Should I give more employees company cards?
By Elaine Pofeldt | Published: May 27, 2013
Your Business Credit
Dear Your Business Credit,
I offer credit cards to a few key executives at my small company, a professional services firm. I'm considering adding more accounts for mid-level people, but I'm not sure whether that's a good idea. Any advice? -- John
It's a good question. At many larger companies, it's common to provide corporate cards to many employees, but in a small business, handing out cards to everyone can create headaches. As the owner of the business and the signer for the cards, you'll typically share responsibility with the business entity for the charges on the cards. You won't be eligible for the types of corporate card programs that big companies get, in which the company may bear all of the liability. That means you'll want to be especially careful about handing out cards.
Whatever card you choose, you'll first want to make sure you're getting a really good deal. If you're going to increase the number of cards -- and presumably the spending -- on your account, you may be able to more easily benefit from any rewards program that comes with the account.
Next, I'd take a look at each employee's situation individually. If you're asking particular employees, such as sales representatives, to make large purchases such as airline tickets on their personal credit cards and wait for reimbursement, this could be burdensome for them, especially for those with moderate salaries. They may appreciate having a separate card for business use.
Even if employees don't travel, it may be helpful for them to have a corporate card. For instance, if your office manager often runs to the office supply store to restock, offering a corporate card to cover these purchases is a good idea.
This isn't just helpful to them. It'll be easier for you to keep track of expenses at tax time if you have opted for a card that offers thorough spending reports. You'll have a clear record of each employee's business purchases, without having to ask them to cough up missing receipts.
At the same time, there's no point in offering business cards to staff members who make purchases on behalf of your company only once in a while. It's easy to forget they have a card, and if it goes missing, no one may notice until it's been misused. You can contest fraudulent charges, but that takes valuable time and can take a while to get reimbursed.
It's also possible that employees will misuse a corporate card. Most won't, but of course, giving cards to people who don't really need them increases the likelihood that someone will be tempted to buy rounds of drinks for friends who have nothing to do with the business -- or go on a spending spree at the mall. Setting a clear, written policy explaining how the cards may or may not be used can help prevent this scenario, but there's no guarantee that everyone will follow it.
Mark Faust, principal of Echelon Management, a growth consultancy in Cincinnati, says that if you've taken pains to hire people you trust, card misuse should not be a big concern. He finds that many employers aren't quick enough to empower staff with cards, sometimes because they're so lost in the weeds in their businesses that they're micromanaging things such as which office paper to buy. Faust notes that if employees make improper purchases, you can always require them to reimburse you when you're reviewing monthly expenses -- or fire them.
For some business owners, that may be too much drama. My suggestion is to consider your own tolerance for dealing with a situation like this if it crops up. Ultimately, you need to find a volume of employee cards that works for your business -- the one that makes life easier for the greatest number of people, including you.
Meet CreditCards.com's reader Q&A expertsDoes a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.
- Handling medical bills automatically charged to your card – If you've agreed to allow medical charges to be put on your card in the event insurance doesn't pay, you could get hit with a big surprise on your next statement. Make sure you take care of the situation swiftly while you still have options ...
- How to find corporate cards opened in your company's name – If you're worried more cards are opened under your company's name than you're aware of, there are ways to find out ...
- Chargebacks over merchandise quality can be tricky – The burden of proving a product isn't genuine can fall on the buyer ...