Company credit cards can be an absolute blessing, or they can turn into an absolute nightmare. Much like any other form of credit, your results hinge greatly on whether or not you can use your credit card effectively within the scope of your business. This requires an understanding of exactly how you should properly manage a business credit card in the first place. If you've been considering taking out credit for your business, this short guide will help you to ensure that you are protected from costly financial mistakes that could cause financial harm.
Restrict Usage to As Few Employees as Possible
Depending on the nature of your business, your employees may require spending cash as they go about their workday. If you've considered giving them a company credit card, you should know that this step should not be taken lightly.
Remember: you are responsible for whatever your employee does with the card, even if that means they gas up their own vehicle, go on a shopping spree, or use it during a personal emergency as their float. While the possibility of suing an employee to recover the funds is possible, it's costly, and you aren't guaranteed a successful result.
You should consider handing an employee a credit card to be the same as handing them cash in an equal value. If you'd second-guess handing over the cash, you probably have good reason to second-guess handing over the card, too. This is especially true of high-value cards with limits of over $1,000.
Give full access to company credit cards to only your most trustworthy employees, and only after completing a criminal background check to verify that they are bondable. Never grant access to cash or credit cards to an employee who is considered non-bondable; these individuals present a high risk, and it may be against federal regulations to do so depending on your industry.
Most insurance company can provide you with fidelity bonds for bondable employees upon request. If you do grant access to either a prepaid or billable credit card, request receipts for any expenditures--these should be mandatory at all times for verification and tax purposes.
Check Credit Card Statements Regularly
If you aren't checking credit card statements at least once a month, or you are simply paying whatever the bill comes out to, you are putting your business at risk. This is especially true if employees have access to the card.
It's very easy for a sneaky employee to start siphoning small amounts of money off of your credit card if they have free and untracked access to it. It starts with 10 dollars here, 20 dollars there, a small grocery item there, and can quickly add up to a serious loss. While these numbers may seem like a pittance at first, especially if you do occasionally permit employees to buy lunch or grant them personal spending cash, untracked spending can really add up over time.
If you think it won't happen to you, think again. Research verifies that nearly 75 percent of employees have stolen from their employers at least once, whether via credit card funds, a checking account, or even just removing items from the store without permission. Cross-checking your credit card statements regularly will allow you to verify that the information employees are giving you is accurate and true, and will protect you from sudden surprises at tax time.
If you are still unsure about how to best manage your business's need for credit, you're not alone. Before you move forward and make a decision, consider contracting a management accounting service to review both your finances and your need for credit. A good management accountant can provide a holistic review of your current monetary situation, including any perceived need for credit, and then point out ways to better utilize credit to your business's best advantage. If you need help with accounting, visit Dale K. Cline, CPA PLLC.