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Should a company provide corporate credit cards to employees or let them use personal credit cards?

Madan Aggarwal's Profile

business credit cards pros & cons

Answers

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

If there is a need for people to have credit cards, I would prefer and recommend them to have company cards with all the controls and policies connected to it. Separating (as much as possible) personal and work finances is just good business practice.

Lyle Newkirk
Title: CFO
Company: Corrigo Incorporated
(CFO, Corrigo Incorporated) |

Occasionally there is an employee who cannot get a card due to personal reasons and you may need to sponsor a card for that person if you expect that person to travel. But watch it carefully and put strict limits on it.
The company is liable for company credit cards and if they are misused you may be on the hook for the charges. I've had better luck with employees using their own cards and then managing the expenses via the travel policy.

John Clinton
Title: Senior Manager - Finance
Company: Wipro Consulting
LinkedIn Profile
(Senior Manager - Finance, Wipro Consulting) |

A corporate card program has costs and risks, but can be a powerful tool for spending control, especially in the T&E space (think of what can be purchased, and from where). Also, access to that data can be a great asset in trying to improve your bargaining power with travel vendors (knowing $s spent on hotels, car rentals, etc.), and can aid your efforts to push compliance / reliance on approved vendors. Finally, linking the card data directly into your T&E reimbursement system can provide a great deal of efficiency gains.

James Scott
Title: Consulting CFO
Company: Early Growth Financial Services
LinkedIn Profile
(Consulting CFO, Early Growth Financial Services) |

Personal whenever possible. Submitting receipts same as for any other expense. Every company I have ever been with who gave our company cards there was at least one case of theft or fraudulent use. Many more incidences of very questionable use of the card, and borderline expense calls. Most misuse coming from those whose personal credit is also the worst. The "convenience" factor is more than out weighed by loss of control. Have you ever tried to get back money from a former employee who misused a card? Legal sink hole and likely write off.

Robert Meybohm
Title: Owner
Company: Meybohm & Bodell, LLC
LinkedIn Profile
(Owner, Meybohm & Bodell, LLC) |

It's got pros and cons. One benefit not mentioned above is the corporation picks up the " points " from the employee business spend that would have been on their personal cards. This can be substantial. Some companies share the points with the employees; others don't. You would have to decide.

Topic Expert
Aaron Codak
Title: Client Services Finance manager, North A..
Company: Kantar Finance Services (Shared Service ..
LinkedIn Profile
(Client Services Finance manager, North Americ, Kantar Finance Services (Shared Service Center)) |

1. We have a corporate program with American Express where any employee who incurs travel expenses in excess of $5K annually is required to obtain an AMEX card on the company account. Employee's cannot earn points on their Corporate AMEX card - we have a relationship with AMEX where the company earns an annual rebate.
2. The employee is still responsible for submitting an expense report and paying their own AMEX statement/bill each month.
3. Airfare is covered by a blanket AMEX card through our travel partner, BCD travel.
4. We have a manager over the AMEX program that monitors past due balances or statements that are not being paid. This information is also verified through HR prior to an employee's last day with the company to make sure we are not on the hook for any substantial expenses sitting on their statements.

Vik Agrawal
Title: President & Co-Founder
Company: ExpensePath, Inc.
(President & Co-Founder, ExpensePath, Inc.) |

There is a split among CFOs on this but I would say the majority I have spoken to do not like company credit cards where the bill is paid directly by the company because it creates more work for the Finance department. Often we have seen these types of cards precede the CFO into the company and the cardholders (often the CEO and other executives) are "grandfathered" so they are allowed to keep them but new employees do not get them.

The primary problem is that employees have no "skin in the game" to really watch what they spend and then to provide the necessary data in expense reports (i.e. receipts and other info to code into the GL). And reconciling the monthly statement often forces Finance to track down that info. We have had good success helping customers automate this to provide much better efficiency and control for Finance.

Also, it should be noted that expenses from corporate credit cards are still subject to the IRS receipt requirements - the credit card statement is not adequate for audit purposes.

Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

A corporate card is a privilege. For heavy travelers it is a convenience, and makes record keeping easy. We have an account where the employee is personally liable for the timely payment of the card. They must submit their T&E reports in a timely fashion to the company for approval and payment.

The company should never assume the credit liability, either solely or jointly. That is an issue, i.e. a problem waiting to happen. If an employee that needs a card does not pass the credit requirements of Amex or the banks, they should not pass your requirements.

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

I disagree with Regis (and some posters?) on this one....Credit cards are no longer a "privilege" (may not even be a "convenience"). It is a necessity for some people in the company and for some transactions. Yes, that includes even executives. Commerce has gone a long way since the olden days of my dad's "Diner's Club". More importantly, the speed of transactions nowadays necessitate having credit cards.

I will post these questions, what are the alternatives? Issue out cash? Wait for purchasing department for needed things? Wait for checks to be issued? How about those frequent travelers that needs re-bookings and transfers and meals (out in an airport somewhere)? etc.

I still am in the position that if a company expects employees not to use company resources for personal use, the company should also reciprocate by not expecting the employee to use his credit resources (line) for company use. The company should be able to provide the resources to the employee to do his job efficiently/effectively. Separating (as much as possible) personal and work finances is just good business practice. Even if the employee volunteers his credit (card) , I would still prefer that he hold a company card. It just takes off potential problems (like ownership of bonus points) down the road. Potential company liability? An employee can expose the company to other greater liabilities than a few thousand dollars in credit limit. But that is another discussion altogether.

Of course this does not mean just issuing out the credit cards. Controls and policies needs to be in place. Credit limits, T&E reports submissions, etc.

BTW. If there are "credit" concerns, there are other financial products available in the market. Prepaid cards for example. The employee can just call someone in the company and have them transfer the needed amount to his "company prepaid card" to keep the balance at a minimum acceptable exposure.

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

"I still am in the position that if a company expects employees not to use company resources for personal use, the company should also reciprocate by not expecting the employee to use his credit resources (line) for company use. The company should be able to provide the resources to the employee to do his job efficiently/effectively. "

I have the same position for laptops, cell phones and company cars or for any item that may have dual use.

Vik Agrawal
Title: President & Co-Founder
Company: ExpensePath, Inc.
(President & Co-Founder, ExpensePath, Inc.) |

I don't think there is a right or wrong answer here, just what is right or wrong for any given company's situation given the following concerns:
- Employee fraud (no card)
- Getting additional transaction data from employees for GL coding (no card)
- Reconciling to the monthly credit card statement (no card)
- (Young) employees without credit history (no card)
- Ease for employees (card)
- Blocking certain merchant codes (card)
- Mileage perks/savings (card if you are willing to take those from employees)

Those more concerned about fraud and getting the necessary data from employees to enter into the GL or reconcile to the monthly credit card statement stay away from company cards that are billed to the company. We have found a way to help companies easily manage those issues but there is always some risk of fraud if you have a bad employee.

The in-between position is a company card where the employee pays the monthly bill so still needs to be reimbursed.

Anonymous
(CFO) |

There is more than fraud. Taxable income issues. Business ethics. Expense control.

They all come to mind.

I've seen plenty of abuse intentional and otherwise in corporate issued cards over my career. Even by individuals making well in excess of six figure salaries, including at least one who's base salary was just under $1M, who felt entitled to certain luxuries that were outside of corporate policy, business ethics and non-taxable de minimis fringe benefits..

Whereas I once thought that forcing employees to use their own financial resources to pay for company related T&E and then apply for reimbursement for same was inherently unfair, I've turned 180 degrees around. When people have skin in the game, they are much more apt to spend corporate funds as though it was their own.

Funny how that works.

I would excuse proprietary interests from this though. It is their money and the are free to spend as they see fit. As a CFO, I just have to make sure we comply with the income tax issues.

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

Reading all the responses, I ask this......If fraud and abuse is the primary concern, is credit card issuance (use and policies) really the core problem? I posit that it is a bigger culture and hiring problem that just manifests in credit card fraud and abuse. Clamping down on legit use of credit cards will NOT solve the problem . It will still leave you with untrustworthy non-policy abiding employees and limit the effectiveness and motivation of good ones.

Vik Agrawal
Title: President & Co-Founder
Company: ExpensePath, Inc.
(President & Co-Founder, ExpensePath, Inc.) |

I actually do not think fraud is the primary concern for most but it can be a concern for some (if it is primary, I suggest you consider moving to a flat per diem). The more common issue is additional info Finance needs - and tax is a part of that. But in both cases, automation with the right solution should greatly improve the experience for Finance and employees.

The scenario I do see with many SMBs is where some corporate cards pre-date the CFO because the CEO got them to make it easy for him/her, early execs, and certain departments. Those cards are often "grandfathered" and then still need to be managed, often separately from the rest of the expense reporting process. That is something we have focused on with great results.

I tend to agree with Anonymous that use of personal cards can help foster a culture where employees give more thought to what they are spending on behalf of the company. But having or not having a card program does not dictate the environment - so just decide what is more important to you and that should help make the decision. Happy to help.

Alan Goldberg
Title: Principal
Company: Triplet Advisory Services
(Principal, Triplet Advisory Services) |

The corporate (liability) purchasing card is a tool for indirect, high volume, low dollar spend procurement. The program should complement the overall purchasing strategy (spend categories, vendors, approval limits, purchasing methods (PO's, wires, EFT, etc.). The justification for deploying a card program should be based on quantified goals, benefits, transaction cost savings, rebate revenue, and price reductions attained through improved spend data visibility and analysis, and subsequent leverage gained. Another benefit is value from deploying purchasing professionals to more strategic, larger volume spend areas. Any fraud should be taken seriously with reasonable controls and strong sanctions in place. An effective tone at the top is also required. The availability of card provider (bank) detection tools and company Data Analytics packages, can serve to effectively monitor higher risk transactions as well.

Fraud is a risk that can be reduced to acceptable levels to achieve larger, organizational goals in the supply chain, purchasing and payables processes. As in any initiative, the benefits should out way the cost.

Alan Goldberg, CIA, CRMA, MBA
Triplet Advisory Services

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