Managing Credit Cards For Business Use

Small company owners who open and manage business credit cards should keep good records of employees' use of the account.

If you are a small business owner who is ready to obtain a company credit card, you may want to note a few simple suggestions as indicated below. Managing a personal credit account can be challenging enough, but supervising employees' use of company credit requires careful diligence and effective record keeping.

Start with a low credit ceiling. In other words, you may want to open a business account with a $5,000 limit. In case someone misuses the account, inadvertently or otherwise, damage control can be implemented before serious losses occur. Later, when the account remains in good order and your business begins to expand, you may want to extend your limit by a few thousand dollars each year, or as needed to support your company's growth.

Distribute a limited number of company credit cards. The owner, assistant owner/manager, and perhaps the buyer, if you have one, may require access to credit services in relationship to their job duties. Issue a card to those who can be trusted. Avoid keeping a card available for anyone's use, and don't leave a credit card laying out in the open. A credit account is like plastic money, so manage it as carefully as you do dollars and cents.

Outline for card users the type of credit purchases that are acceptable. For example, will you authorize business lunches with clients? How about gasoline for car travel on after-hours business trips? What about medical expenses not covered by company health insurance? Be sure that each user understands exactly what is, and is not, acceptable purchases for company business. They also need to have a budget for spending up to a specific dollar amount per month, per employee.

Keep good records. Remind each card user to turn in charge slips for bookkeeping purposes. Check these against monthly statement to be sure every transaction is accounted for. Discrepancies or uncertainties should be handled immediately rather than waiting for another to occur. Remember to make the minimum payment on the account while disputes are negotiated. Encourage employees to keep copies of charge slips for their records as well.

Try to pay the balance in full each month. This will save the company money in interest fees and reduce bookkeeping costs in tracking varying interest rates, should the percentage rate change. This is more likely with a variable rate credit account.

Don't combine personal and business expenses on the same account. Even the owner or president should avoid blending the two, as they can be difficult to sort when it comes to making the monthly payment, and no one wants to ask the boss to pay his bill.

You may want to use the credit card for business expenses such as travel, entertaining clients, and conventions, as these out-of-office ventures can be easily tracked and monitored through the monthly statement. Another benefit is that a credit card prevents the employee from carrying cash or waiting for reimbursement if personal money is used.

A company credit card can be advantageous in many ways. Remember, though, that even a business account can lead to overspending and mismanagement, so remind staff to avoid unnecessary purchases and a debt mentality.

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