Due to the pandemic, various companies and even some established businesses face the problem of handling their expenses on a month-to-month basis. There are situations when the companies have to pay upfront for the business-related expense.
Issuing a corporate credit card can be a possible fix to this situation. They come with a high, thus enabling businesses to fund their needs. It also provides entities with generous reward points. Similar to personal credit cards, corporate cards accrue reward points on purchases. This feature is notably beneficial for the big companies because they undertake large expenses, and hence the rewards earned by them are also sizeable. Akin to a personal credit card, corporate entities avail of credit cards tailored to fulfill their daily funding needs and professional expenses. Employees generally use these types of cards to manage their authorized business expenses like hotel stays, plane tickets, rental cars, and to get access to cash at ATMs, all without using their own funds or a company advance.
Now, there are two types of corporate credit card relationships that are attainable for the vast majority of the business community. The main difference here is whether or not the employee is paying for business purchases.
1. Employee Authorized User
In this type of relationship, the primary account holder can set custom spending limits for each employee and earn rewards on their spending. Authorized users aren’t legally responsible for making a payment. The primary account holder has to foot the bill.
From an employee’s point of view, a corporate liability card can mean financial relief, since it eliminates the need to pay from their own pocket for business-related expenses, and then wait for reimbursements.
2. Employee Reimbursement
Many companies allow employees to use their credit cards for work-related spending and then submit reports to review and reimburse. This is the best arrangement for an employee. It lets them rack up rewards on their personal credit without really spending any of their money.
What Makes Corporate Credit Cards Unique?
There are few things to keep in mind while using a corporate credit card.
The first is to save the receipts of the business-related spending. It helps the business owner with expenses, management, and taxes. It could also be the ticket to reimbursement if the employee uses their card.
Also, employees should consider using separate cards for business and personal use.
Employees should be aware of their company’s policies regarding corporate cards, to prevent committing mistakes that could lead to challenges in accounting or even worse. Cardholders should be familiar with the company’s spending and reporting requirements. They should know spending limits that apply to certain cases. It’s also crucial to know about the position and department-specific rules. Company managers, for example, will likely have different spending profiles than, say, lower management.
Once the employee learns about their company’s policies regarding corporate credit cards, they should strictly adhere to it. If a cardholder uses the card to buy something which is not an approved business expense, it can affect his/her reputation in the eyes of their employer, even if it’s an honest mistake. What’s more, many large companies have a card manager on staff who could audit the employee’s expenses at any point in time. It’s integral for cardholders to use common sense to decide if an expense they’re about to make is 100% job-related or not. If not, they should use their personal card instead of a corporate one, and discuss it later with the card manager if they feel entitled to full or partial reimbursement.
Just like any other credit card, cardholders/employees should treat their corporate credit card as if it is their own, and keep it in a safe place to prevent theft or loss. If a card is lost or stolen, it should be reported as soon as possible, so the card can be canceled and replaced.