Mastering Corporate Credit Card Management Policy: Best Practices for Success
Corporate credit cards are a powerful expense management tool, as they offer a centralized statement that highlights employee purchases. With smart corporate credit card management, Finance teams can ensure budgets are followed.
Extending Corporate Cards to Employees vs. Reimbursement
Not every company opts to issue a corporate card to employees. Today, many corporations still require employees to charge business expenses to their personal cards and submit them for reimbursement. There is definitely value in offering employees a corporate card so they don’t always have to front their business purchases on their personal card.
If your employee has a corporate card, it saves them from having to pay for job-related purchases while on the road, potentially causing cash-flow issues upfront and while awaiting reimbursement. Corporate cards also provide better visibility into who purchased what and where and allow for negotiated rates with frequently used vendors.
As noted by Brex, having access to a “credit card statement featuring all employee purchases can take the stress out of reconciling expenses.” Some of the other benefits Brex highlights include:
- Streamlined management of employee profiles in relation to credit limits and spending restrictions
- Ability to allow only specific types of purchases based on the employee, such as purchases on fuel and vehicle-related services
- It’s easier to keep personal and business expenses separate
Credit Card Agnostic Expense Management
Today, many expense management and payment solutions are launching their own credit card as a way to generate additional profit. If a customer refuses to use the credit card associated with the system, they may face additional processing fees or penalties.
As we’ve stated previously, this is hardly a viable option for many companies today. The reality is that even for companies with wide adoption of corporate card usage, employees will occasionally need to be reimbursed for expenses made on their personal cards or corporate spend will occur on other accounts. Further, customers of companies that push the one card mantra are penalized with unbundling fees if they do not require single source purchasing.
Let’s face it, credit card selection isn’t a one-size-fits-all scenario. Different industries have different expenses—and the credit card issued by an expense management platform may not have the same benefits as a card issued by another financial institution. How you pay shouldn’t be limited or penalized.
Corporate Credit Card Management Best Practices
If your company issues corporate cards, it’s essential to follow a few best practices surrounding card use, expense reporting, and approvals, and have everything outlined in an easy-to-follow policy.
Establishing Corporate Credit Card Policies
For instance, you may want to limit the types of purchases certain employees can make on their corporate cards. If it is an employee in the field, you may only allow them to make fuel, construction supply, or related purchases. Or, if it is one of your business travelers, perhaps they must limit corporate card spend to travel or meals while on the road. You may opt to require receipts for all expenses, or only for spend over a certain amount, like $50. (Often these limits and guidelines are similar to existing expense policies.)
Regardless of the guidelines you set forth, clearly define your corporate credit card policy. And require each employee to read and sign that policy being issued a card on the company’s account.
Like with any financial tool, it’s important to manage corporate cards responsibly to ensure the business is staying within its budget and avoiding costly mistakes. One of the best ways to do this is through regular reconciliation of corporate card statements.
Reconciling corporate card statements involves comparing each purchase on the statement with internal records to verify accuracy. This helps businesses identify discrepancies in spending patterns, as well as potential fraud or misuse of funds by employees.
The reconciliation of corporate credit card accounts is a daunting task for the Finance and Accounting department. To help streamline this process, take advantage of technology to automate processes such as alerts for overdue payments, automated billing cycles, and reminders for late-payment fees or unpaid balances.
Similar to your corporate travel policy, the guidelines related to your corporate credit card program need to be communicated clearly to employees and documented in an accessible location.
- As your new employees are onboarded, or existing employees are issued a corporate card, require that they read and sign the policy.
- Make sure to include spending limits, purchase types, and required receipts or documentation in your policy.
- And when issuing cards, set individual spending limits, block merchant categories codes (MCCs) as necessary, and customize expiration dates specific to the cardholder and the business purpose of their purchases.
Optimizing Rewards and Incentives
Using corporate credit cards for business expense management comes with numerous benefits, including the potential to earn rewards and incentives. One way to maximize the value of corporate credit card-related rewards is by finding a program that offers relevant perks. Many programs offer points which can be redeemed for travel or merchandise; others have cash back options; and some reward cardholders with discounts at certain retailers or restaurants. Researching available programs and determining which one best fits your business needs is an important step in ensuring your reward-earning efforts will pay off.
For those managing corporate credit cards, set up an automated system for redemption of rewards points. Automating the process can help streamline redemption and maximize value from the reward program.
Preventing Misuse and Fraud
Misusing corporate credit cards can lead to a number of financial risks for businesses, such as:
- Uncontrolled costs – Without proper management, companies may not have visibility into their spending and this can lead to excessive and unnecessary expenses.
- Fraud – Companies are exposed to fraud risk when employees use corporate credit cards without the required oversight and control measures in place. Additionally, if a card is lost or stolen, it can create additional vulnerabilities for the business.
- Excessive debt – Incurring too much debt on the company’s books can lead to cash flow problems and put the organization at risk of defaulting on its payments.
Examples of common types of corporate card fraud include:
- Unauthorized transactions – unauthorized purchases with company cards by employees, contractors or vendors without approval.
- Misuse of funds – using the card for personal expenses outside of business purposes.
- Excessive spending – exceeding predetermined limits on spending and making frequent large purchases which are not allowed in a company’s policy.
- Weak security controls – inadequate review processes to validate employee purchases or to ensure that only authorized personnel have access to credit cards.
To prevent misuse and fraud,
- Establish internal policies and controls. Develop specific guidelines outlining what corporate credit card purchases are allowed, as well as who is authorized to make them. Make sure all employees have to these policies, and ensure everyone understands them.
- Monitor spending regularly. On a regular basis, double-check your company’s credit card transactions to identify any suspicious activity or potential misuse. It’s also important to review the monthly statements for accuracy before paying the bill in full each month.
- Properly secure cards and accounts information within your organization. Keep track of all corporate credit cards, and train employees how to securely share account information (i.e. not via email!).
- What is a corporate credit card? A corporate credit card is a type of payment card specifically designed for businesses. These cards are often branded with the company’s logo or name.
- What is the advantage of a corporate card? Corporate cards are an efficient and convenient way to manage business expenses and track employee spending. They typically provide more generous rewards than traditional consumer credit cards. Corporate cards can also offer travel insurance coverage, cash advances, and other perks designed to help businesses better manage finances. Corporate credit cards may also offer discounts on select products and services from partnering merchants.
- What is corporate card expense management? Corporate card expense management is the process of monitoring and controlling corporate credit card usage for a business. It involves:
- determining how much to spend
- when to spend,
- who to give the cards to
- setting limits on the amount of spending allowed per period or transaction
- enforcing compliance with company policies and procedures
- and tracking expenses for accounting purposes
- What is corporate card reconciliation? Corporate card reconciliation is the process of reconciling corporate credit cards transactions and ensuring their accuracy. This process includes reviewing all purchases made with corporate cards and verifying they’re valid expenses. Corporate card reconciliation ensures money isn’t wasted by employees or vendors. It also provides a record of all transactions for auditing purposes.