It’s a dilemma most
small-business owners face: determining to give your employees credit cards so
that they embark on business trips and wine, can pick up office supplies and dine
clients that are prospective. Business owners tackle this question in a variety of ways, from asking employees to use their personal cards and get reimbursed later to ordering freshly minted company cards to the VP of sales for everybody from the office manager. Each option has pros and
cons, and a company owner should consider the company needs, the types and
frequency of employee purchases and the comfort level with providing employees
plastic, says Jennine Leale, CEO of HRPro Consulting Services, a New York human
resources consulting firm. “What works for some
companies may not work for others,” she says. “It’s about finding your own
Ways to give employees don’t have to pick just one
method of dispensing credit cards to workers. You may mix and match options
to give each employee only the kind and amount of credit they want.
Here are five ways small-business owners are able to disburse and manage employee credit cards, along with the
pluses and minuses of each method:
1. Workers for company charges on their cards that are personal.
Bosses commonly piggyback on the employees’ personal credit, which, in many cases, can
be the best option for everybody. First, it can motivate employees
to remain organized with purchases. “This procedure incentivizes workers to maintain receipts and submit
backup in a timely manner so that they can get reimbursed and pay
the credit card bill,” Leale says.
Pro: Going this route
also can help control costs. The owner of a startup in Houston, AJ
Saleem, learned that lesson after a worker went overboard with the company
card, buying loads of office décor and snacks he had not requested. “Some people really like to shop, and I figured
they would be less likely to overspend on their own card,” he says.
Con: The drawback is
that leaning on cards that are personal can put a burden on workers who need
to make purchases that are costly. Additionally, if reimbursement lags, they’ll get dinged with
interest rates. And this won’t be possible for a worker who does not carry cards or has a low credit
limit as a result of bad credit. “I can see where this could be a problem, especially if
purchases get into the $100 range,” Saleem says.
“Some people really like to shop, and I figured
they would be less likely to overspend on their own card.”
2. Let employees borrow your
business card when needed.If you prefer using a
company card, but still wish to maintain a tight handle on purchases, consider
having employees use your business card. This isn’t illegal, even if the
employee’s name isn’t printed on the card, so long as you’ve authorized them to
use it, says Nessa Feddis, senior vice president at the American Bankers
Pro: This strategy can
provide an easy way for a company to let employees make purchases.
By way of instance, if the receptionist should purchase, say, a cake for an
office birthday party, return it immediately and he can ask to borrow your card. This strategy keeps you in the loop on card purchases and also limits opportunities for fraud, says Charles Read, a CPA who works through his payroll firm GetPayroll with small-business owners.
Because Read has heard from many small business owners about it and has experienced employee theft, he believes in being cautious. “If you’re going to have a company
credit card, have one and keep it in your wallet,” he says.
Con: unless you leave the company credit card with a trustworthy office supervisor or other employee But one minus is that your employees would be not able to make purchases when you’re sick or on holiday. Also, card asks could disrupt the workflow of your day.
That founder of IdeaRocket, William Gadea, a company that makes animated
videos for companies, won’t go this route even though employee card fraud has been dealt with by him. “It’s a bit more trouble than it’s worth,” he says.
3. Add workers to a small-business card account.If you have workers
who create many business purchases or travel frequently, it might make sense to get
them firm credit cards in their names. Adding employees is comparable to adding users that are authorized to a card that is personal, and it
eliminates the hassle of reimbursing employees.
employee credit cards prevents workers from having to lay out personal funds for business expenses that are large. Most small-business cards provide tools that allow you monitor and to control spending, and isolate purchases by card user. And to going this route one advantage is that
your organization keeps any rewards, points or cash.
Con: Because business cards often have higher credit limits than cards that are personal, you’re taking a huge risk if you don’t limit employee spending power.
Unless you can convince them to pay, if a cardholder does go on a shopping spree, you will likely be on the hook for the fee. That is what happened in Gadea’s case. Later he fired the guy confessed and called to buying $400 worth of clothes at Banana Republic on the company
The employee sent a check a couple weeks later. “I
don’t believe he was attempting to steal, I believe he was giving himself a loan,”
Gadea says. However, the incident “really opened my eyes,” he says.
4. Get a corporate card.Depending on the size and credit history of your company, a corporate
card, which differs from a small-business card, might be the ideal
Unfortunately, you can not just hop online to apply for a card. Just a handful of issuers offers cards, generally to bigger companies
with relationship and an established credit history with the lender.
Pro: A card that is corporate delivers a way for organizations to manage their spending and to extend credit, and they may have more features and management tools than small-business cards.
There flexibility: An employer may decide on an
individual liability card, where the employee pays an expense report is then submitted by the invoice and gets reimbursed, or liability, where the
company foots the bill directly.
Con: Like business
owners that add workers as users to their small-business cards,
companies that issue cards that are corporate will have to monitor card usage to
make sure workers don’t slide charges onto the company card.
5. Use gift cards for
particular expenses.Gift cards work well for
Deborah Sweeney, CEO of MyCorporation, a small company that provides online
document filing and other business services. With no fees Express gift cards in bulk, so they get a deal in actuality.
members of the sales team travel, the business pays the costs, such as hotel, airline and car rentals, and hands over a gift card for meals and incidentals, Sweeney says.
“Employees should have to get your OK for any purchase over a certain
amount, such as $100 or $500.”
Pro: A worker might
find a $ 1,000 card for a trip that is longer or a gift card for a short trip nearby
further away. This works well for workers who don’t travel frequently enough to
merit their own card, and restricts company risk to a particular dollar amount,
Con: The only
inconvenience is that the horizontal face value means there is usually a random amount. If it’s more than $ 50 Sweeney takes back the card to use for travel. The organization lets the employee keep it as a
reward for a job well done. “They love it,” she says.
Be wise about giving
workers cards.If you do decide to
extend credit to your workers, by giving them your card or giving them their
own, it is important to take action to prevent misunderstandings, reduce the risk
of fraud and protect your organization. Below are some employee credit tips:
rules that are clear. It’s critical to draw up
a detailed credit card policy, says David Waring, co-founder of
FitSmallBusiness.com. In writing, spell out specifics like when a
company card may be used, what can be bought with the card and dollar limits
on spending. You also need to specify whether workers must fill out expense
reports and that they have to provide itemized receipts, says Tiffany Couch, a
leader at forensic accounting firm Acuity Forensics and author of “The Thief
in your organization.” Spell out the consequences for making a purchase. And make it clear that the miles and points would be the property of the organization, Couch says.
Approval for purchases.
Employees should be required to get your OK for any purchase over a certain
amount, such as $100 or $500, Couch says. That prevents surprises when you get
Put controls on cards. Should you give their own company card to an employee, make full use of available tools, such as limits and alarms, monitor and to control spending. Along with setting a daily, weekly or monthly dollar limit for each employee, you can define the types of companies where the card can be used by them, Waring says. If you operate your employee and a landscaping company needs to fill the tank you could limit his spending he says.
Check charges regularly. It’s crucial to review fees
and it is surprising how many business owners never seem, Couch says. In
some cases, just a quick scan of merchant names would reveal a issue,
she says. By way of instance, she recently saw a case where a worker ran up
thousands of dollars in purchases in a shopping spree. The fraud was spotted by A new administrative assistant at the firm
when she decided to open the credit card invoice and ran from work to do.
“This is obviously something you could catch by doing a really quick
review,” Couch says.
owners say that the trust involved in using credit has caused them to
think more carefully about decisions that are hiring. The tutoring startup’s owner, Saleem, says it is crucial to gather a group of workers who honor
the fact that a company should watch every expense.
“You don’t want people who believe they can simply go
splurging on the company dime,” he says.
See related: Handling employees’ expenses on company cards, How to Take Care of employee abuse of company credit card, 6 questions to ask about your company credit card, Corpirate cards go virtual, offering security