Should You Issue Company Credit Cards?
Some companies issue company credit cards for employees to use for legitimate business expenses. In general, company credit cards are more trouble than they are worth. However, there are pros and cons.
Depending on the particular circumstances, issuing company credit cards may be justified. Consider these two scenarios:
Charges need to be assigned to specific accounts
If charges need to be assigned to specific accounts, company credit cards can be problematic. Consider a situation where the company can frequently pass through charges on the company credit card to clients. The employee will need to indicate which charge to allocate to which client.
There are a number of ways to accomplish this, but in our experience, getting employees to provide this information in a timely manner can be challenging. Employees have other priorities and getting expense reports turned in on time is often not at the top of the list. Accounting cares about expense reports, but the employee’s boss may not.
This leaves accounting in the awkward position of having to chase employees to get the information it needs, costing the company time and money. Of course, you can resort to Draconian measures. However, firing an otherwise good employee for not turning in expense reports on time does not go a long way toward building a positive culture in the workplace.
A much more effective way to deal with the issue is to require employees to use their own credit cards for company expenses. Employees then turn in expense reports to receive reimbursement. This provides the needed incentive to submit expense reports in a timely manner. When this happens and the company reimburses quickly, the employee will receive his/her money before the credit card bill is due.
Charges do not need to be assigned to specific accounts
In some cases, all charges may be assigned to the same account. There is no need for the employee to communicate which charges go where. In such situations, company credit cards are less problematic. However, in our experience there can still be problems with employees charging things inappropriately.
When confronted about an inappropriate charge, employees will invariably say that the charge was a mistake. Perhaps it was. Fewer “mistakes” happen when employees are required to use their own cards and submit expense reports for reimbursement.
Ultimately, the risk of “mistakes” has to be balanced against the cost of dealing with expense reports. A company may well decide that its employees are trustworthy and that the cost of expense reports (completing and processing them) greatly exceeds the risk of “mistakes.” In such circumstances, company credit cards may be warranted.
But for the most part, company issued credit cards are not worth the trouble. Carefully weigh the costs and benefits before deciding to give company credit cards to employees.