Small and large businesses are doing everything they can to minimise expenses in the hope of cutting total costs and increasing profits. Typically, expenses related to employee travel and purchases are areas where changes can be implemented quickly. One of the simplest ways to reduce unnecessary spending is to create an employee credit card policy. A company that lays out the rules and regulations concerning credit card use will likely be far more frugal than one that has no policy in place.
Many companies are not familiar with how they can develop and implement credit card policies. Many business owners want to do something to save money, but don’t know where to start. Here are some things to consider when developing an effective credit card policy:
Do you need a business credit card?
Firstly, you need to work out if your business needs its own credit card. In some cases, it can be obvious, such as when you want to maintain separation between personal and business spending or build your business’s credit history.
What about small businesses? Sometimes it’s not wise to opt for a business credit card because there can be risks. A personal credit card can sometimes be better suited to a sole proprietor with minimal overhead costs. Additionally, personal credit cards can sometimes be better if your spending doesn’t align with business credit card spending categories. A personal credit card can be more straightforward in some situations. With the help of RateCity, comparing credit cards can be quick and painless compared to applying for a business credit card.
Set clear spending limits
A business credit card policy needs to dictate activities or transactions where credit cards should or should not be used. Spending should be limited to the needs of specific employees. Each department will have different needs, which should dictate their spending limits. These limits should be made clear when cards are handed out, and if an employee exceeds their limit, they will incur fees. Finally, NO cash advances!
Ensure cardholder responsibility
When credit cards are distributed to employees, some responsibility needs to go onto these employees around using their cards. Employees should be held responsible for their card’s security. More importantly, it should be the employee’s responsibility to maintain the privacy of any information related to the company and to ensure no fraudulent activities occur. Furthermore, the card should only be used by the employee it was given to, nobody else.
Never use business credit cards for individual expenses
You need to be strict when it comes to business credit card usage. Nobody should be allowed to use their business credit card for personal expenses - the card should be limited to use for business-related spending and activities. Any expense not related to business operations should be considered personal. All companies should enforce strong consequences for breaking this rule.
Collect month by month usage reports
Business credit card usage needs to be documented and enforced. At the end of each month, all employees with a credit card should submit a detailed explanation of all charges, receipts and relevant accounting codes. Employees should attach receipts to the monthly statement before they present it, to help avoid late payments and ensure the company can monitor spending with ease.
Final usage reviews
Reviewing a business credit card after a specific period has passed is recommended, to ensure the card is being used for its intended purpose. The evaluation of the card should be carried out by supervisors, human resources and the accounting team, to ensure the receipts and expenses are all authentic and that nothing fraudulent is occurring.
Every company should have a policy in place when it comes to credit cards, to prevent the misuse of cards by individuals. A person who is not following policy may be hurting the financial situation of their company.
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