As your business grows, you’ll likely need a corporate credit card for work expenses, for your growing team. 62.85% of the people who used business credit cards to start their businesses said that it helped them succeed.
Employees are provided with an employee corporate credit card to equip them with easy travel expenses, marketing expenses, or work-related purchases such as buying SaaS subscriptions, paying vendors, office supplies, etc.
Company cards have few direct restrictions on their use, which makes them vulnerable to misuse unless proper precautions are taken. Implementing an effective expense policy is crucial for success. While enforcing such policies can be challenging due to limited visibility, manual data entry, and slow approval processes, there are practical approaches to develop expense policies that proactively deter credit card misuse.
In this article, we will discuss employee misuse of corporate credit cards, why it happens, and ways to prevent it.
Understanding Responsible Corporate Credit Card Use
Responsible corporate credit card use involves adhering to the guidelines and policies set by the company regarding the appropriate usage of the card for business-related expenses. This includes understanding approved expenditure categories, spending limits, and any specific restrictions put in place by the company.
What is responsible corporate credit card use?
Responsible corporate credit card use means using the card for business-related expenses only and adhering to the company’s expense policy. This includes:
- Obtaining prior approval for major expenses: Companies typically require employees to obtain approval from their manager or another authorized person before making large purchases. This helps to prevent overspending and ensure that all expenses are necessary and justified.
- Keeping accurate records: Employees should keep detailed records of all corporate credit card purchases, including the date, amount, purpose of the expense, and supporting documentation. This information is essential for completing expense reports and ensuring that all expenses are legitimate.
Common Employee Misuse of Corporate Credit Cards
Mentioned below are the most common ways that employees misuse corporate credit cards. These misuse categories illustrate how employees can exploit corporate credit cards for personal gain, resulting in financial loss for the company.
|Unauthorized Personal Expenses
|Employees use corporate credit cards for personal expenditures unrelated to business activities.
|An employee used the corporate card for personal shopping sprees during a business trip.
|Employees exaggerate or inflate business expenses, seeking reimbursement for more than the actual incurred costs.
|Many employees admitted to inflating meal expenses on corporate credit cards.
|Employees create fictitious or non-existent expenses to request reimbursement from the company.
|An office admin submitted fake invoices for office supplies and pocketed the reimbursements.
|Employees submit multiple reimbursement requests for the same expense, aiming to receive double compensation.
|A team of senior sales executives submitted duplicate claims for the same travel expenses.
Misuse can stem from unclear expense policies and a lack of proper training on the usage of corporate credit cards. Common misuse scenarios include:
- Unclear Expense Policies: Without a well-defined expense policy, employees may inadvertently misuse their corporate credit cards due to confusion about what expenses are allowable.
- Lack of Training or Guidelines: Inadequate training regarding expense policies and guidelines can lead to unintentional misuse by employees who are unfamiliar with proper usage.
Practical Tips for Preventing and Minimizing Misuse
The following points provide practical tips on how to prevent and minimize employee misuse of corporate credit cards through a well-defined expense policy, employee training, and the use of corporate cards with built-in controls:
- Ensure that the expense policy is clear, comprehensive, and easy to understand.
- Define all allowable and non-allowable expenses in detail.
- Outline the procedures for submitting expense reports.
- Review and update the expense policy regularly.
- Train employees on the company’s expense policy and on how to use their corporate credit cards responsibly.
- Provide training to all employees, regardless of their position or experience level.
- Make training mandatory and provide employees with opportunities to ask questions.
Corporate Cards with Built-in Controls
- Consider using corporate credit cards with built-in controls, such as spending limits, temporary block or permanent block options, and automatic categorization.
How to proactively address corporate credit card misuse
Companies can take a number of steps to address corporate credit card misuse proactively. These include:
- Implementing a comprehensive expense policy: The company’s expense policy should clearly define what types of expenses are allowed, how to obtain prior approval for major expenses, and how to keep accurate records. The policy should also be regularly reviewed and updated to ensure that it is comprehensive and effective.
- Training employees on the proper use of corporate credit cards: All employees should be trained on the company’s expense policy and the proper use of corporate credit cards. This training should be conducted regularly and should be tailored to the specific needs of the company and its employees.
- Monitoring employee spending: Companies should monitor employee spending on corporate credit cards in real time. This can be done using a variety of tools, such as online spending dashboards and fraud detection software.
- Freezing cards and engaging in employee conversations: If a company suspects that an employee is misusing their corporate credit card, the company should immediately freeze the card and investigate the matter. The company should also engage in a conversation with the employee to understand the situation and take appropriate disciplinary action, if necessary.
By incorporating these strategies and practices, your business can establish a strong foundation for responsible corporate credit card use, effectively minimizing misuse and ensuring financial accountability across your organization. Remember, a well-informed and well-trained team is key to maintaining a successful credit card usage system.