In today’s dynamic business environment, precision and agility are paramount to gaining a competitive edge. Companies continuously seek ways to streamline operations and harness greater control over finances.
One strategy that has gained significant traction is implementing a well-structured corporate card policy. These policies serve as the compass for finance departments, guiding expense management, financial transactions, and total accountability within operations.
Whether you’re a business owner looking to fortify your financial infrastructure or a team member navigating the intricacies of employee expenses, corporate credit card policies help shape a more compliant corporate landscape.
In this article, we’ll look at what a corporate credit card policy is, why it’s important, how to build your own, and the implementation of best practices.
Table of Contents
What is a Corporate Credit Card Policy?
A corporate credit card policy is a set of rules, guidelines, and procedures that a company creates to regulate the issuance, usage, and management of an employee credit card. A business acts as the card issuer, handing out credit cards to cover business-related expenses, such as travel, entertainment, and operational needs.
Using a corporate credit card policy helps outline clear expectations and responsibilities of both parties (the business and the employee card holder). It ensures equal treatment for all staff, and protects an organization from misunderstandings or misuse.
Key Components of a Corporate Credit Card Policy
Here are some of the more critical parts of a company credit card policy to consider:
Employees follow this procedure to request and obtain a corporate credit card. It should include any required documentation and approvals.
This part of the policy specifies who is eligible for a corporate card. This is usually based on things like an employee’s role, responsibilities, and need for travel.
This rule sets the spending limits for different expense categories. Card transactions can include:
This policy may also establish a maximum credit limit for each cardholder, which helps to curb unauthorized expenses.
This part of the policy delineates what employees must submit with their expense reports. Credit card statement amounts should match the receipts turned in. However, many corporate cards now allow the accounting department to skip this step, since the statement itself is a receipt.
This defines what types of expenses are eligible for reimbursement. It may also list types of card expenses that are not allowed.
Every card program should outline the responsibilities of the employees who hold them. This includes guidelines for tracking expenses, credit card use, adhering to spending limits, and promptly submitting reports.
This part of the policy talks about corporate credit card data security. This includes how to settle outstanding expenses in the event of an employee’s unexpected departure.
This part of the rulebook should go over what happens when policy guidelines are violated; like exceeding spending limits or using the card for personal expenses.
Here are a few additional measures to consider when writing a corporate credit card policy:
- Lost or stolen cards
- Reimbursement process
- Dispute resolution
- Termination of employment
- Record-keeping tactics
Steps to Create Your Own Credit Card Policy
A corporate credit card policy is necessary to clearly delineate the how, why, and where staff can use them. Although it sounds complex, it’s easy as long as a business makes the effort to define, in writing, what is and is not allowed.
Here are some specific steps you can take as a card provider, to ensure the policy is relevant, fair, and easy to follow:
Step #1 – Identify the Need
Take the time to research the reason for the need for corporate cards. Explain to staff why you issue corporate cards. Cards may be issued for a specific purchase or a range of approved expenses.
Corporate cards may go to specific roles depending on the job description and responsibilities. Although an employee’s credit score is unnecessary, the card may have a spending limit depending on the job scope and anticipated expenditures.
Step #2 – Define Eligibility
Not every employee should have a corporate card. It’s best to explain, upfront, who will be allowed to use one and under what circumstances. For example, corporate cards can be issued after 30 days of employment and good performance, in certain categories. This can include:
- Salespeople who regularly travel on company business
- Account Managers who entertain potential clients
- Department Managers with purchasing responsibilities
Other staff members may be issued a regular or virtual credit card at their manager’s discretion.
Step #3 – Lay Out Uses and Card Limits
The majority of employees understand that business credit cards are to be used for legitimate business expenses only. However, it’s good to have some rules in writing for those that may not.
In addition to spelling out how staff can use corporate cards, policies should clearly state what the cards can and can’t be used for.
For example, corporate cards can be set aside only to cover preauthorized business expenses. This can include:
- Software subscriptions
- Travel expenses
- Client entertainment
- Meals while traveling
- Work-related equipment or supplies
The staff that regularly make these work-related purchases do not need prior authorization for each expenditure. Examples of when an employee should not be able to use a corporate card include:
- Excessive amounts of alcohol
- Tobacco or CBD products
- Gambling or lottery tickets
- Cash advances
It’s also a good idea to take this time to delineate any policies regarding emergency expenses.
Employees may need to replace equipment while traveling. Do they need prior approval if their laptop is stolen? What about medical care or if their luggage is lost? Consider all possibilities and try to spell out as many expectations as possible.
Step #4 – Delineate Reporting Requirements
One key benefit of using corporate cards is that most employees will not have to submit receipts or detailed expense reports. Rather than scanning receipts, the expenditures are on the monthly credit card statement.
However, this doesn’t indicate you can completely eliminate paper receipts. If staff is expected to submit receipts, code expenses, and make reports, now is the time to show them how to do that.
Best practices suggest that employees who use a corporate card for business expenses should save their receipts for a minimum of 30 days after the end of the reporting period in which the expense was incurred. This is to have evidence in the case of a discrepancy or dispute.
It’s always a good idea to have employees submit an expense report at the end of each month showing the business purpose and spending category of each charge made on the corporate card.
Step #5 – Discuss Potential Challenges
Although a business hopes for the best, planning for the worst is important. Good corporate policy will anticipate that somewhere, down the road, someone will use the card inappropriately. What are you going to do about poor spend management? That should be part of the policy.
Discuss common problems and open card usage in writing, explaining exactly how the company will react. Does this warrant termination, or do you anticipate a range of disciplinary actions? State those clearly as well.
For example, ensure that corporate cards are still company property, and employees must do their best to keep them secure. Unauthorized users (like family and friends) should not be given access to these funds.
The employee must notify the company immediately if a card is lost or stolen. Failure to submit expense reports or inappropriate uses may result in the revocation of card privileges. Access to the card will always end when an employee leaves.
Step #6 – Signing the Policy
A policy is not good unless your staff has read and signed it. It’s important you take the time here to ensure fewer issues down the road. Ask each cardholder to meet with a manager or HR member, where they can read through the corporate card policy together. Here, employees can ask any questions where clarification is needed.
All parties involved must sign and date the document after the policy is discussed and questions are answered. This acknowledges it was read and understood together. Employees should also receive a copy of the signed policy before it is placed in their file.
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9 Best Practices for Your Credit Card Policy
Now that we’ve gone over the basics of creating a corporate credit card policy, there are some best practices to review. These ensure staff uses cards appropriately, mitigating financial risks, and minimizing challenges.
Just as you‘d review a personal credit card bill, someone needs to monitor the corporate credit card balance and the monthly charges. Who will be signing off on each employee’s monthly charges? Who is going to perform an accounts payable audit? This is an important responsibility that should go to someone with authority.
Adhere to the Policy
Once you have a policy in place, make sure you stick to it. Not enforcing the rules only weakens them. Remember, the policy should include something about emergency expenses. Outside of that, everyone in the company must abide by the policy, including executives. Policies need to be applied uniformly, or they don’t work, and all of the effort going into creating the policy is null and void.
Adjust as Needed
Don’t be rigid in the policy. Understand when it needs to be adjusted and do so quickly. Needs and spending habits are bound to change as an organization evolves. Don’t stick to outdated policies that no longer serve the company and hinder business. Take the time to do a formal review and update policies as needed.
The same goes for employee spending limits. Their need for access to credit and credit limit requirements can change over time. When job descriptions change, or there is a legitimate need for an expense, reexamine the policy.
Corporate card companies always offer a free unlimited number of employee cards, but do you really need all of those? Consider which individuals need a card to get their job done. Other employees can arrange repayment on infrequent expenditures in another way.
Assign Credit Limits
Every employee card should have its own limit, so rogue employee spending doesn’t eat away at the credit balance. These credit card limits often depend on how employees use their cards. For example, a traveling salesperson will likely have a much higher credit limit than someone who needs a card for office supplies.
Corporate cards make it easy for a business to adjust individual credit limits. In some cases, a company can limit spend categories as well, like office supply vendors or software renewals. This makes auditing and spend analysis a much easier process when the time comes.
Allow for Exceptions
A corporate credit card policy must clearly state the consequences of unacceptable card usage. Some grace should be reserved for honest mistakes, but an employee who consistently flouts expectations must be addressed.
Most of the time, a reasonable first response is a warning. This gives the team member the benefit of the doubt. This first response should also include the employee’s prompt repayment of expenditures.
Take the guesswork out of spending limits by creating expectations for per-diem, per-trip, or per-meal expenses. A corporate card isn’t a blank check, and employees shouldn’t buy lobster dinners or wine unless explicitly allowed. These expectations can be adjusted by location and other factors, like role or events, to help deter unauthorized use.
Go Virtual When Possible
While a physical card is good for T&E expenses, companies can issue virtual and single-use cards with tight limits. Virtual cards are good for single-use or recurring subscriptions.
Virtual cards can be locked to a particular vendor or have a credit limit allowing employees to pay for specific purchases. They can also have an expiration date that prevents additional use.
Find a Robust Solution
Manage card spend, expenses, and more, from one centralized spot in your AP automation platform. Plus, a business can earn cashback on every transaction!
When using the Tiaplti Card, expect key features like:
- Spend limits, vendor limits, and pre-approved categories
- Custom workflows based on process requirements
- GL codes applied to each card
- Visibility and control throughout the entire transaction
- Automatic reconciliation and sync with your ERP
The card is easy to set up and also helps a business facilitate fraud management strategies.
What should be included in a credit card policy?
A credit card policy should contain as much information as possible and include the purpose of the credit card accounts, who is eligible, uses and limitations, reporting requirements, and consequences for unauthorized use. Employees must always sign and date this paperwork to acknowledge they’ve read and understood the rules.
What expenses are allowed on a company credit card?
This all depends on business needs, but some common categories for corporate card expenses include:
- Office supplies and equipment
- Travel expenses
- Meals and entertainment
- Conference and training costs
- Subscription services and memberships
- Marketing and advertising expenses
The list goes on. Cards can also be used for client gifts, communication expenses, and research and development.
It’s important to note that while these are some of the more common categories, many expenses require preapproval, documentation, and receipts. It’s also important to adhere to local tax laws and regulations.
Who should have access to a corporate credit card?
Anyone in the organization who makes routine purchases for the business. Your expense policy should lay out exactly which roles in the corporation (or small business) have access to cards.
Can I use my company credit card for personal purchases?
Corporate credit cards should only be used for legitimate business expenses, or an employee risks card cancellation. These cards are not intended for personal use, and a corporate credit card policy will lay out the consequences for misuse. This may include termination of employment.
Summing It Up
Writing a corporate credit card policy is not as complex as you think. It takes due diligence, planning, and a good understanding of employees. You must know who will get the card, how much they can spend, and in what circumstances.
Virtual and one-time corporate cards are also a great option when a business doesn’t want to commit to physical cards. Tipalti offers both solutions and can help teams stay more organized, informed, and on board at all times.
Can automating your AP process facilitate corporate credit card management? Download our whitepaper, The Ultimate Accounts Payable Survival Guide, to learn what it takes.