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Budgeting is a key part of every company’s success and can help control costs and make better financial decisions. However, implementing budget rules that are clear across the board is difficult with different departments having their own ideas about what to include in this process. In order for companies to benefit from corporate credit cards, they need an agreement on policy guidelines.
A business credit card policy specifies how to use, qualify for, and use a company credit card. Corporate credit card rules are internal agreements between an organization and its workers that spell out what is and isn’t appropriate when it comes to using corporate credit cards. Card payments, expenditure reimbursement, responsibility, and credit limitations are all outlined in these rules.
What Is the Purpose of a Corporate Credit Card Policy?
A corporate credit card policy is a document that lays out the rules and restrictions that internal stakeholders must adhere to while using a corporate credit card for company spending. Eligibility, financial duties, cost reporting, card spend limitations, disputes, and ownership of a corporate credit card are all covered under corporate credit card rules.
While you might write a corporate credit card policy from start, organizations like Rocket Lawyer provide policy templates that may assist your company implement a corporate credit card policy that works. The templates are adaptable to your individual requirements and include legal language.
Why Is It Important to Have a Corporate Credit Card Policy?
Companies having a corporate credit card account should have a corporate credit card policy. You may set spending limitations for each card, protecting your firm while still giving workers a convenient method to pay for corporate costs. When workers will be utilizing a kind of company finance, such rules are critical.
There are four reasons why a company credit card policy is important:
- Laws and restrictions that apply to the use of corporate credit cards: A corporate credit card policy lays out the processes that all internal stakeholders, including workers and the company, must follow.
- Defines cardholder duty and responsibility: Liability is either held by the company or jointly held by the firm and the cardholder, depending on the card and issuer. This implies that payments, fees, and disputes are the responsibility of either the corporation or the cardholder. Outlining liability problems safeguards the business and establishes use expectations.
- Credit restrictions, for example, are defined in the policy, as are the repercussions of exceeding those limits. Frequency limitations, monthly spend limits, and spending category limits are all examples of corporate credit card rules. When workers use a type of company finance, such rules are critical.
- Increases the efficiency of expenditure reporting and reimbursement: Expense rules must be clearly specified, which may be done with a proper corporate credit card policy. To achieve corporate spending efficiency, it’s critical to follow expense report processes.
Overall, corporate credit card policies assist organizations in establishing expectations and guidelines for workers while using a corporate credit card. It’s easy to overlook certain elements, which is why using a template, such as one given by Rocket Lawyer, might be beneficial. You may, however, accomplish it on your own. Simply make sure you go through our business credit card policy checklist to ensure you don’t overlook anything.
Creating a Corporate Credit Card Policy Checklist
Overall, your company’s internal credit card policy is unique to it. Set a policy start date, identify your card kinds, decide who’s eligible, set spend limits, establish expenditure reporting requirements, specify any repercussions of a policy violation, and describe who’s accountable for the policy to develop a business credit card policy.
When drafting a business credit card policy, there are seven crucial checklist things to keep in mind:
1. Set the start date for the corporate credit card policy.
A commencement date should be included in all company credit card rules. This reduces confusion by ensuring that everyone is aware of when new rules take effect. An effective start date also allows workers to use their credit cards before the start date.
2. Determine the kind of business card you have.
There are two sorts of corporate credit cards: business payment cards and individual payment cards. The card type determines cardholder responsibility and, if applicable, spending reimbursement. Understanding the card’s individual needs aids in the creation of a more effective business credit card policy.
3. Find out who qualifies for a corporate credit card.
The categories of workers that are eligible for a corporate credit card are outlined in the corporate credit card policy. For example, some businesses only provide corporate credit cards to full-time staff. Other businesses only allow corporate credit cards to be used in certain areas, such as sales.
You’ll also need to understand how to issue business credit cards. Your company may distribute cards to qualified workers automatically. Employees, on the other hand, may be required to submit an application for approval. Applications are solely used internally and do not appear on a person’s credit record.
4. Establish spending limits on corporate credit cards
You may set spending limits for business credit cards depending on a number of variables. Individual expenditure limitations, frequency constraints, and monthly spending caps may all be imposed. It’s critical that you understand any and all card restrictions before including them in your company’s credit card policy.
You should set monthly spending limitations, expense-specific restrictions, and, if applicable, frequency limits. Furthermore, you may set various restrictions for individual cards, which you should specify in your policy. Senior executives, for example, may be subject to greater monthly limitations than salespeople. If this is the case, you should create a policy for approving exceptions to the agreed expenditure limitations.
5. Communicate with employees about expense report expectations.
Some businesses need spending reports for both personal and business cards. A bill is given to each cardholder for separate cards. Employees usually file an expense report that includes their charges. The bill is paid on behalf of the employee after it has been authorized. On corporate cards, a single bill comprising information for all cards is given to the firm. Although the corporation pays the bill before any expenditure reports are filed, cardholders are still required to file reports.
If any of these scenarios apply, you’ll want to spell out your expense report regulations and processes, including the receipts that must be submitted, the approval process, and more.
Using prepaid business cards from a provider like Bento for Business is a simple way to eliminate the burden of employee-submitted expense reports. You have complete control over your spending limits and categories, and all of your cost reports are maintained in one easy-to-find location that you can access in seconds.
6. Describe the ramifications of a corporate credit card policy breach.
It’s critical to have clear repercussions in place if your employee violates any part of your company’s credit card policy. Smaller offenses, such as a salesman overpaying a customer, might result in his or her business credit card being temporarily suspended. Larger concerns, like fraud, may, nevertheless, result in an employee’s termination.
7. Determine who is in charge of the policy.
Finally, identify the person or employees in charge of enforcing your company’s credit card policy. Credit card payback, expenditure report approval, and any disciplinary measures resulting from credit card usage will fall within this person’s purview.
A corporate credit card policy is often owned by the company’s chief operations officer (COO) or chief financial officer (CFO). Business owners, CEOs, and other senior executives, on the other hand, are known to enforce corporate credit card regulations.
After you’ve gone over the corporate credit card policy checklist item, you’ll need to decide whether you’ll write your own policy or utilize a customizable template. A credit card policy template for your business will save you time and guarantee that you cover all of your bases.
Incorporate all aspects of the business credit card policy.
The rules for corporate credit cards differ based on the company. Eligibility and approval, usage and financial obligations, receipts and expenditure reports, spending limits, violations and repercussions, disputes, and ownership and cancellation of credit cards are the seven important topics you should include in a business credit card policy.
The following are seven critical aspects to include in your company’s credit card policy:
1. Eligibility & Approval
This is usually the first part of a credit card policy for a business. The section on eligibility and approval explains which workers are eligible for a corporate credit card. Some businesses, for example, may only allow salesmen to use corporate credit cards.
Second, this part explains the approval procedure for new card issuance. Businesses may offer cards to their workers directly or have them apply for a corporate credit card. Individual payment cards need an application, while company payment cards are usually supplied instantly.
2. Use & Financial Responsibilities
The allowed costs charged to a business credit card are outlined in this part of a company credit card policy. Often, businesses will state that the card is exclusively for “authorized business spending.” In addition, this section explains how to repay a credit card in general. It will be indicated here if a corporation is accountable for paying the bill. If staff is required to submit expense reports for reimbursement, it will be indicated here instead.
3. Receipts & Expense Reports
If you need employee-submitted spending reports, this portion of a corporate credit card policy applies. If the firm pays the credit card bill in its whole and does not need expenditure reporting, the preceding portion of the policy is skipped, and this section is removed.
However, if a company demands expenditure reports, this portion of the policy explains how to be reimbursed for them. This section includes information such as needed receipts, expenditure report due dates, and approval and reimbursement dates. Expense reporting is an excellent idea since it encourages cardholders to keep track of their spending.
4. Limits on how much you may spend on credit
A corporate credit card policy’s credit spending limitations part is self-explanatory. Any budget restrictions are explicitly mentioned here. Frequency limits, monthly credit limits, limits on certain spending categories, and other restrictions are examples of limitations. Limits for travel, entertainment, workplace equipment, and anything else should be included here.
If you use a prepaid credit card like Bento, you just put a chosen spending limit onto each employee’s card and you’re done. With two free cards and no setup costs, you may try it out for 60 days for free.
5. Credit Card Violations & Consequences
This part of a corporate credit card policy lays out all of the possible breaches as well as the repercussions that come with them. Cash advances, personal spending, erroneous expense reports, and other credit card breaches are just a few examples. Violations and penalties for violating the expenditure restrictions stated in the preceding section might also be included.
6. Items in Controversy
The business credit card policy’s disputed items section handles the possibility of erroneous transactions on an employee’s corporate credit card. Businesses often make workers accountable for resolving any disputed transactions, refunds, or changes on their cards.
7. Ownership & Cancellation of Credit Card
The responsibility of cardholders is discussed in this section. Your company’s credit card policy should clearly state who is accountable for credit card payments and lost cards. The right of the corporation to cancel or suspend corporate credit cards is usually included in this clause.
Consider Issuer-Specific Policy Requirements
When drafting your business credit card policy, keep in mind the terms and conditions of corporate credit card providers. The payment conditions, credit limitations, and responsibility of a credit card issued by an issuer, for example, are all stated by the credit card firm.
There are three corporate credit card policy criteria to consider that are distinct to each issuer:
1. Terms of Payment
A company credit card policy’s payment conditions are very essential. The regulations you make regarding card payback are dictated by the card issuer’s unique conditions. Many business credit cards, for example, enable you to carry a balance, whilst others do not allow you to carry a balance forward.
When designing your business credit card policy, you should also consider the card’s APR and minimum payments. You may be able to hold a load on your business credit card, but if the APR is excessively high, you may want to establish a policy requiring monthly balances to be paid in whole.
When it comes to late payment costs, card issuers also identify the parties responsible. Individual payment cards, for example, charge these costs to the cardholder. It’s critical that this information be included in your company’s credit card policy.
Limits on credit
Your business credit card account may be subject to a limit imposed by the card issuer. If this is the case, it’s critical that you understand the corporate constraints that have been imposed on your account. These limitations might be either a general corporate credit limit or a card-specific credit limit.
Credit restrictions established by the issuer will, of course, change the regulations you set up around credit spending limits. If your monthly corporate limit is $50,000, for example, you’ll want to be sure there are adequate controls in place to prevent your firm from going overdrawn.
3. Accountability
Card issuers are very clear regarding cardholder obligations. If your firm has a payment card, your company is responsible for all credit card payments, and your workers are not. If you have a personal payment card, your card issuer will either hold the firm accountable or jointly hold the company and the cardholder liable.
As a result, it’s critical to understand how your business credit card provider analyzes responsibility. This will aid you in appropriately defining credit card responsibility in your business credit card policy, as well as the repercussions that come with it.
A real-life corporate credit card policy example
Patrick West, the founder of Be The Machine, an experienced marketing business with offices in New York and Ft. Lauderdale, claims to have a monthly corporate credit card bill ranging from $65,000 to $100,000.
Corporate credit cards are plentiful at Be The Machine. Each employee is issued a company credit card with no monthly credit limit. West trusts his staff to “manage up” and make the best purchase choices on the company’s behalf.
“In my line of work, workers must make quick choices. It offers them the flexibility and authority to act responsibly. I’m afraid of systems, restrictions, and barriers more than I am of misuse, theft, or incorrect expenditure.”
― Patrick West, Be The Machine’s Founder
Be The Machine’s credit card policy, in particular, serves to assist its workers by requiring:
- For direction and monitoring, all workers must submit monthly cost reports.
- All costs on an expense report must be accompanied by a receipt.
- For operational expenditure tracking, all expenses must be tagged to a single client project.
- Within 30 days after receiving the monthly credit card statement, all reports must be completed.
- The employer will compensate the employee for any business-related costs.
Credit card regulations in the workplace don’t have to be this permissive. Nonetheless, West’s liberal spending policy, which is balanced by effective cost reporting rules, demonstrates how flexible a corporate credit card policy may be. Overall, West believes that when using a company credit card instead of another kind of short-term financing, it’s critical to have a plan in place, no matter how rigorous it is.
West goes on to say that credit card firms have enhanced their internet monitoring systems, allowing him to verify business transactions and summaries more easily. Furthermore, modern credit card applications make it much simpler to scan and code receipts.
The Advantages of Having a Corporate Credit Card Policy
Any dangers associated with the abuse or violation of a corporate credit card may be mitigated by implementing a corporate credit card policy. A business credit card policy has various advantages, including establishing any laws and regulations, clarifying cardholder liability and accountability, and describing processes for internal stakeholders.
The Advantages
- Clearly specifies rules and regulations: A corporate credit card policy allows your company to set criteria for what activities or transactions the corporate card may be used for. You may, for example, establish spending limitations for yourself.
- Describes the steps taken by internal stakeholders: The corporate credit card policy of your company specifies how workers and employees must use the corporate card. Some processes, for example, require monthly cost reports and the submission of a matching receipt for all expenses.
- Cardholder accountability and obligation should be defined in a corporate credit card policy, which should make cardholders accountable for the security of the corporate card as well as sensitive business information. If the policy is broken, this might assist define the repercussions.
A business credit card policy, in general, aids in increasing security and reducing fraud or abuse of a corporate credit card. We spoke with Molly Walsh, Chase’s Managing Director of Commercial Cards, who said:
“From the standpoint of the company, corporate credit card regulations guarantee control while simplifying spending across numerous payment vehicles.” A good policy will increase efficiency while reducing the risk of fraud or abuse. A corporate card policy, when combined with a corporate card program that is aligned with the company’s operational structure, creates a data warehouse that can be connected throughout an organization to support ERP, general ledger, accounts payable, and eProcurement.
“Data integration saves time, increases accuracy, aids leakage detection, and facilitates program extension.” Spend data may be used to strengthen connections with individual suppliers and perhaps save money. A corporate card policy, from the employee’s viewpoint, permits business expenditure to be recorded on the specified company payment vehicle rather than flowing onto personal cards.”
With all of this in mind, corporate credit card rules are quite adaptable. As a company owner, you have the authority to establish your own rules and regulations, which must be followed by all corporate cards. However, there are several disadvantages to drafting a policy on your own that you should be aware of.
Cons of Creating Your Own Corporate Credit Card Policy
Using a customizable template to create a business credit card policy is the quickest—and maybe safest—option. If you opt to write a policy on your own, be aware that it will take more time and that you may overlook details. Because using the right legal terminology and vocabulary might be tricky, you may want to speak with an attorney if you create your own policy to ensure you’ve covered all of your bases.
The Cons
- A policy requires more work compared to using a template: Without a Template for a Corporate Credit Card Policy, you’ll have quite the work cut out for you. Creating a policy from scratch is much more time-consuming and involves a lot more work.
- There’s a chance you’ll forget about certain key rules: It’s difficult to remember all of the various laws and restrictions that cardholders must follow. It’s easy to be sure you’ve covered all the basics if you utilize a template.
- Using the right legal terminology is tough: For most small company owners who are drafting a policy on their own, legal language is challenging. A customizable template may assist you in ensuring that you’ve utilized the proper words to safeguard your company. It’s a good idea to contact an attorney if you’re uncertain.
Overall, putting out a company credit card policy on your own may be time-consuming and difficult. You may, however, utilize customizable templates to make this process easier. Rocket Lawyer, for example, provides company owners with low-cost corporate credit card policies and process templates to guarantee that their policies protect their companies.
Most Commonly Asked Questions (FAQs)
We covered a lot of ground when it came to corporate credit card policy and how to set one up for your company. Some questions are more often asked than others, and we answer them here. Please leave a comment below with any further questions, and we will respond as soon as possible.
The following are the most commonly asked questions concerning employee credit card policies:
Is it true that corporate credit cards are issued on the basis of personal credit?
When applying for a corporate credit card, the card issuer won’t consider a business owner’s personal credit score. Additionally, the business owner won’t be held personally liable. Card issuers, however, require a “good” business credit score, rated by one of four business credit bureaus: Dun & Bradstreet (80+), Experian (76+), and Equifax (90+), or FICO SBSS (140+).
Is it possible to use a company card for personal purposes?
A corporate credit card is often used only for company spending. The majority of small company corporate credit card rules will include cardholder use policies. Employee credit cards are often not authorized to be used for personal purposes.
What is the definition of a business credit card?
Corporate credit cards are different from small company credit cards in that they are provided to workers to pay for business-related costs like travel. Corporate cards are suitable for companies with yearly sales of $4 million and card costs of $250,000. Select a credit card that complements your spending patterns.
Conclusion
Businesses having a corporate credit card account should have a corporate credit card policy. An effective corporate credit card policy clearly explains the requirements for eligibility, approval, and use of corporate credit cards for internal purposes. Employees who utilize other types of business finance, such as small business credit cards, may be subject to such a policy.
