Corporate Credit Card Policy and Procedures: The Definitive Guide

Implementing corporate credit card policies and procedures is vital in protecting your company’s assets and managing company spending. Introducing such policies ensures all employees understand their responsibilities related to using the cards. It further reduces the risk of fraud and abuse.

Want to know more details on how you can achieve that? Continue reading this guide as we provide an overview of the different aspects of implementing a corporate credit card policy, including best practices and guidelines for setting up the policies and procedures.

The rise in corporate credit cards

Businesses in the past relied on cash and cheques to pay for goods and services. However, with the advent of modern technology, corporate credit cards have become an efficient and secure way to make purchases.

Corporate credit cards offer several advantages to businesses:

As more businesses accept corporate credit cards, their use will continue to increase. An increasing number of merchants have also started accepting corporate credit cards. Several organizations have thus adopted policies requiring employees to use corporate credit cards for purchases.

What is corporate credit card policy?

Policies are frameworks that guide users toward appropriate actions that remain compliant with a company’s norms. Corporate credit card policies offer guidelines that dictate how a company’s employees should use business credit cards. The policy typically ensures corporate funds are used for legitimate business expenses and prevents misuse or abuse of company resources.

How can a corporate credit card policy help prevent fraud?

A well-designed corporate credit card policy prevents fraud and misuse of company resources in the following ways:

1. Clear guidelines

Clear guidelines in a corporate credit card policy can help prevent fraud in the following ways:

2. Spending limits

Specifying spending limits will ensure employees do not make unauthorized purchases beyond a certain threshold. For example, a company may set a limit of $1,000 per transaction and $5,000 per month for each corporate credit card issued to employees. Any transaction exceeding these limits will require approval from a designated authority before it can be authorized.

3. Receipts and documentation

If an employee attempts to make a fraudulent purchase or use the card for personal expenses, they must provide a receipt or other documentation that justifies the expense. For example, if an employee claims to have purchased office supplies but cannot provide a receipt or documentation, it would raise a red flag.

4. Regular audits

During an audit, the company can review all transactions made with corporate credit cards and compare them to the receipts and other documentation. It will help identify any suspicious transactions or discrepancies and prevent fraudulent activities.

5. Transaction monitoring

If an employee attempts to make a suspicious transaction, such as a large purchase in a foreign country, the transaction monitoring system can alert concerned staff immediately. The company can investigate the transaction further and determine whether it is legitimate or fraudulent.

6. Pre-approval for certain expenses

Pre-approval for expenses prevents fraudulent activities like employees using the card for personal expenses or making unauthorized purchases. It also ensures expenses are necessary for business purposes and are within the company’s budget.

7. Enforcing consequences for policy violations

The policy may state that if an employee exceeds the spending limit on the card without pre-approval, they will be required to provide a detailed explanation for the overspending and may face disciplinary action if the explanation is unsatisfactory.

Consequences for policy violations create a culture of accountability where employees understand the seriousness of violating the policy and remain committed to preventing fraud.

Guidelines to create a corporate credit card policy (sample)

Creating an effective corporate credit card policy requires careful planning and consideration of the company’s needs and resources, as well as considering your employees.

Corporate credit card policy for the employer

Here are some guidelines to follow as an organization when creating a corporate credit card policy:

Corporate credit card policy for the employee

Here are some guidelines to frame when creating a corporate credit card policy duly keeping in mind the needs of your employees:

How to write a corporate credit card policy?

Establishing a clear and comprehensive set of guidelines is essential when writing a corporate credit card policy. Here are some key factors to consider when drafting a policy:

1. Define the policy purpose

You should clearly state the purpose of the policy at the outset. It could include streamlining expense reporting, reducing the risk of fraud, or improving the accuracy and timeliness of financial reporting.

2. Define policy scope

The scope of the policy should be clearly defined, including who is authorized to use the card, what types of expenses can be charged, and usage limits.

3. Outline policy elements

The policy should outline spending limits, restrictions on certain categories of expenses, requirements for obtaining approval before making purchases, procedures for reporting lost or stolen cards, and consequences for non-compliance.

In addition to these core elements, the policy should also address other important considerations, such as the need for regular reporting and auditing and guidelines for reviewing and updating the policy regularly.

Essentials for your corporate credit card policy

Here are some essential elements to include in a corporate credit card policy.

1. Cardholder responsibilities

Clearly define the responsibilities of cardholders, including how they can use their credit card, how to record expenses and the consequences of non-compliance. Furthermore, outline the need for cardholders to report lost or stolen cards and any other fraudulent activity to the appropriate parties.

2. Employee spending limits

It should include monthly and transaction limits and restrictions on the types of expenses that can be charged to the employee’s credit card.

3. Exceptions

Establish guidelines for any exceptions to the policy. These can be situations where a cardholder needs to make a purchase that falls outside their usual spending limits.

4. Approval requests

Mention the appropriate approval level. For instance, who is authorized to approve purchases and the process for submitting requests? Additionally, outline any documentation requirements and specify the timeframe for submitting requests.

Corporate credit card policy template

Here’s a sample template for credit card policy to seek inspiration to create one for your business.

1. Overview

The purpose of this policy is to provide guidelines for the proper use of corporate credit cards by employees and ensure company funds are used appropriately. This policy outlines the eligibility, approval process, spending limits, financial responsibilities, record-keeping, and consequences for violating the policy.

2. Eligibility

Corporate credit cards will be issued to employees who meet the following criteria:

3. Approval

Employees must submit a request to the card provider to obtain a corporate credit card. Supervisors will review the request and forward it to the appropriate department for approval. Employees must sign an agreement to comply with the terms and conditions of the credit card policy.

4. Use and financial responsibilities

Employees are expected to use corporate credit cards only for travel expenses, client meals, and office supplies. The company will not reimburse them for personal expenses charged to a corporate credit card. Finally, they must preserve all receipts and submit expense reports promptly.

5. Credit spending limits

The employee’s job responsibilities will determine credit card limits, and spending limits may be increased or decreased at any time (to be determined by respective managers). The company reserves the right to monitor and audit credit card usage.

6. Credit card statements

Employees may view their statements online to monitor spending and ensure that all charges are legitimate.

7. Receipts and expense reports

Employees must provide receipts for all purchases made with a corporate credit card. Receipts must be submitted with a detailed expense report within 30 days of the purchase.

8. Credit card violations and consequences

Violations of this policy will result in disciplinary action, including termination of employment. Examples of violations include but are not limited to: personal use of a corporate credit card, exceeding credit limits, and failure to submit expense reports promptly.

9. Ownership and cancellation of the credit card

Corporate credit cards are the company’s property and must be returned upon employment termination or at the company’s request. The company reserves the right to cancel credit cards at any time.

10. Disputed items

In case of disputed transactions on their credit card statement, cardholders must immediately contact the credit card company to resolve the issue. The company will not be responsible for any unauthorized charges made on a corporate credit card.

11. Protecting the credit card

Employees must keep their credit cards secure and report lost or stolen cards immediately. Employees may be held responsible for unauthorized charges on a lost or stolen credit card.

12. Contact information

Employees may contact the company’s finance department for questions or concerns regarding this policy.

Best practices to create a corporate credit card policy

Here are some best practices for creating a corporate credit card policy.

1. Start with a clear purpose

The policy should have a clearly defined purpose that includes streamlining the expense reporting process, simplifying travel arrangements, or ensuring compliance with tax regulations.

2. Define eligibility criteria

Be specific about which employees are eligible to receive corporate credit cards and what conditions they must meet to be eligible.

3. Determine spending limits

Set spending limits appropriate for the position and responsibilities of the cardholder. Establish procedures for requesting increases or decreases in spending limits.

4. Establish clear guidelines for card usage

Clearly outline the acceptable uses of corporate credit cards, and set guidelines for any restrictions or prohibitions. It can include limitations on types of expenses, locations, or merchants.

5. Determine procedures for approval

Include aspects like requiring approval from multiple departments, verifying job responsibilities and anticipated expenses, and requiring employees to sign an agreement to comply with the policy.

6. Establish record-keeping procedures

A clear procedure for record-keeping should include submitting expense receipts and expense reports.

7. Establish penalties and consequences

Outline the consequences of policy violations, including potential disciplinary action or termination of employment.

8. Educate employees

Provide training and education to cardholders on the proper use of corporate credit cards, and ensure they understand the policy and their responsibilities.

9. Monitor usage

Regularly monitor and audit credit card usage to identify policy violations or spending trends.

10. Update the policy regularly

Review and update the policy regularly to reflect changes in company procedures, regulations, or best practices.

Conclusion

Implementing a corporate credit card policy and procedures is vital to managing company finances and ensuring employees use corporate credit cards responsibly.

By following the guidelines and best practices outlined here, you can create a comprehensive policy that establishes clear guidelines for card usage, determines spending limits, and streamlines procedures for approval, record-keeping, and consequences for policy violations.

Educating employees on the proper use of corporate credit cards and regularly monitoring credit card usage helps promote responsible spending and effective management of company funds. Updating the policy regularly to reflect changes in company procedures, regulations, or best practices is also important.

FAQs

1. What is a corporate credit card policy?

A corporate credit card policy outlines procedures that a company establishes to govern employees’ use of corporate credit cards. A corporate credit card policy aims to promote responsible spending and effective management of company funds while reducing the risk of fraud, misuse, or abuse of the company’s financial assets.

2. What should be included in a credit card policy?

A credit card policy should include the following elements:

a) Eligibility criteria
b) Credit limit
c) Acceptable usage guidelines
d) Approval procedures
e) Record-keeping procedures
f) Consequences for policy violations
g) Process for handling disputes or fraud

3. What is the difference between a credit card and a corporate credit card?

The primary difference between a credit and a corporate credit card is their usage. A credit card is a personal financial tool individuals use to make purchases or obtain cash advances. The cardholder is responsible for paying the balance on the card, which may accrue interest if not paid in full by the due date.

In contrast, a corporate credit card is a financial tool issued to an employee by their employer (an organization) to make business-related purchases on behalf of the company. The company is responsible for paying the balance on the card, and the employee is expected to use the card only for approved business expenses.

4. What is the limit on corporate credit cards?

The limit on corporate credit cards varies depending on the policies of the company issuing the card. Generally, the company sets the limit based on the employee’s position, job responsibilities, and anticipated expenses. The limit can also be adjusted based on the company’s financial situation, the employee’s credit history, or other factors.

5. What are the advantages of a corporate credit card?

One significant advantage is that it provides a convenient and efficient way for employees to make purchases and pay for expenses without using their funds. It eliminates the reimbursement process and reduces the amount of paperwork and record-keeping. Additionally, corporate credit cards help monitor and control expenses more effectively, as they can track purchases and set spending limits.

6. Who should have access to the corporate credit card?

Access to a corporate credit card should be limited to employees with legitimate business needs. It includes employees who regularly incur business-related expenses like travel and supplies. Businesses should establish specific eligibility criteria, such as job title, department, or other factors, to determine who is eligible for a corporate credit card.

Related Posts: