Business expense accounts wield great power and require great responsibility.
Corporate credit cards are necessary for some small businesses, and there are some important practices to implement to ensure they're not abused by employees. Distributing corporate credit cards among some employees can save business owners time by removing them from routine purchases. This means business owners can spend more time focusing on the business as opposed to non-critical, repetitive tasks.
Still, while it may be a big time-saver, handing your employees the financial power of your business can be a big step for any business owner. Recently, members from the Business.com community were trying to determine how to develop this policy, so we got in touch with experts to determine what the best practices are for distributing business credit cards at the office.
The three biggest takeaways, regardless of your type of business, is to give them only to people you trust, monitor monthly credit card statements and be clear with your employees about what the cards are supposed to be used for. [Interested in business credit cards? Check out our best picks.]
Give cards to employees you trust
This is an obvious tip: You want to provide financial power only to the workers you trust most. However, it's important to remember that trust works both ways in this case. By providing some workers with credit cards, you show that you trust them. This can be empowering. If you distribute credit cards and then treat workers like teenagers it can be a major turn off to productivity. This is a situation where employees should want to rise to the occasion and prove that they can be trusted.
"If one of my assistants is buying and testing various software that's only $30 to $100 per month, I give him/her the green light with a credit card," said James Pollard, owner of a marketing consulting company that works with The Advisor Coach. "I don't need to personally authorize every single transaction. If it can save me time, I do it."
A lot of business owners opt to only give cards to upper management or employees who make routine purchases. Giving cards to high performers who need them is also a common practice when it comes to business credit cards.
Be clear with employees
Some companies may opt to develop a full-fledged expense policy. This can involve defining exactly what kinds of purchases should be made, how they should be expensed and what the reimbursement process is like (if there is one). If you don't have time to do this or are running a small operation, it's often best to sit down with each employee and go over what the card should be used for. Here, you can decide the level of autonomy you want to grant each employee. Many business owners will allow employees to make routine purchases without seeking approval while asking for approval on first-time or larger purchases.
Karla Singson, a small business owner who runs four businesses, said she only provides cards to upper management.
"This is because they have expenses that I approve, but I'm not always around to do it or replenish the petty cash for [it]," she said. "These are the people I trust with my company, and since we are just a small business – very little bureaucracy – they can still ask for my confirmation every time they need to use it."
Regardless of whom you give cards to, it's important to define what they are for and set benchmarks for when you should be notified. This can be in dollar amounts, for example. These types of rules will be clear based on your business and its various expenses.
Check the monthly statements
While it may not be ideal to approve every purchase, it's still important to scrutinize monthly statements to ensure that funds are being used the way they're supposed to. This can be a safeguard, especially for business owners who are reluctant to provide their workers with corporate cards.
"Scrutinize your statement," Pollard said. "Make sure that nothing strange is going on. Question every charge that you don't recognize. Also, give your employees a strict dollar limit – I recommend 110 percent of what you actually think they will need."
Build the right culture
If you've hired the right workers, then issuing business credit cards shouldn't be an issue. Good employees will know when it's appropriate to use them and will follow your direction when you define what the cards are for. You can further build company culture by providing these cards, proving to employees that you trust them and value their hard work.
Employees "know that they should use the funds to accomplish the tasks that I give them," Pollard said. "If you hire the right people from the get-go, you don't have to worry about credit card abuse."
If you're really worried about distributing cards but need to save time, you can always turn on alerts so you are notified each time the card is used. This allows you to keep a close eye on employee purchases without having to directly approve each purchasing decision.
It also may be a good idea to tie rewards points to card usage. If employees are using them for routine company purchases, you can issue the card in their name and provide them with the opportunity to earn miles or points. Singson said she does this with some of her workers.
"I linked the cards to some miles (airline rewards) so they get to keep the rewards, because the miles account is in their name," she said.