Every growing company has business expenses like hotel bookings and airfare that are not borne directly by the company but through its employees. A simple way to track and control business expenses is by issuing corporate credit cards to employees. This prevents employees from using their own money and lets the company pay directly, thereby making things easier for both of them.
If used efficiently and smartly, corporate credit cards can prove to be a catalyst for the company’s growth. Since companies can control them directly, their usage can be monitored and limited effortlessly.
A corporate credit card is a credit card that is issued to specific employees by their employer for business-related expenses. Companies issue corporate credit cards A corporate credit card is a credit card that is issued to specific employees by their employer for business-related expenses. Companies issue corporate credit cards to employees so that they can pay during business trips without using their personal cash or credit cards.
Corporate credit card accounts are usually opened by businesses through:
Although they are normally issued in the employer’s name, they also bear the name of the cardholding employee. However, unlike a personal credit card, in case of non-payment, the employer can be held liable as well.
Using a corporate credit card is very similar to using a personal credit card. During business travel, the costs an employee incurs are basic necessities like accommodation and flight bookings. Without a corporate credit card, employees need to use their personal cards or cash for business expenses. Although reimbursable, employees need to forgo personal funds temporarily. This is where corporate credit cards work their magic.
Like personal cards, corporate credit cards are usable at the counter or for online payments during business travel. They are a convenient medium for the company to pay for employees’ business expenses. The payments made through them are registered on the company’s card statements. This lets the employees’ personal funds remain untouched while the company can personally access and track card usage.
If you are a small business owner, you should first check whether a corporate credit card is right for your business or not. Corporate credit cards and business credit cards generally differ in two major aspects - eligibility and liability.
The basic difference between a business credit card user and a corporate credit card user is that of company size. Corporate credit cards are for companies that have annual revenue of over $4 million. Business credit cards are for smaller companies with less frequent credit card transactions.
Business credit cards necessitate a personal guarantee i.e., both the employer and the cardholding employee are accountable for non-payments.
Some corporate credit cards, like American Express cards, offer joint liability as an option. Depending on the card type, either the employer or the employee is liable for payment charges and non-payments. The employer can choose which kind of card to offer an employee as per the business needs.
Corporate credit cards are categorized as individual liability cards or corporate liability cards, depending on who would be responsible for payments and debts.
The cardholding employee is responsible for the payment of charges. He is also responsible for reporting those charges as business expenses to the employer for reimbursement. The credit card issuer checks the employees' personal credit score before issuing them this card. However, their personal credit score is unaffected by their corporate card usage.
The employer is responsible for payment charges in this case. Nevertheless, the employee is still responsible for reporting those charges. The employer can then reconcile the card statements. The credit card issuer checks the company's credit history before issuing the employee this card.
As mentioned earlier, $4 million annual revenue is the basic eligibility criteria for issuing a corporate credit card. Some other criteria that card issuers consider are as follows:
A company may apply for corporate credit cards if it satisfies the above criteria. To process their application, the card issuer may request for:
As per the above criteria and information, credit card issuers decide if the company qualifies for a corporate credit card or not.
If used in the right manner, corporate credit cards can effectively support a company in meeting its business objectives. At the same time, using them exposes the company to certain risks. Let’s have a look at the advantages and risks of using corporate credit cards.
The reconciliation of card statements gets quicker and more legit. Corporate card expenses are recorded on the company's card statements instead of the employee's statements. Hence, the employer doesn't have to rely on the employees to submit their statements for credit card reconciliation. They receive bank statements directly from the banks as they are the account-holders. This eases the accounting and auditing processes and reduces credit card fraud.
Using a corporate credit card makes life easier for businesses, as long as they stay compliant. Here are some of the best practices around managing corporate card spends that you can employ within your company:
Although some companies offer electronic expense reporting to quicken report creation, the report submission and verification process is still manual. An expense management software automates and streamlines card expense reporting, verification, and reconciliation.
Here are some reasons why businesses are adopting corporate credit card usage:
Due to the ease of use and availability, most of our transactions today have become cashless. The same applies to businesses as well. A growing practice is to encourage traveling employees to use corporate credit cards to incur business expenses. This allows them the leisure of not spending their own money on business trips.
Corporate credit cards are an effective way for employers to trail their employees’ card expenses. It is also an effective way to negate risks attached to personal card usage and business expense reimbursements.
Fyle does much more than just streamlining your expense reimbursements. Schedule a demo with us today and hop on to the bandwagon of digital change.