Research shows that 67% of small business owners currently own a business credit card. Are you interested in allowing your employees access to the same privilege? If so, it's important to brainstorm and prepare before unveiling your new plan.
Creating a corporate credit card policy is a great way to outline the rules and regulations around how your team members can use their new cards. You can also use this policy to explain analytical procedures, establish cardholder responsibilities, and prevent future fraud.
In this article, we talk about the nuances of creating an effective corporate credit card policy. We also talk about some of the best practices around managing corporate credit card spending. Read on for more!
The rise in corporate credit card usage
Though once a nice-to-have commodity, corporate credit cards are now more commonplace than ever before. Today, about one in five finance departments plan to invest in more company-backed cards moving forward.
This brings us to the question - why is this movement beneficial for businesses? And, what can yours stand to gain from such a roll-out?
The impetus behind the rise of corporate credit card usage is multi-fold. While expense tracking is one benefit, it isn't the only one.
Top 5 reasons your business should use a corporate credit card:
- First, these resources make it easier for business leaders to track expenses, especially travel-related ones.
- They also make it easier on employees' wallets, as many cannot afford to wait for reimbursement after paying for flights, hotel rooms, and meals on their dime.
- Extending corporate credit cards to more employees also allows companies to pay for their goods quicker than before.
- Finance folks can also net in more favorable terms with preferred vendors. This could include discounts, with their card providers.
- It can also help them maintain compliance with vendor requirements, so they never fall behind or get into trouble with the IRS.
- Also, it gives team members the freedom to utilize the expanding array of digital vendors (e.g., UberEats, Amazon Prime) that only accept credit card payments.
How can a corporate credit card policy help avoid fraud
While there's no denying the benefits that a corporate credit card can provide, it isn't without its inherent risks. Any time you issue anyone a credit card, you're trusting that person to be responsible for its use. However, it's all too easy for that piece of plastic to fall into the wrong hands.
Consider this: Of the nearly 450,000 cases of identity fraud reported in 2018, credit card fraud was the most prevalent crime, accounting for nearly 160,000 of them.
But, how can your business avoid corporate credit card fraud?
While there's no failsafe way to completely shield your team, there are a few critical steps you can take to prevent it. Some of the top ones?
- Limit your overall number of cardholders.
- Although most issuers will require that you have at least 15 cardholders under your account, it's smart to aim for as few as possible.
- When you keep your circle small, it's easier to locate the origin of any potential fraud.
- Prioritize employees who frequently travel or complete major business transactions on your company's behalf.
- Everyone should understand his or her spending limit, along with which expense categories are restricted.
What is a corporate credit card policy?
A corporate credit card policy is an internal agreement between an employer and their employees. This policy outlines card usage, as well as what constitutes misuse. It is a detailed document that explains everything that employees need to know about their new card, including its:
Quick guidelines for creating an effective corporate credit card policy:
- The corporate credit card policy start date
- A description of the type of card (company payment cards or individual payment cards)
- Cardholder eligibility requirements
- Spending limits (monthly spending limits, expense-specific limits, and frequency limits)
- Expense reporting requirements
- Consequences for inappropriate card use
- The name and contact information for the policy manager (typically the CFO or COO)
Must-haves in your corporate credit card policy
Ready to draft your corporate credit card policy? Let's review a few important inclusions to add.
Your corporate credit card policy should define cardholder responsibilities
One of the essential sections to include is cardholder responsibilities. In this section, you'll explain the steps that employees can take to ensure they use their cards the right way.
Some vital statements to include:
- Employees cannot use the card for their personal expenses unless explicitly mentioned so. If not enforced, your colleagues could begin charging everything, including their town off-duty mileage and weekend coffee, to the card.
- You can also help avoid fraud and identify theft by explaining that only the person whose name is on the card is authorized to use it.
- Also, ensure your employees should store their PIN and card in a safe place.
Your corporate credit card policy should define employee spending limits
- There won't be a one-size-fits-all spending limit for your organization. In most cases, issuers can tweak each employee's limit to reflect his or her level of authority and daily responsibilities.
- You can choose to set these limits on either a per-item or cumulative basis.
- For instance, you might inform a sales manager that his spending limit on a formal client dinner is $100 per meal (per-item.) Or, you could set a limit of no more than $500 on client dinners per month (cumulative).
Your corporate credit card policy should define approval requests
It's also important to discuss which employees must seek higher-level approval before charging their corporate credit cards. For instance, some might not be able to book a flight until their manager double-checks the details.
Your corporate credit card policy should define exceptions
To avoid overspending, many business leaders establish exceptions in their corporate credit card policy. For instance, you might allow your team members to book a standard hotel room when they travel, but they can't invest in a penthouse suite.
In your policy, you can also outline the specific items that employees are never allowed to buy with their card, including:
- Adult entertainment
- Prescription drugs
Establish an ideal corporate credit card policy today!
A corporate credit card policy is an ideal way to help companies stay competitive and compliant. The key is to make your corporate credit card policy as comprehensive and informational as possible. While the list of critical touch points mentioned-above is helpful, it isn't exhaustive.
There are myriad other considerations to keep in mind at all times, and chances are, you're already pretty busy. That's where we come in.
Our user-friendly plugin allows you to automate all card-related activities, so you never miss a beat. Card spend updates are always visible, as are direct bank feeds, automated reminders, assignment notifications, and more. As your company seeks to become as safeguarded as possible, we'll help you stay compliant, reduce the likelihood of fraud, and streamline your expense management efforts.
Want to learn more about Fyle? Click here to schedule a demo to make your work life smarter, one swipe at a time!