As those businesses grow, they often face this decision as well: Should certain employees have their own company-issued credit cards? While many entrepreneurs remain psychologically opposed to issuing plastic to employees, business credit cards offer many benefits at little or no cost.
For one thing, they can greatly reduce the number of checks the business has to write. What’s more, they provide detailed and itemized expense documentation, and reduce the frequency and cost of employee expense report reimbursements.
They can also save the day. Say, for example, you have a big presentation first thing tomorrow morning. You send your key employee to pick up the finished presentation materials at the printer, which closes in an hour. Your employee shows up with a signed check for the original quote, but the final total is higher. What now? If your employee has a business credit card, you wouldn’t have to cut a check in the first place, and there’d be no problem.
A business credit card is an efficient payment tool for a small business, and can help you manage your cash more effectively. And you can earn valuable rewards and discounts at the same time. For many businesses, this can amount to thousands of dollars per month. And of course cards also cut down on the costs associated with issuing paper checks.
Business credit cards can also cut down on expense account abuse. When paying cash or using their own personal accounts to cover businesses expenses, employees sometimes inflate charges on expense reports.
Access to quick capital is still another reason to consider a business credit card. If your card comes attached to a line of credit, you can use it as a stop-gap mechanism to cover a brief cash shortfall. But since interest rates tend to be high, it’s best to pay it off as quickly as possible.
Still, there are several factors to consider when entrusting employees with a business credit card. Here are three rules that business owners should consider when issuing company cards:
1. Set spending limits: Often, the best way to prevent credit card abuse among employees is to set tight spending limits and “merchant category codes” (MCCs) to limit areas in which employees can spend money on the card. For example, American Express offers MCC blocking for hundreds of standard codes, as well as those you define. By using this feature, business owners can allow employees to spend only with merchants in specified categories. You can also link card holders to a list of MCC codes and enable them to spend at any establishment other than the merchants in the codes listed. You can even restrict spending to specific merchants or locations by using Preferred Supplier Lists.
2. Issue guidelines and a written company policy: In other words, do not assume employees know their limits when it comes to credit card spending. Ask employees to read and sign a written agreement that states compliance with the company’s rules for using credit cards. Make it clear what employees are allowed to charge on the card, and what they aren’t.
3. Review statements closely and require receipts: Regardless of trust in employees or any signed company policies, it is important to remain aware of employees’ spending. Conduct monthly reviews of credit card expenses. It’s easy to do online where you can see details of every transaction. Also ask employees to provide receipts and to reconcile their spending monthly. Immediately bring any questions or concerns to the employee’s attention.
4. Capture points and rebates: Using company credit cards is also a great way to consolidate business purchases, earn points and capture extra discounts. So make sure these features are activated and take advantage of them.
The website CreditCards.com is one good place to search and compare business credit cards. The site offers a variety of articles and tips on finding the right card for a small business.
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