Every business has the need to segregate its capital into budgets for each team and individual employee to use for their respective operational tasks. Many companies choose to opt for corporate credit cards to disburse funds to their teams. They are easy to use and employees don’t need to file reimbursements.
But the place where most organizations hesitate to choose corporate cards is the aspect of control over the spending that happens through these cards. This is where corporate credit card policies come into play. Most corporate card providers allow you to regulate the amount that can be spent through each corporate card that you issue for each employee.
Rising Corporate Credit Card Fraud in Organizations
The increased use of corporate credit cards for business transactions by employees is a good and progressive system for spending management. But it is also a key reason for employee fraud and not meeting compliance requirements which is a big challenge for businesses.
The flexible nature of letting employees make business expenses through corporate cards might be taken advantage of by people to use company funds for purchases that are not permitted by the expense policy. To prevent such fraud, control systems and corporate credit card policies for employees need to be set.
What is Corporate Credit Card Policy?
Corporate credit card policies and procedures involve methods to set rules and systems in place to avoid or restrict the misuse of corporate cards by their users. This can be instructions and regulations in the form of a document given to each employee who uses a corporate card or enforced in the form of automated tech systems linked to each corporate credit card.
Once you establish the set of rules and systems for the way you want your teams to utilize their budget in the form of a corporate card policy, then you would be able to eradicate fraudulent activities and improve the overall expense management of your company.
Why Drafting a Corporate Credit Card Policy and Procedures is Essential for your Business?
- Outline the correct use of corporate credit cards for employees – Just like any other tool provided by a company to its employee for business purposes, a corporate credit card is an asset of the company that needs to be used properly. Setting up a corporate credit card policy helps employees know what type of expenses they can make and how much they can spend.
- To establish cardholder responsibilities – Another reason why companies must set up corporate card policies before giving their employees access to corporate credit cards is so that each employee is aware of all the responsibilities that come with using this company asset.
- Ensure compliance – Unless and until there is a proper document or resource that outlines the correct usage of the corporate credit card, employees might assume that they are allowed to spend on anything they wish to. Having a policy set in place will help in the proper usage of the card and prevent any intentional or unintentional fraudulent activities.
- Guidelines for consequences for any misuse – Lastly, when you have a corporate card policy in place, it also provides information regarding the consequences of not complying with the rules and regulations of using a corporate card. This can help in preventing any sort of misuse with respect to using the corporate card and help keep all expenses compliant with the company’s policies.
Quick Steps for Creating an Effective Corporate Credit Card Policy
STEP – 1: Analyse the purpose of corporate credit card use for employees
The very first step when planning to create a corporate card policy is to identify the purpose for which these cards are being issued. How do you want these corporate cards to benefit your employees and at the same time maintain control over the spending? Listing the aim of implementing corporate cards can help you create the right policy.
STEP – 2: Describe cardholder eligibility requirements
The corporate cards your company issues might not be available to use for each and every employee. It might be that interns and freshers are not allowed to use these cards and only managers or senior-level employees can use a corporate card. Whatever the eligibility requirements might be, they must be mentioned in the corporate credit card policy.
STEP – 3: Write down simple and clear guidelines
Once you have established who is eligible to use corporate cards provided on behalf of your company, the next step is to outline simple and clear guidelines on how to use them. This will include rules on what you can and cannot make purchases for. There may also be limits set for certain types of expenses.
STEP – 4: Reporting requirements
The policy you create should also have submission rules regarding information about the expenses you made through your corporate card. Most corporate cards are linked to expense management dashboards that automatically report the data. But certain documents like expense receipts still need to be submitted in order to verify the transaction.
Benefits of Having a Solid Corporate Credit Card Policy in Place
- Prevent unauthorized use of company money – When you have a proper corporate card policy set in place then company money being misused or its unauthorized use can be prevented to a very high degree.
- Streamline financial management processes – The corporate credit card policy for employees acts as a great tool as part of your overall financial management suite. It helps you control expenses and also ensure compliance.
- Save time and reduce the risk of errors – Setting and enforcing expense policies beforehand can save a lot of time for the finance department from rectifying any errors by reducing the occurrence of any errors themselves.
- Avoid failing to properly account for expenses – Most corporate card policies involve the mandatory submission of receipts. This ensures that each expense is recorded in your expense management system and has a receipt attached to it for verification, saving the finance and accounting team a lot of manual work.
- Eliminate fraudulent activities – Once the policies are set, the chances of fraudulent activities taking place are minimal to none. This is thanks to tech automation systems that enforce expense policies instead of just outlining them in a document for people to follow.
Corporate Credit Card Policy Best Practices – 2023
Being given a corporate credit card on behalf of your company to make company expenses is a role that must be fulfilled with the responsibilities that come with it. Some responsibilities include the rules regarding the card’s usage, the types of expenses you can make, the liability of the card, the consequences if the card is lost or stolen, and more.
Clear Spending Limits
Each card that is issued to an employee must have clear spending limits on it for the management to ensure budget controls. These spending limits on corporate cards are often enforced using a tech expense management system that is linked to each card. This way, both parties are assured that there will be no unnecessary or extra expenses above the set limit.
Have an Approval System
An approval system is a crucial part of any corporate credit card policy. There might be times when an employee needs to make expenses that are above their monthly spending limit. In such cases, they can request more funds through their expense management app. This request will be sent to the assigned manager or admin for approval through the custom approval routing system.
Any expense that is not permitted by the company for their employees to make is known as an out-of-policy expense. These types of purchases must be clearly mentioned in the corporate card policy.
How do Policies Help in the Corporate Credit Card Reconciliation Process?
The corporate credit card reconciliation process can be a long and cumbersome one if a proper recording of transaction data does not take place. But thanks to real-time transaction updates through corporate cards and the mandatory submission requirements within a corporate card policy, accountants can ensure that the card statements match the general ledger.
Create Corporate Credit Card Policies for your Company
If you are looking to streamline the expenses within your company and plan to opt for corporate cards, then you should always look for expense management systems that allow you to create custom corporate credit card policies that can be linked to the cards. This helps you maintain and control everything digitally on a single dashboard.