be actual business costs.
I would also be mindful of the person you are allowing access to this account. If they can be trusted then there's no concern. If the person is overreaching, then tighter controls and measures are needed, but that's a management role.
In each case if a salesperson overspends without justification, they the company should pay the bill the first time, with a warning that if this happens again they will only be reimbursed according to the guidelines.
Handing out business expense cards can be a big time-saver for business owners who want to remove themselves from routine purchases. However, a big concern can be that employees will abuse the power of their expense cards. To ensure this doesn't happen, you can follow these best practices written by the Business.com team: How to Create a Business Credit Card Expense Policy
You should allow only the employees you trust to have a business expense card. Even then, make sure it is clearly defined which types of transactions are considered a business expense or not. You can decide what level of monitoring is most comfortable for you. Some managers turn on notifications for each time the card is used or ask employees to submit receipts for each transaction. Other managers only check the monthly statement once a month.
Remember that business expense cards should be an added benefit for the employees who have been with your company longer. Over monitoring will discourage them from using the card. Choosing a card your employees can earn rewards, airline miles or points from can be a nice perk and incentivize them to use the card when appropriate.