Employers can often give employees credit cards so that they can carry out company business. It is important to follow ground rules to avoid any suspicion.
Many employers have found it easier to give employees credit cards than to follow the traditional expenses routine. The traditional routine with work place expenses was to have expenditure to be incurred by the employee first and then to be claimed back. This method created some suspicion. Firstly it meant that the employees often felt that they were subsidising the employer as they would be borrowing to do things that were necessary for carrying out their job, while the employer got the credit for this. There was also some administrative overhead for the employer as the employer had to process all the forms, approve the expenses and then to pay the right amounts in a timely manner.
Employee credit cards change this. Employee credit cards mean that the credit card user has only to have a credit card supplied by his or her employer and then to use it for work related expenses. It can be as simple as this, but there are problems with this method.
The first problem is that there can often be an overlap between personal and business expenditure. Although most of these credit card schemes do have the ability to pay back personal expenditure, this has been a general problem for credit card users. Personal and business expenditure needs to be separated quite strictly. Otherwise there will be needless suspicion between the employer and employee.
It is a good idea for a person who is using an employer’s credit card to also carry around their own credit card at all times. This will mean that there is less chance that the person will have to use the employer’s credit card in an emergency, and have to explain this afterwards.
The employer’s credit card should not be used for the core purpose of the business, unless specifically instructed. This will mean things such as raw material and other things that go into making the good or providing the service that the company offers. The reason for this is that this can mean that cash flow becomes far harder to manage for the company, and the chances of fairly hefty credit card debt can increase.
It is also important to keep receipts for all things that are purchased with the card, even though they have been paid for. This will mean that they will be easier for the business to reclaim against tax and will forestall any queries.
