Credit Card, How To Manage One

How-To Manage A Corporate Credit Card

After you've decided which corporate credit card your company will be using (see "How-To Choose A Corporate Credit Card"), the next decisions are even more important: deciding who gets to use the credit card, for what purposes, and how to manage the account. Here are a few tips on how to make sure that the corporate credit card is not being used for lavish weekend getaways in Jamaica (unless, of course, you're extremely generous).

Who Needs It?

Now that you know what credit card you're going to use, the first question you need to answer is: who will need

To protect customers from Y2K problems, American Express never issued a credit card (as of 1/98) with an expiration date past December 1999.

the card for business? Consider the following factors when going through your list of employees:

Schmoozing. Will this employee be taking clients clients to meals, golf matches, etc., that will help with business? Employees that handle sales and other business dealings will most likely need a charge card for expenses.

Travel. Does this employee travel a lot? Traveling employees tend to make a lot of quick decisions on the road, such as changing airline tickets, leaving at a moment's notice, etc. This means the employee should have a corporate credit card.

Frequent Bulk or High Cost Purchases. While corporate departments will likely handle most big ticket items with an account rather than a card, some jobs require frequent purchases. For example, a promotions manager may need to buy last minute tickets to an event to fulfill a prize, or a designer setting up a client event might have forgotten to buy table centerpieces and dinner's in a half hour. People who represent your company's image to the public or who are often in the position to buy client gifts or work events should have a corporate credit card to deal with these situations.

Upper Management. While credit cards aren't always a necessity for managers, they can come in handy for morale-building instances such as employee luncheons or going away gifts.

Department vs. Individual Accounts. Some employees are in charge of major purchases. For example, if the employee is in charge of ordering office supplies, is this something that an employee needs a corporate charge card for? Probably not. Those items can usually be handled through management and corporate accounts.

Liability

This is the job that nobody really wants, but somebody's got to do it: accepting liability for charges and missed

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payments. Not that you'd ever do such a thing - but accountability is key for a well-run business. Always have a plan in place so the issue is taken care of swiftly and by the appropriate person. There are three different options:

Individual Liability. Here, the individual is fully liable for all payments on charges they make.
Shared Liability. Both the individual and the company are partially liable for payment, in which case the company may have to cover the cardholder's debt if they are unable to pay for their charges.
Company Liability. Here, the company takes full responsibility for charges and payments. In most cases, purchases will be business-related, so company liability may be logical. But then, Jamaica is very tempting in the winter...

Check with your credit card distributor to determine the different rates for each of these options and decide which one will work best for you.

Check For Bad Credit

One of the advantages to getting a business credit card is that the card company will check the credit rating each employee receiving a card. This may seem a bit Orwellian, but it is for the protection of your company, its assets and its own credit reputation. If one of your card-carrying employees has a bad credit rating, this is a red flag and should be considered. If you do not have to give the employee a credit card, then don't. If you must, then monitor their spending closely.

Watch Over-Spending

Abuse of a corporate credit card could greatly hurt your company during its growth. Make sure that you have a solid system to check charges and expenses. Most credit card providers now offer purchase reports that detail where, when and what goods were purchased. If not, have employees fill out regular reports which describe their expenses. Be sure to require that receipts accompany the report.

Also, if there is heavy spending being done on the cards, make sure that you can pay these bills off on a regular schedule. All credit card expenses, past, present and future, should already have been accounted for in a projected budget. If your company cannot afford the payments, then cut down on expenses. A bad mark on your company's credit rating affects not only the company, but also the authorizer of the card.

Set Rules

Certain rules should be communicated and followed when using corporate credit cards.

If a debt is more than 25 cents in Canada, it's illegal to pay if off in pennies.

Cash Advances. One such rule is that an employee should never use their corporate credit card to receive cash advances. Cash advances come with high transaction fees, and interest begins to accrue immediately. And they usually carry a higher interest rate than normal transactions.

Specify Allowable Charges. Limit charges to only specific things, such as meals or gas. This will help employees judge what's appropriate to charge and what's not. Also consider outlining your rules on items that aren't allowed. For example: meals and beverages, but not alcohol. The more specific you are, the less room for abuse without recourse.

Discipline. If (knock on wood) the card is being abused for personal expenses, you should either take the card away from the employee, make him/her pay for the expenses, or discipline the employee. Discipline could range anywhere from a written warning through suspension or termination.

The key with credit cards is to be clear, consistent and organized. Decide what the rules are, communicate them, and have solid systems in place to track activity. Make any disciplinary consequences clear to all concerned, and be consistent in using them if the need arises. Managed correctly, redit cards can be a huge time and life saver in business.