Business credit cards can make life a little easier to pay for company-related expenses.
Business credit cards can make life a little easier when it comes to paying for company-related expenses. However, when credit cards are used irresponsibly, they may not only hurt the company but the cardholder as well.
The Benefits to Business Credit Cards
Business credit cards allow you and your employees to make business-related transactions with ease. This eliminates the need to reimburse employees for expenses or withdraw large amounts of petty cash. For employees who travel, this can save them a lot of headaches and help them maintain their traveling expenses.
Many business credit cards offer special repayment terms, allowing you to work out payment plans with your creditor if needed. Furthermore, many cards offer high rewards programs, making these cards work even more in your favor. While you may have to spend more money to reach these rewards than you would with a personal credit card, with more employees and numerous expenses, it is much easier to meet these spending requirements.
The Drawbacks to Giving Employees Business Credit Cards
While the advantages to these cards may sound excellent, providing every employee with one can cause trouble. With most business credit cards, the cardholder holds responsibility of the accrued debt, along with the business, not the user of the card.
To help your employees hold a little more accountability, one option to consider is an individual payment business card. With this type of credit card, your employees file an expense report, receive reimbursement and pay the creditor themselves. While you won't have to pay one large credit card bill each month, it still requires a lot of work to approve every charge and provide reimbursement. However, approving each charge on the credit card ensures any personal expenses made are caught and that the employee pays it.
By providing employees with corporate credit cards, you must be wary of personal transactions made on the card. It can be a hassle to make separate transactions and employees may try to get away with small charges. The more cards that are issued, the greater chance there is for credit card theft or fraud.
Policies to Consider
If you offer your employees credit cards, ensure policies are in place for how to use and handle the cards. For example, establish spending limits and restrictions on all cards. Many employees may use the cards as an excuse to take a client out to the most expensive restaurant in town and easily spend hundreds of dollars. If your company cannot handle these large charges, stress this to your employees.
Additionally, give employees a probationary period with the card. For the first several months, ask them to bring in all receipts for approval. This lets you keep a close eye on transactions and any individuals who may abuse the company credit card.
Before employees receive a credit card, it is wise to train them on proper credit card use. Train them on what to do if the credit card is stolen and go over any spending limits or requirements your company may have. While some executives and upper management may think these trainings are silly, they are a good reminder and will help keep everyone out of financial trouble.
Overall, there are many benefits for employees to have a company credit card, particularly if employees travel or make many business-related expenses. However, if an individual rarely makes company-related transactions, issuing them their own credit card may not be worth it. The chance of loss or theft is high and if the card is rarely used, nobody will know until it is too late. Too many cards increase the chance of abuse, costing you and your company a lot of money.
Image from Kaprik/Shutterstock