Having expenditures for your business is inevitable. In order for you to earn profit, you will first have to shell out for capital. It is also a well-known fact that the costs do not end there. There are still overhead expenses that would have to be accounted for in order to ensure smooth operation and maintenance of the business.
For small expenditures, most businesses have a petty cash fund. For bigger transactions, however, checks are the way to go. These are not the only means for business to handle their monetary outlay. Aside from these two options, they may also opt to use credit cards under the corporate account.
It’s understandable enough if the boss would have to have a company credit card of his own. The question is, is it necessary to allow the employees to have access to business credit?
There are many considerations that must be factored in before this particular decision is made. Small-to-medium enterprises, most especially, have to think this out clearly before handing out business credit cards to their staff.
In this article, we will delve into the benefits and disadvantages of such a step, and examine what exactly are the pros and cons of business credit cards.
THE PROS
Convenience
First and foremost, it is fairly obvious that having a business credit card can make things a whole lot easier, not only for the staff but also for the entire company. By having one credit card account, it ensures that the employees will be able to make the necessary procurements for the office without having to lug around fat wads of cash with them.
Take note that these “necessary procurements” are exclusively for office-use. So obviously, the issuing company must make it absolutely clear that the staff cannot – and should not – use it for their own personal expenses.
The good thing about having a corporate account is that the company can easily account for the costs incurred by the company. It is up to them if they will bill the employee for any personal charge they make on the card, or if they will issue a memo for discipline if it is against the rules. That is ultimately up to the discretion of the company’s policies. Regardless, what is important is that it will take hours off their accounting work, just trying to gather receipts and cost data from their staff.
Reap the Rewards/strong><
The other thing that could be an advantage for them is the rewards attached to the credit cards. As you may very well know, credit card companies aim to make the use of cards even more desirable by giving rewards or prizes to the account holder for every point they accumulate on their credit cards.
This reward system is also applicable for corporate accounts. The good thing about this is that because multiple staff is using the company’s account, it becomes easier for them to get enough points for redemption. In fact, if the company uses it wisely, they may even end up using the points to take care of their bill entirely.
Better credit
Whether it is for personal or company use, admit it, we could all use a little bit of good credit. Of course, this is important especially for those who would like to avail of assistance from financial institutions in the future.
This is even more urgent for businesses, because obviously, a continuous flow of money for operations is a non-negotiable necessity. By having a company credit card, it allows for business growth with business credit. That is, of course, assuming that the company and its staff properly and wisely use their plastics.
So in a nutshell, there are actually a lot of advantages that companies can derive from offering credit cards for their staff under the company’s name. The important thing is to ensure that this does not get abused by the staff. But by and large, it should help companies get a better overview of their expenses, operating costs, and “bridge the gap between their receivables and payables by periodically revolving business debt.”
THE CONS
Privacy
Now, as with any story, there ought to be two sides. While there are certain benefits to be garnered from having business credit cards, there are also disadvantages. Foremost of which is the issue of privacy protection.
It should ideally be easy if the number of people using the company credit card is only a handful.
However, if it cannot be helped that there are going to be more than just a couple of staff that will be awarded with the card privileges, then this could be a problem.
A way to solve this would be for the company to send out a clear and concise set of guidelines regarding the use of the company credit card. First of all, it should be used exclusively for official company use. Also, they must make sure to report loss or theft at the soonest instance possible As with any credit card user, the staff must also guard the safety of the account at all times.
Financial Responsibility
Ideally, you should be able to assign a person who is responsible enough to have access to the company credit card. Obviously you wouldn’t want it to fall into the hands of someone who has the propensity to abuse the said privilege. Having a look at the financial capability, and general work performance, of the employee could turn out to be a good gauge in choosing who should have the company credit card.
If you think Identity Theft can only happen to individuals think again. Part of being financially responsible should include monitoring of the business credit reports for fraud or errors.
These are just some of the factors that should be weighed in deciding whether or not to get a company credit card. If you think there are more that should be included, feel free to share it with us and the rest of our community through the comments section below.
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