8 Steps to Consider Before Issuing Employee Corporate Credit Cards

8 Steps to Consider Before Issuing Employee Corporate Credit Cards explained by professional Forex trading experts the “ForexSQ” FX trading team. 

8 Steps to Consider Before Issuing Employee Corporate Credit Cards

A business has to make purchases or do maintenance. With these expenses in mind, it is often a good idea to consider issuing corporate credit cards to selected employees.

Issuing these cards to employees means that they can do certain transactions on behalf of the business and later file all the receipts to the chief financial manager at the end of every month. As a company, instead of issuing cash advances to every employee, corporate credit cards turn out to be the best option since you won’t be involved in the hassles of giving out cash.

However, before you issue out corporate cards, you need to put precautionary measures in place. Without doing so, there is a possibility for some employees to misuse business funds. The risk of unauthorized purchases increases when the corporate credit cards are in their hands, and there are no protective measures in place. In order to control this risk, the following policies will help:

At the Start, Set Expectations

When issuing the cards, it is advisable to set and inform all the employees on what is expected of them when it comes to card usage. You need to establish a policy that vividly explains the responsibility of the card holder, the type of expenses the cards should be used on and the type of documents one should submit for each expense.

This is one of the keys things every company should put in place so as to curb how the card holder uses the card. Without doing this, your business will incur extra expenses that were never budgeted which in the long run increases the cost of running the business.

Make Sure the Card Rules Are Properly Understood

As we know, most of the employees do not have the reading culture. This means that if you just dish out employee corporate cards with a legal fine print of the rules without taking them through on how or what is expected in regards to card usage it won’t help since many of them may use the card without reading the rules.

To avoid the above scenario, it is good to organize a meeting with the employees and take them through the policy. After this is done, it would be good for them to acknowledge the understanding of the policy in writing. This means that in case an employee goes against what the policy states, appropriate measures must be taken.

Be Keen on Spending

At times most employees tend to go against the rules and end up spending more than what is outlined in the policy. With this in your mind, it is good to keep close tabs on the usage of the business credit cards. The chief financial officer should inform supervisors in each department that they will be given a responsibility of supervising the employees with cards in that department.

This will in a way will minimize the misuse of cards on the part of employees. When an employee knows that there is somebody monitoring card spending, they will fear to engage in any disallowed purchases that are not stated in the policy.

Have Protective Measures in Place

Money is an economic resource, and hence it is very scarce. This means that when an employee abuses their card usage privileges, the burden is immediately transferred from them to the company. With this in mind, it is okay for you to put spending limits on every card.

Those in managerial positions could be given higher limits compared to those in the lower ranks. This measure is meant to reduce the risk of doing unauthorized transactions. The spending limit set should never be surpassed and should be stated in the policy. If any employees surpass the limit, the extra amount has to be deducted on their payroll plus a penalty.

Always Conduct an Annual Review

The credit card program of the company has to be reviewed year after year. This is because certain employees might have moved from one department to another and since every department has a specific spending limit, there is a need to do an annual review of the program.

Doing so also allows heads of departments to issue new spending limits in accordance with the responsibilities of every employee. If an employee works in a department that no longer needs a corporate credit card, then he/ she may be removed from the Credit Cards for good credit program.

Increase Efficiency by Doing Follow Ups

It is good for you to have someone who is not part of your company or neither a card holder to do summaries of transactions on behalf of the company and submit them to you at the end of every month. The main purpose of this designated person will be to list the names of employees who did not hand timely explanations and statements on their card usage.

This is an easy way for you to monitor which employees are adhering to the card policies and which ones are not. After a certain period of time, you might opt to crack a whip on those perpetual card holders that always go against the policies either by taking the cards away from them temporarily or even permanently.

Assess the Outliers

Remember, an employee issued corporate card should only be used on certain items that are useful to the company and should never be used on buying personal items unless ni an emergency. Thus, there is a need to monitor all the expenses each employee uses on the card at the end of every month.

If one or more employees use the card on personal items, a thorough assessment should be done to determine whether it was due to an emergency or not. If it was not an emergency case, then disciplinary measures should be taken against the card holder. Conversely, if it was due to an emergency, the expenses incurred will have to be deducted from the card holder’s salary without any disciplinary action taken against them.

Divide the Risk

Your corporate card policy should ensure that the employee user is personally responsible for all the credit card balances at their own risk. With such a policy in place, the company will only need to reimburse funds to individual card holders according to the amount of approved expenses. This is what we refer to as sharing of risk between the company and the employees. This is a good way to deal with employees who tend to buy their personal stuff using the card since they will only be given an amount which matches with the approved expenses only.

8 Steps to Consider Before Issuing Employee Corporate Credit Cards Conclusion

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