Do you have a business expense reimbursement horror story? I bet you do. We all do. webaroo-com-au-em37kS8WJJQ-unsplash.jpg

 

My latest is with a well-known company for whom I speak at events every year. The accounts payable people know me. I’m in the system. I’ve been submitting invoices to them for years. And yet, even so, last year it took five months to get my travel expenses for an event reimbursed.

 

I get it – I’m a small fish in a very large pond, but still. Imagine if I were an employee trying to get repaid for expenses I incurred on behalf of the company. I would not be a happy camper.

 

This issue is especially relevant for small businesses. Employees and accounting folk equally seem to dislike expense reports and reporting. One common solution then is to give company credit cards to appropriate staff members.

 

This intuitively makes sense, but does it work in actuality? Consider the pros and cons:

 

Pro: Ease of use. Let’s face it – expense reports are a pain in the rear for everyone. Employees don’t like filling them out (even if they are digital) and often do so late, and management often does not prioritize paying them. Expense reports take up time and eat up resources.

 

Giving employees credit cards may remove the need for cumbersome expense reports. And equally, it is easy for the bookkeeping team to review credit card bills and charges online. All in all, credit cards can make everyone’s lives easier.

 

Con: Overspending. Because the point of a credit card is to make spending easier, some employees may abuse that privilege.  Check with your credit card company to see if they offer employee misuse protection.

 

Watch this video about managing a credit line for your corporate credit card.

 

Pro: Happier, appreciative employees. On the other hand, having a company credit card makes taking clients out to dinner easy. Indeed, it can be stressful for some staff members to entertain clients or buy expensive items on their own dime, knowing it may take time to be reimbursed. Removing that stress will be much appreciated.

 

Similarly, the time savings of not having to fill out expense reports – and not having to wait to get them paid – will be very welcome as well.

 

Con: Comingling. Another downside is that, because using a company card is in fact so easy, it can sometimes be too easy for employees to accidentally (or accidentally on purpose) mix personal and business expenses. As such, two things are critical:

 

  • The employee must be someone you inherently trust
  • You need to remember the immortal words of Ronald Reagan about the Soviet Union regarding the SALT arms control treaty: “Trust but verify.” It will be incumbent on your bookkeeper to keep close tabs on credit card expenses.

 

For the employer, one benefit is that expense monitoring can be done more easily. Checking online for what has been charged can be done effortlessly, quietly, and as often as desired.

 

Learn how to easily manage your business with account alerts.

 

Pro: Card benefits. These days, credit card rewards are common, often generous, and so, if employees are using cards for company expenses, those card benefits will go to the business.

 

All in all, while there are definitely some risks to consider, they usually can be mitigated fairly easily and as such, the pros of issuing company credit cards usually outweigh the cons.

 

Next: Find the credit card to fit your business needs.

 

About Steve Strauss

 

Steven D. Strauss is one of the world's leading experts on small business and is a lawyer, writer, and speaker. The senior small business columnist for USA Today, his Ask an Expert Steve+Strauss+Headshot+SBC.pngcolumn is one of the most highly-syndicated business columns in the country. He is the best-selling author of 17 books, including his latest, The Small Business Bible, now out in a completely updated third edition. You can also listen to his weekly podcast, Small Business SuccessSteven D. Strauss.

 

Web: www.theselfemployed.com or Twitter: @SteveStrauss

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Bank of America, N.A. engages with Steve Strauss to provide informational materials for your discussion or review purposes only. Steve Strauss is a registered trademark, used pursuant to license. The third parties within articles are used under license from Steve Strauss. Consult your financial, legal and accounting advisors, as neither Bank of America, its affiliates, nor their employees provide legal, accounting and tax advice.

 

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