BY DOUG AND POLLY WHITE Special Envoys
QUESTION: I’m thinking of getting corporate credit cards for my employees who regularly spend money on refundable items. Do you think this is a good idea?
ANSWER: Some companies issue corporate credit cards that employees can use for business expenses. The company expects the employee to use the card only for legitimate expenses. The credit card bill arrives at the company and is paid by the company, often without the employee seeing it.
Generally, we find that business credit cards are more trouble than they’re worth, but there are pros and cons. Depending on the circumstances, issuing corporate credit cards may be warranted. Consider two scenarios:
- Charges must be assigned to specific accounts: If charges need to be assigned to specific accounts, corporate credit cards may be an issue. Consider a situation where the business may frequently pass charges on the business credit card to customers. The employee must indicate which charge to assign to which client.
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There are several ways to do this, but in our experience, getting employees to provide this information in a timely manner can be difficult. Employees have other priorities and submitting expense reports on time is often not at the top of the list. Accounting cares about expense reports, but the employee’s boss doesn’t.
This leaves accounting in the awkward position of having to chase employees to get the information it needs, costing the company time and money. Of course, you can resort to drastic measures. But firing an otherwise good employee for not submitting expense reports on time doesn’t do much to create a positive workplace culture.
A much more effective way to deal with the problem is to require employees to use their own credit cards for company expenses. Employees then submit expense reports to receive reimbursement. This encourages timely submission of expense reports. When this happens and the company reimburses promptly, the employee will receive their money before the credit card bill is due.
- Expenses do not need to be assigned to specific accounts: in some cases, all of a particular employee’s expenses may be assigned to the same account. The employee does not need to communicate which charges go where. In such situations, corporate credit cards are less of a problem.
But in our experience, there can always be issues with employees charging things inappropriately. When confronted, employees will invariably say that the accusation was in error and that it may have been. Fewer “mistakes” occur when employees are required to use their own cards and submit expense reports for reimbursement.
Ultimately, the risk of “mistakes” must be weighed against the cost of processing expense reports. A company may very well decide that its employees are trustworthy and that the cost of expense reports (i.e. completing and processing them) far outweighs the risk of “errors”. In such circumstances, business credit cards may be justified, especially if the business generates a large volume of small fees.
But if you’re going to issue corporate credit cards, check the fees to make sure they’re appropriate. Also, make sure your employees know you’re doing this. If they believe their charges are never investigated, at some point they will be tempted to charge something inappropriately. Don’t put your employees in this situation. Remove the temptation by letting them know that fees are being monitored.
Doug and Polly White own a significant stake in Gather, a company that designs, builds and operates collaborative workspaces. Polly focuses on human resources, people management and human systems. Doug’s areas of expertise are business strategy, operations and finance.