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A company credit card can remove a lot of administrative hassle when reimbursing employees for company purchases and travel. But just what are your employees doing with their company cards?
Upgraded Points, a travel site that focuses on strategies for maximizing rewards and travel perks, recently looked at how employees use company credit cards. Here's their breakdown of how many respondents use their cards for various types of expenditures:
Business Travel Expenses (64.8 percent)
Meals/Entertaining clients (55.8 percent)
Office Equipment/Technology (55 percent)
Everyday Tools (54 percent)
Employee Gifts/Rewards (36.4 percent)
Professional Development or Training (35.8 percent)
Personal Expenses (26.8 percent)
While it may seem a little shocking that so many people had personal expenses on their company credit cards, the report also pointed out that 23 percent of businesses explicitly allow employees to use company credit cards for personal use.
How should you approach company credit cards? Do you even need them?
Company credit cards are generally a good thing--even with the possibility that employees could charge personal expenses to them.
To understand why, take a look at the numbers: The average monthly company credit card bill is $6,506, compared to $2,347 for personal credit card usage. Bankrate says the average person has a credit card limit between $2,000 and $10,000. If your employee charges $6,506 in business expenses and $2,347 in personal expenses on their personal card, that could lead to maxed-out credit cards. Many people's credit limits wouldn't even allow them to charge that much.
Just remember, if the employee carries a balance or their company credit card has no grace period, they might have to pay interest on business expenses. That's unfair to the employee. Business expenses, including any credit card interest on those expenses, should fall on the business, not the employee.
Having a company credit card also allows your employees to carry out business duties like travel without incurring personal debt. But, of course, not everyone needs a company credit card, even if they occasionally need to make business purchases.
For an employee who makes one business trip per year, prepay the hotel room and buy the plane tickets directly instead of having the employee put it on their own credit card. Yes, the hotel will likely ask for a card for a security deposit, but that's significantly lower than the cost of the hotel itself. You can do the same with rental cars. You can even prepay Uber rides for them to remove that burden.
Your goal, as a business owner, is to get business done. That works best when employees have the resources they need, including being free from credit card burdens.
Because of the way I work, I print a lot. I just spent about $300 on ink. As a solopreneur, this is my responsibility. But if I were an employee, this would be a business expense that I shouldn't have to pay for out of my own pocket.
It's certainly easier to have employees--especially remote employees--just make these purchases on a company card rather than going through a procurement process. Give people budgets for office supplies that they can use without getting further approval, and save time and headaches. Yes, they can also buy those supplies on their own cards and submit requests for reimbursement, but this can be easier.
While I'm generally in favor of company credit cards, you do always have to worry about fraud. Some cards have the company billed directly with the company responsible, while the company facilitates others but affects the employee if not paid promptly. The latter can punish the employee for a slow reimbursement process.
As mentioned above, nearly 27 percent of company card users charge personal expenses to company cards--and notably, only 23 percent of companies say they allow that. So, there are definitely people putting personal charges on their card without permission. But this may not be a big problem--of course, you'd rather have your employee put gas on the company card and have them reimburse the company than risk them running out of gas.
That said, you don't want people taking their friends out to dinner and charging it as a business expense, or buying plane tickets for a family vacation and trying to pass it off as a business expense.
Ensure you have clear policies around this--when company cards can be used, what constitutes an acceptable personal purchase, and when company cards should not be used. Monitoring the bills can save you money in the long run, and having clear guidelines prevents people from making personal purchases from the beginning.
If you require employees to travel or go on tons of business dinners or make other big purchases, their company cards will rack up quite a few points, and keeping them for the company might be tempting. So I say this clearly: Turn the points over to the employees. It's a cheap perk to help compensate them for the hassle of travel and entertaining clients.
If you don't have company credit cards and are issuing regular reimbursements, or if your company credit card policy isn't clear, it's time to consider the best way to handle the ad hoc purchases your staff needs to make your business run.
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