How to handle an employee misusing a business credit card

Your Business Credit columnist Elaine Pofeldt
Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of 200kfreelancer.com, a website for independent professionals. She writes "Your Business Credit," a weekly column about small business and credit, for CreditCards.com.

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Question Dear Your Business Credit,
I have a few employees who have company credit cards. The cards are Chase business cards, and each one is in each person’s own name along with the name of the business.

We have someone who pays all the bills and is supposed to match the cards and receipts. However, she hasn’t been doing that and has just been paying the bills each month.

We discovered about two months ago that over the past year one of our employees has been using the card for personal use, for grocery store purchases and gas and stuff like that. However, we can’t find all the receipts to go through them, nor do we really know what they were or weren’t supposed to be putting on there.

Their limit was $2,500 a month, and we know there is stuff on there that was business-related and stuff that was not. We have never had anyone sign anything saying what they can or cannot use the cards for.

Is there anything we can legally do in this situation?

We have not fired the person and have just started to take money out of each paycheck, but if the employee quits is there anything we can do?  – James

Answer Dear James,
I see two problems here. One is that you have an employee who has, essentially, been stealing from the company by using a company credit card for personal expenses. The other is that the person you have been counting on to look out for such problems has failed to do so – removing the one safeguard you have in place to prevent employee card misuse.

From your note, it sounds as if you have already confronted the employee and made a determination that the employee owes you restitution. It also appears that the employee has agreed to pay you some of the money back. Otherwise, I don’t see how you would be deducting money from this individual’s paycheck.

Determine what your company is owed.

What I’m not clear about is how you determined the amount owed, given that you say you can’t find all of the receipts.

I am also unsure why you don’t know what the employee was or was not supposed to be putting on the card. If you are the owner or manager of the business, you must have some sense of what an appropriate business charge would be for your industry.

For instance, if you run an auto parts store, it would be highly unusual for an employee to make business purchases at a grocery store on a routine basis.

If the employee cannot produce receipts showing what the purchases actually were, I suggest you contact the credit card issuer to find out if you can get more detail on any business expenses for which the employee cannot provide receipts. If you are the card guarantor, this may be possible.

This will help you come up with a more accurate amount the employee must pay back. If the amount is substantial, I would speak with an attorney who has experience in credit-related matters to see what you can do.

It may be hard to prove an employee misused the card if you never offered any guidance on how to use the card appropriately, but an attorney may have some creative ideas after delving into the particulars of your situation.

Get expert advice.

In the meantime, I would bring in an experienced human resources consultant to help you draft a written policy covering employee use of company credit cards and distribute it to anyone who has a company-issued card.

This policy should define what employees are and are not allowed to charge to the card.

In your shoes, I would seriously consider revoking the offending employee’s credit card, but before you do, ask for advice from your HR pro on how best to handle this.

Put someone else in charge of checking company card bills.

As for the person who is supposed to be reviewing your team’s credit card purchases and comparing them to receipts employees have submitted, it doesn’t appear you have put the right person in charge of this job.

If the person you have tasked to match receipts to charges does not have the time or temperament to check things over carefully, reassign the job to someone who does. The potential for financial damage to your business is too great to let this slide.

Good luck!

See related: How to avoid unwanted purchases on a company credit card

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Updated: 07-18-2018