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How to Develop a Business Credit Card Expense Policy

Matt D'Angelo
Matt D'Angelo

Business credit cards can be useful, but how can you tailor a credit card expense policy for your employees to follow?

Distributing corporate credit cards among some of your employees can save business owners time. With some rules (and processes) in place, business owners can spend more time focusing on the business as opposed to handling noncritical, repetitive tasks.

Issuing corporate credit cards to employees can be a big step for a small business. It entails a significant amount of trust. There are some important practices you'll want to implement to ensure your company credit cards are not abused by employees.

We got in touch with experts to determine what the best practices are for distributing business credit cards to employees. 

The three biggest takeaways, regardless of your type of business, is to give cards only to people you trust, monitor monthly credit card statements, and be clear with your employees about what the cards are supposed to be used for.

Give business credit cards to employees you trust

This is an obvious tip: Provide financial power only to the workers you trust the most. By providing some workers with credit cards, you show that you trust them, which can be empowering for them. Those trusted employees should want to rise to the occasion and prove that they can be trusted.

"If one of my assistants is buying and testing various software that's only $30 to $100 per month, I give him or her the green light with a credit card," said James Pollard, owner of a marketing consulting company that works with The Advisor Coach. "I don't need to personally authorize every single transaction. If it can save me time, I do it."

Karla Singson, a small business owner who runs four businesses, said she only provides cards to upper management.

"This is because they have expenses that I approve, but I'm not always around to do it or replenish the petty cash for [it]," she said. "These are the people I trust with my company, and since we are just a small business – very little bureaucracy – they can still ask for my confirmation every time they need to use it."

Be clear with employees about business credit card policy

Give serious thought to developing a full-fledged expense policy and putting it in writing. Your policy should define what kinds of purchases should be made, how they should be expensed and what the reimbursement process is (if there is one).

If you don't have time to put the policy in writing or are running a small operation, sit down with each employee and discuss what the card should be used for. With each employee you meet with, you can determine how much autonomy you want to grant to him or her. Many business owners allow employees to make routine or small purchases without seeking approval first, but require that employees get approval for first-time or large purchases.

Check the monthly statements for your business credit cards

While you may not approve every purchase, as the business owner, it's important to review monthly statements to ensure that funds are being used the way they're supposed to.

"Scrutinize your statement," Pollard said. "Make sure that nothing strange is going on. Question every charge that you don't recognize. Also, give your employees a strict dollar limit – I recommend 110% of what you actually think they will need."

Build the right company culture around business credit cards

If you've hired the right workers, then issuing business credit cards shouldn't be an issue. Good employees know when it's appropriate to use them and will follow your direction when you define what the cards are designed to be used for. You can further build company culture by providing these cards, proving to employees that you trust them and value their hard work.

Employees "know that they should use the funds to accomplish the tasks that I give them," Pollard said. "If you hire the right people from the get-go, you don't have to worry about credit card abuse."

Can you set limits on a corporate credit card?

Most credit card companies won't let you set credit limits on multiple users (though American Express does). Further, most business credit cards have higher credit limits compared to personal cards.

If the credit card company isn't setting spending limits on your employees' corporate cards, it's important to have frank discussions with your trusted workers about how they should use the cards.

How to develop a business credit card expense policy

The person who should be responsible for implementing a credit card expense policy depends on the size of your business. In larger companies, management sets the policy, and the human resources and accounting departments manage corporate spending accounts. For a small business, though, the duty will likely fall on the shoulders of the owner.

Developing a policy includes setting hard rules around how credit cards are to be used, including:

  • Who can use corporate cards
  • What they can be used for
  • What the spending limit is for each employee who has a card
  • What the cards cannot be used for

Who is liable for corporate credit cards?

The issue of liability depends largely on the arrangement your business has with the credit card company.

If the credit card bill goes to your business, then the company is liable for payment. However, if your employee receives the bill and is reimbursed by your business and then pays the credit card company, then the employee is liable for payment on the card, not your business.

When you meet with employees you issue a card to, discuss who is liable for charges.

Business credit cards can save time and demonstrate trust

If you're concerned about potentially fraudulent charges on your company credit card, you can always turn on alerts so you are notified each time the card is used. This allows you to keep a close eye on employee charges without preapproving each purchase.

It also may be a good idea to tie rewards points to card usage. If employees are using credit cards for routine company purchases, you can issue the card in their name and let them earn miles or points. Singson said she does this with some of her workers.

"I linked the cards to some miles (airline rewards) so they get to keep the rewards, because the miles account is in their name," she said.

Issuing business credit cards to trusted employees is a good way to streamline daily operations and demonstrate trust in your team. However, before you fill out the application, first develop a policy that outlines all the rules employees are expected to abide by, and check monthly statements to ensure that all spending is appropriate.

Business credit cards are a privilege, but it must be managed properly by small business owners.

Image Credit: Anatta_Tan/Shutterstock
Matt D'Angelo
Matt D'Angelo
business.com Contributing Writer
I've worked for newspapers, magazines and various online platforms as both a writer and copy editor. Currently, I am a freelance writer living in NYC. I cover various small business topics, including technology, financing and marketing on business.com and Business News Daily.