Tom Patros loves his company's business credit cards.
His company recently gave business credit cards to employees, and “it is literally saving us hours every week,” says Patros, managing partner at Red Argyle, a technology consulting firm..
Having employees use company credit cards can help streamline operations in the workplace. Cards make it easy to keep business and personal expenses separate, track costs and pay bills.
[Check out our business credit card G+ Hangout on Air below with host Erica Sandberg and guest "the Credit Union Guy," Greg Meyer.]
Before handing out any plastic, however, you'll want to have a clear plan in place. We asked employers and human resources experts what advice they have for creating a business credit card policy. Here are five rules they suggested:
1. Restrict who you give it to
When it comes to getting company credit cards for employees, “base it on the concept of need,” advises human resources expert Steve Kane. If an employee regularly travels for business or entertains clients, giving that individual a business credit card might make sense.
You may also find certain employees regularly make purchases for office supplies or inventory with personal funds. A business credit card can simplify the procedure.
As a precaution, many businesses do run credit checks on the employee before issuing the card, notes Sabrina Baker, founder of Acacia HR Solutions, a firm offering human resource solutions for small- and medium-sized businesses.
2. Establish spending rules
You might opt for the same credit card limit for each employee. You could also set different limits, depending on workers' spending activities for the company.
Another option is to start with a specified amount and then increase it. Give each employee a low limit during an initial three-month probation period, suggests Bret Bonnet, co-owner and cofounder of Quality Logo Products. Then increase the limit. This way, “the risk of the employee mishandling the company credit card is significantly reduced,” he explains.
In addition to setting limits, document what the card can — and cannot — be used for. Write the terms in easy-to-read language, and be specific. For instance, if your employees entertain clients, and you don't want the company to cover liquor costs, make a note that the card cannot be used to purchase alcohol.
3. Track spending
A description of the product or service purchased should be included, as well as the reason for the expense, says Baker.
Set up a system that workers can easily follow.
“Each [Quality Logo Products] employee is required to complete and submit a detailed expense report for every transaction,” explains Bonnet. At Red Argyle, workers use Harvest. This time tracking, invoicing, and reporting software allows users to snap a photo of the receipt, add details and send it in.
Regardless of the method you use, decide how often expense reports will be reviewed, such as every week or once a month. Make one person responsible for monitoring credit card expenditures.
4. Create consequences
Write down steps that will be taken for misuse of the card, such as using it for personal purchases or failing to document business costs.
“If an expense report is missing, we give the employee an opportunity to fix or correct the matter,” states Bonnet. If the employee is unable to do so, the limit might be reduced or the card privileges revoked.
Also note that employees who leave the company will need to turn in their credit cards, which will be canceled.
5. Communicate clearly
To avoid confusion, meet in person with employees to go over how the card should be used. Explain spending limits, what constitutes a business expense, and how purchases should be reported.
Let employees know that from time to time, expenses will be audited.
“Simply stating that will have an impact on people's efforts to make sure nothing illegitimate shows up,” says Kane.
When you're finished describing the policy, have employees share how they understand the guidelines. Ask if they have any questions. Then, have employees sign an agreement regarding proper credit card use.
For best results, keep the usage in check from the very beginning and coach issues of misuse as they occur, says JoAnn Corley, founder and CEO of The Human Sphere, a talent management consultancy.
“Everyone comes to the table with a different set of experiences related to values, financial practices and habits,” she says. Employees will appreciate the transparency that comes with a clear policy in place.