As a small business owner, you know that a credit card can be a helpful tool for managing your business’s finances. It’s also an excellent way to provide your employees with the means to handle their business expenses.
But if they’re not used correctly, credit cards can quickly get out of control and cause severe problems for your business. So, let’s provide you with some tips on keeping your business credit card under control.
Distribute Cards Wisely
Being wise about who you entrust with a business credit card is half the battle in keeping your business credit cards under control. Make sure to give the cards only to those employees you trust to be sensible and who actually need them to complete their job-related tasks.
Essentially, the fewer cards you distribute, the fewer opportunities there are for misuse. It’s essential to limit the number of cards you issue; that way, you can keep a closer eye on spending, understand who is using cards responsibly and who isn’t, and avoid having too many expenses to track.
You can set up alternative routes for employees who aren’t eligible for a company credit card. For ineligible employees, petty cash or a similar solution involving pooled money could be a better choice. You can also reimburse employees for paying company-related expenses using their personal cards based on receipts.
If you do decide to opt for an alternative approach, make sure it’s one that provides healthy levels of accountability.
Finally, don’t forget to collect cards from employees if they are leaving the company. Disenfranchised employees might misuse the card, and it could be difficult and time-consuming to undo that damage.
Create an Expense Policy
An expense policy is a set of guidelines that businesses use to manage employee spending. It’s advisable to include a card user agreement as part of the policy, and your employees should sign the agreement annually.
The actual policy can include setting limits on how much can be spent per day or per purchase. You should also establish what types of expenses are allowable and make it clear that you need receipts for all expenses.
In short, you want to set the ground rules for using the credit card. This is because credit cards and the interest they accrue can spiral out of control if left unchecked.
When writing your expense policy, you should be clear about the disciplinary process. This will be useful in cases of non-compliance. Once you have the signed agreements, you can, and should, enforce disciplinary action if need be.
In addition to setting spending limits, you’ll also want to limit the types of purchases that can be made with business credit cards. This will help prevent your employees from making personal purchases with the card.
Creating purchase categories can also be helpful. For example, you may want to allow only certain types of expenses to be charged to the card. Creating limits on how much can be spent in each category can also be beneficial.
Setting limits for company lunches, hotel rooms, and other expenses could make all the difference. It could be the key between responsible company card use and employees indulging themselves on the company’s behalf.
Simplify Expense Reporting
Make it easy for your employees to track their expenses by simplifying the expense reporting process. Asking for receipts is mandatory if you want to prevent overspending.
This system isn’t perfect, and it can create a hassle when things go wrong. After all, receipts can easily get lost or damaged. What’s more, this approach requires a person from your company to oversee the process of verification and matching the receipts with the expenses.
The easier way to manage this is by using software that allows employees to submit their expenses and track spending easily. You may also want to consider providing employees with pre-printed expense reports or templates that they can use.
Filling in a report every time a card is used may seem like a waste of everyone’s time. However, having everything documented so that people can be held accountable will prove to be invaluable if and when a problem arises.
Monitor Activity and Set Alerts
It’s important to monitor your business credit card activity and ensure that all charges are legitimate. You can do this by signing up for an online account with your credit card issuer. You can set up alerts for when a purchase is made or the balance reaches a certain amount.
This will help you identify any unauthorized charges and take action accordingly. If left unsupervised, irresponsible credit card use could generate debt and have a negative impact on your company’s credit score. With a credit score weighted down by credit card debt, you might find it difficult to borrow capital for your business down the line.
Have a Plan in Place to Handle Issues
Despite your best efforts, there may be times when problems arise. Sometimes, the issues in question could be missed flights or the sales team dealing with a complicated client that requires you to spend more than you’d budgeted for.
It’s essential to have a plan for handling these situations even before they arise. If you do, your employees won’t be tempted to resolve them by simply swiping the credit card. The solution could be having a designated contact for reporting issues or establishing procedures for dispute resolution.
On the other hand, if the issue boils down to blatant misuse of the card by an employee for personal reasons, you should be strict and firm about it. Make sure to broach the issue at the right time and place.
You should ensure that the whole process is transparent; everyone who has access to credit cards must understand what’s acceptable and what won’t be tolerated. By creating a solid level of transparency, you’ll also be encouraging employees to come forward with any issues they might have.
All in All
By following these tips, you can help keep your business credit card under control and avoid any potential problems. Implementing these guidelines will go a long way towards ensuring that your business credit card is used responsibly and efficiently.
Aleksandra Arsic is a Content Specialist at Fortunly.com. With a degree in economics, she enjoys subjects such as finance, global economy and also computer science. She can be found writing, designing and developing all sorts of quality content, and makes sure she keeps up with the latest technology trends.