As your small business grows, you may want to consider whether to issue employees credit cards. While business credit cards can save time, boost productivity and even earn rewards, they also have downsides, so weigh their advantages and disadvantages carefully before making a final decision.
Advantages of Issuing Employees Credits Cards
One of the benefits of issuing credit cards to some employees, especially those who are responsible for business purchases or who often travel for business, is convenience, both for the business and for the employee. With a credit card, you no longer have to worry about making cash advances, issuing checks or reimbursing expenses.
Credit card statements can be valuable records of business spending. Many credit card companies will even track spending by category and/or by employee, making your bookkeeping even easier.
Many business credit cards offer valuable rewards that your company can't earn if it pays with cash or checks. Depending on how much your company spends, these rewards could add up quickly, perhaps offsetting any costs related to your business credit card.
Using credit cards can simplify your bill-paying process, since you will have to make only one payment at the end of the month (to the credit card company) rather than multiple payments to numerous vendors and service providers.
Disadvantages of Issuing Employees Credit Cards
While the advantages of credit cards for employees may make this seem like no-brainer for your company, there are some downsides to consider as well.
Your business should only issue cards to employees who you are
confident will use it responsibly. Otherwise, you could find that the
time spent dealing with misuse of the card takes more effort than it's
Even if you are careful to issue credit cards only to your most trustworthy employees, you will need to monitor their expenditures carefully. At the least, this means taking the time to review statements monthly and to verify expenditures when necessary.
If you do decide to issue credit cards to some of your employees, first establish guideline and limits for the program, including the following.
Set spending rules. These should detail what are acceptable (or authorized) expenditures and any expenditure limits. For example, you may require that any expenditure over a certain amount requires authorization from you or a supervisor first.
Ban personal charges. Make it clear that no personal expenses should be charged on the business card. Allowing personal charges will make it difficult for you to track business expenses (undercutting one of the advantages of using business credit cards) and could result in employee fraud.
Put the rules in writing. Give each employee being issued a credit card a copy of the credit card rules in writing and have him read and sign them.
Set individual limits. Have your credit card company set individual credit limits on each employee credit card.
Track usage. Track employee usage of business credit cards carefully and act quickly if problems develop.
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