Credit Worthy

Do your employees need company credit cards?
Magazine Contributor
3 min read

This story appears in the January 1996 issue of Business Start-Ups magazine. Subscribe »

If you're constantly buried in a sea of expense reports, issuing company credit cards to employees who routinely spend money on behalf of the business is a perk to consider. But it may not be appropriate in every case, says Aaron Eidelman, a partner with New York City accounting firm Goldstein Golub Kessler & Co., P.C.

Depending on the nature of the expenses, a company credit card may streamline your accounting processes. But, cautions Eidelman, it won't eliminate expense reports completely because employees will always have expenses-such as parking and taxis-that can't be charged.

Here are some advantages of employee credit cards:

Expense processing may be simplified and accelerated. Charges made on a company credit card are invoiced by the card issuer monthly, which means you don't have to wait for employees to fill out and submit their expense reports. This is particularly important, says Eidelman, if expenses are billed back to clients. You'll also have a more accurate picture of your cash flow.

Financial analysis is simplified. The credit card company can provide annual reports analyzing your spending patterns.

Expense report abuse may decrease. It's easy to alter the amount on a handwritten receipt being turned in for reimbursement, but it's much more difficult to inflate expenses charged directly to the company.

Employee out-of-pocket expenses are reduced. Employees will not have to use their own funds and wait to be reimbursed-which could be viewed as a significant benefit, especially to those with sizable expenses.

One caveat to giving out credit cards, however, is that business charges-particularly those for travel and entertainment-must still be sufficiently documented with receipts to meet IRS standards. (See "Management Smarts," October 1995, for tips on documenting entertainment expenses.)

If you decide to issue company credit cards, setting clear policies is essential. Be very specific on how the cards are to be used and what your procedure for unapproved charges will be.

Keep in mind that the credit card business is extremely competitive, so ask your credit card issuer to help you design a program for your employees. This could include different credit and cash advance limits for each user based on need, special coding to expedite your accounting, or temporary cards issued for a limited time to cover specific expenses, such as travel to a one-time event.

Finally, use caution when issuing company credit cards. This is a responsibility as well as a privilege for the employee, and has potential risk for you, too. "The main reason to consider credit cards for employees is symbolic," Eidelman says. "It says you trust them, it helps them with their personal cash flow, and it makes them feel like an important, valued member of the company."

Jacquelyn Lynn is a business writer in Winter Park, Florida.


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