The Dos and Don'ts of Using Corporate Card

Corporate credit cards offer convenience and flexibility for businesses, allowing employees to make necessary purchases while streamlining expense management. However, understanding what you should and shouldn't do when using these cards is crucial to maintaining financial integrity and compliance. 

In this guide, we'll explore essential practices and pitfalls to help businesses effectively manage corporate card usage.

The Dos of Using a Corporate Credit Card

Utilising a corporate credit card carries both privilege and responsibility. Below are key guidelines to consider when leveraging your company-issued credit card:

Set Clear Spending Limits

Setting clear spending limits is essential to controlling expenses and preventing overspending. By establishing predefined limits for individual employees or departments, businesses can ensure that purchases remain within budgetary constraints. This practice promotes responsible spending and enables better financial planning and management.

Many corporate card providers, including corporate cards from Payhawk let the user set advanced limits to ensure expense control while also ensuring a smooth business operation. Businesses must communicate these spending limits clearly to employees and guide appropriate use. Regular reviews and adjustments to spending limits based on business needs and financial performance can help optimise card usage and align with strategic objectives.

Separate Personal and Business Expenses

Differentiating private and business costs is critical for accurate accounting and compliance with tax regulations. Encouraging employees to use their corporate cards exclusively for business-related purchases helps streamline expense tracking and simplifies reconciliation.

Businesses can implement policies or provide training to educate employees on the importance of segregating private and business costs. Emphasising the significance of maintaining clear records and documentation can mitigate potential issues and ensure compliance with financial regulations.

Review Statements Regularly

Regularly reviewing credit card statements allows businesses to promptly identify discrepancies, unauthorised charges, or fraudulent activity. This proactive approach enables swift resolution of any issues and helps safeguard against financial loss or misuse of corporate funds.

Encouraging designated personnel to review credit card statements monthly ensures timely detection of irregularities. Implementing internal controls, such as requiring dual authorisation for high-value transactions, enhances oversight and accountability.

Understand Company Policies and Guidelines

Employees at all levels must understand and adhere to company policies and guidelines regarding corporate card usage. Clear communication of these policies and comprehensive training ensure alignment with organisational objectives and regulatory requirements.

Businesses should regularly review and update their corporate card policies to reflect evolving needs and industry standards. Providing access to resources and support channels for employees to seek clarification or guidance promotes compliance and fosters a culture of accountability.

Save Receipts for Documentation

Saving receipts for all corporate card transactions is fundamental for accurate expense reporting and financial transparency. Maintaining detailed records facilitates auditing processes and ensures compliance with regulatory requirements.

Encouraging employees to submit receipts for all purchases promptly eliminates the risk of missing or unaccounted expenses. Implementing digital receipt management systems or expense tracking tools streamlines this process and enhances efficiency.

The Don’ts of Using a Corporate Credit Card

Utilising a corporate credit card can provide a convenient avenue for conducting business-related transactions; however, it is imperative to acknowledge that the card does not belong to you on a personal basis. Below are some key practices to avoid when using a corporate credit card:

Ignoring Spending Policies and Guidelines

Following the company's spending rules and guidelines can prevent financial problems and ensure you comply with regulations. Ignoring these protocols increases the risk of unauthorised spending, budget overruns, and regulatory violations.

Businesses must emphasise the importance of compliance with spending policies through training programs and regular reminders. Automated controls and monitoring mechanisms can enforce adherence to established guidelines and mitigate risks effectively.

Mixing Personal and Business Expenses

Commingling personal and business expenses on corporate credit cards complicates expense tracking and creates challenges during reconciliation. Mixing these transactions can lead to errors, inaccuracies, and potential tax implications for the employee and the company.

It is essential to establish clear boundaries and enforce policies that prohibit the use of corporate cards for personal expenses. Providing alternative reimbursement methods for personal expenditures encourages compliance and simplifies accounting processes.

Overspending Beyond Budget Limits

Exceeding budget limits or spending beyond allocated thresholds can strain financial resources and disrupt cash flow management. Overspending on corporate cards may lead to budget deficits, increased debt, and challenges meeting financial obligations.

Implementing robust budget controls and monitoring mechanisms helps prevent overspending and promote fiscal responsibility. Regular reviews of expenditure patterns and variance analysis enable businesses to identify areas for cost optimisation and strategically reallocate funds.

Failing to Keep Receipts and Records

Refraining from retaining receipts and maintaining accurate records of corporate card transactions hampers expense tracking and auditing processes. Proper documentation can help businesses avoid non-compliance with financial regulations and challenges in substantiating expenses during audits.

Emphasising the importance of record-keeping and implementing policies to ensure receipt retention is essential. Leveraging digital receipt management solutions or expense-tracking software enhances efficiency and accuracy in maintaining transaction records.

Sharing Card Information or Misplacing the Card

Sharing corporate card information or misplacing physical cards increases the risk of unauthorised usage and potential fraud. Unauthorised access to card details compromises security and exposes the company to financial liabilities and reputational damage.

It's crucial to teach employees about keeping card details safe and following security rules. Using extra verification steps and updating who can access cards regularly can make cards more secure and reduce the chance of unauthorised transactions.

Making Unauthorised Purchases

Making unauthorised purchases on corporate cards violates company policies and breaches trust between employees and employers. Unauthorised transactions inflate expenses and undermine financial controls and accountability within the organisation.

Establishing robust approval processes and transaction monitoring mechanisms helps prevent unauthorised purchases. Prompt investigation and disciplinary action in response to unauthorised transactions demonstrate the company's commitment to enforcing compliance and integrity.

Conclusion

Effectively leveraging corporate credit cards requires a balanced approach encompassing dos and don'ts. Adhering to spending limits, separating expenses, and reviewing statements are key to optimising card usage. Conversely, ignoring policies and overspending can pose significant risks. Compliance with these guidelines is critical for maximising benefits and minimising financial vulnerabilities.