How to establish a corporate credit card policy to improve financial control

Effective business expense management is crucial for maintaining financial stability and maximising profitability. A well-crafted business credit card policy can provide the framework for companies to control their expenditures and ensure responsible spending practices.

What is a corporate credit card policy?

A corporate credit card policy is a set of rules that outlines the dos and don'ts of using business credit cards within an organisation. It governs all the rules and regulations under which employees can use business credit cards to pay for business expenses.

Usually, a sound credit card spend policy will include information such as:

• Who is responsible for approving purchases made using the corporate credit card
• What types of purchases are allowed and what aren't
• How employees must make and report expenses
• Additional restrictions or guidelines on spend control, such as maximum spend amount, necessary approval workflows, and additional spend requests

The policy aims to ensure that all employees understand their responsibilities when it comes to using the company's credit card and protect the company from any potential misuse of funds (such as buying personal items using a corporate credit card).

Why do you need a business credit card policy?

A clear policy helps set expectations around the proper use of business credit cards, which can help reduce fraud or misuse within an organisation.

Consider including these ten elements when designing a sound corporate card policy:

1. Eligibility criteria for employees to receive a corporate credit card
2. Instructions on how to obtain and activate a new business credit card
3. Outline of the process for submitting, approving, and reconciling expenses
4. Lost or stolen cards reporting procedures
5. Card audit policies used to monitor and manage expenses
6. The consequences for non-compliance with the card policy
7. Spend control limits which describe what types of purchases are allowed with company funds. For example, you could allow each employee to spend a maximum of £150 per month on commute expenses
8. An outline of any additional documents, such as invoices, that need to be in place to ensure compliance with applicable laws and regulations and get timely reimbursement
9. Restrictions around what type of purchases require approval and who can access corporate cards to prevent unauthorised use
10. Approval workflows - having a clear policy in place helps ensure that all employees are aware of the rules surrounding the usage of company funds

Creating an effective corporate credit card policy in four steps

Creating your corporate card policy doesn't have to be complicated. And for many businesses, setting an effective card policy (and achieving better spending control using corporate cards) starts with these four steps:

1. Decide what types of purchases should (and shouldn't) be allowed with company funds and decide who needs access to those funds for them to do their job effectively.
2. Speak with legal counsel or other finance experts before finalising anything so that you can double-check that your policies are up-to-date with current laws and regulations surrounding business spend management in your region. Here's an example of such guidelines provided by the UK government.
3. Determine the exact parameters for your spending policy, such as spending types (commuting expenses, business trip expenses, office supplies, etc.) and how much employees can spend on each per month. Determining who would report on expenses (and approve them) is also crucial at this step. This process can take ages if done manually, so we recommend you consider using a business spend management solution.
4. Make sure you communicate the new policy clearly throughout your organisation to ensure a pain-free adoption process and good compliance.

Once you've nailed these four important steps, you'll have all the information you need to set up and distribute corporate credit cards to your relevant teams and individuals.

Key elements of an effective business credit card policy

A comprehensive corporate credit card policy is integral to maintaining financial control within an organisation. Your policy should clearly define eligibility criteria for card issuance, set spending limits, and outline permissible expense categories. It's crucial to establish transparent procedures for submitting and approving expenses and strict protocols for reporting lost or stolen cards.

You should conduct regular interviews to ensure compliance and identify any misuse. Most importantly, communicate the consequences for policy violations clearly. By incorporating these elements, companies can foster responsible spending practices, minimise financial risks, and ensure that corporate credit cards are used effectively and ethically.

Here's a bullet-point summary of the key elements of an effective business credit card policy:

• Eligibility Criteria: Define who qualifies for a corporate card.
• Spending Limits: Set specific limits on card usage.
• Permissible Expenses: Outline allowed categories for expenses.
• Expense Reporting: Establish clear procedures for submitting and approving expenses.
• Lost/Stolen Card Protocol: Detail steps for reporting lost or stolen cards.
• Compliance Audits: Regularly review for adherence to the policy.
• Policy Violation Consequences: Communicate clear repercussions for not following the policy.

Ten best practices for setting up an effective corporate credit card policy

Implementing best corporate card policy practices is essential to maintain financial control and ensure compliance within your organisation. Here are some of the best methods to consider:

1. Clear eligibility criteria: Define who is eligible for a corporate credit card and under what circumstances, including role-specific guidelines or spending threshold requirements.
2. Detailed usage guidelines: Specify what expenses are permissible with the corporate credit card, including categorising allowable expenses and setting clear boundaries for personal use.
3. Spend limits and budget control: Establish spend limits for different levels or departments within the organisation. This aids in budget control and prevents overspending.
4. Expense reporting requirements: Implement a systematic and transparent process for reporting and reconciling expenses. You could include regular submission deadlines and use digital tools for tracking.
5. Approval workflows: Define the process for expense approval, including who is authorised to approve different types and amounts of expenses.
6. Security protocols: Develop robust security protocols for lost, stolen, or compromised cards to mitigate risks and ensure quick response.
7. Regular compliance audits: Schedule periodic audits to ensure policy adherence and identify potential misuse or policy violations.
8. Training and communication: Regularly train employees on the policy and ensure they understand their responsibilities and the consequences of non-compliance.
9. Policy review and adaptation: Regularly review the policy to ensure it stays relevant and effective, adapting it as needed to reflect changes in the business environment or regulatory landscape.
10. Leveraging technology: Use corporate spend management solutions, like Payhawk, to streamline policy enforcement and expense tracking.

And if you're still struggling to ensure people submit expense documents on time? Leverage a smart spend management solution to provide even more incentive with card freezes. Here's how the Finance Manager, Uchenna, approaches it at MDM Props Ltd:

With Payhawk, I love that we can freeze cards if people don’t submit receipts on time; it really helps me encourage compliance and good finance hygiene around the business. And we do love a clean process!

Bringing in the experts

Take some time to create a comprehensive business credit card policy explicitly tailored to your organisation's needs. This work will save you from any headaches if issues arise, including improper use of cards, employee or vendor overspending, and human error.

Once you have your policy, it's time to bring in the experts, as your corporate card policies will only be effective if your team adopts them. Using a corporate spend management platform lets you automate a good chunk of work, from card issuance and controls to reporting and accounting system reconciliation.

With Payhawk, for example, the corporate cards and connected software mean that your spend policy is built right into the tool employees use to pay. This means that employees can stay compliant more easily and don't have to search around for their company's rules and regulations.

Payhawk customer Mercell explained how crucial built-in spend policies are to their business. Now, the finance team can effectively encourage compliance to company-wide regulations by implementing widespread policy adjustments.

Leon Steenbrink, CFO at Mercell Nederland explained:

My favourite feature is having the ability to assign spend policies to employees. I like it because it empowers employees to perform their job functions without having to ask for permission to spend money that they have already budgeted.

Ready to learn more about setting spend policies and controlling spend? Book a demo today.