Aug 29, 2023
3 minutes

Business credit card expenses: Why and how to keep detailed records

Trish Toovey - Content Director at Payhawk - The financial system of tomorrowTrish Toovey
Employee reconciling her business credit card expenses using the Payhawk spend management solution
Quick summary

This article has been updated in December 2023 to include the latest data

As a financial leader or business owner, you know how vital it is to have accurate, well-tracked employee expenses. Detailed records not only help you stay on top of your finances, but they're also essential for audit and tax purposes. Need more reasons to care? Here's a complete rundown of why you should keep detailed records for corporate cards expenses at all times.

Table of Contents

    Naturally, business credit cards help with corporate cash flow management, but they can also help with audits and tax issues.

    Taking the time to itemise each purchase made on a business credit card is crucial, even if time-consuming. Typically, when done manually, the paperwork filling process for a business invoice takes 20 minutes.

    The good news is that with the help of a corporate business credit card solution, you can cut this process down to just seconds.

    Choose the right spend management solution with our RFI template

    At the end of the year, having all your expenses catalogued will make paying your taxes much easier. In addition, for UK companies, it makes VAT reclaims simpler and more accurate.

    VAT is a big reason to keep meticulous records when using a business credit card. If you have correctly captured, stored, and bucketed expenses, VAT reclaims are a piece of cake.

    As the Finance Manager at MDM Props explains:

    "before Payhawk, missing credit card receipts meant missing VAT reclaims. With quarterly VAT bills of up to £240K, that’s massive. Now, with Payhawk, our cardholders upload receipts in seconds and save the business thousands.”

    So, next time you think about skipping out on logging a purchase made on your business credit card, think again. Keeping detailed records may seem tedious, but it's worth it in the long run.

    The benefits of keeping detailed records for business credit card expenses

    Keeping precise track of business spending not only cuts out any confusion but can also help prevent overspending by letting business leaders quickly check spend against budgets and identify expenses that should be reviewed or eliminated.

    A good corporate credit card solution provides many ways for you to simplify this process:

    • Manage employee expenses more efficiently with automated approval workflows, custom spend policies (split by department/country or per employee) and card auto-blocking features. By choosing a good solution and correctly leveraging these features, you can ensure that your team won’t overspend corporate funds
    • Achieve better spend control & visibility, with a complete overview of all company transactions thanks to expense management software and accounting integrations
    • Stay on top of incurred expenses with automated reminders for employees who submit their receipts for review.
    • Fund your corporate account easily with real-time balance checks and top-ups for all company business credit cards
    • Streamline accounting with direct integrations with your company’s accounting and ERP software. Say bye-bye to clunky data transfer, and missing expense information.

    These and many other business credit card management features help accountants accomplish three very important things:

    1. Plan better for future investments
    2. Monitor employee spending habits
    3. Determine which types of purchases are most essential for the success of their venture

    Proper business credit cards and unified spend management brings many advantages and should therefore be an integral part of any business strategy. While keeping detailed accounts of all company credit card expenses might be hard, corporate expense management software can help you light the way.

    How to save time and avoid manually tracking and managing business credit card expenses

    Of course, if not properly tracked and managed, business credit card expenses can be risky for your organisation’s financial health.

    Unfortunately, corporate credit cards are sometimes misused for personal purchases by employees. And without a proper credit card management system in place it can be all too easy for things to go wrong.
    To prevent the above scenario, you should put corporate expense management software in place to help you keep an audit trail of all company purchases.

    That’s why opting out for a security-compliant corporate credit card solution can help you unify company finances to save time and money, avoiding manual tracking. The right enterprise spend management solution will also let you assign corporate cards to specific employees, monitor spending activities and data transactions, and encourage policy enforcement to ensure every corporate expense is managed and accounted for properly.

    How to get transparency and accountability over employee spending

    While expense management software provides organisations with greater transparency and control of employee spending, it’s vital for businesses to ensure smooth adoption of corporate expense policies. Your organisation can create a culture of financial responsibility by implementing an expense tracking system.

    Using unified expense management system within your organisation makes this process extremely simple. All you need to do is:

    1. Issue company-wide corporate cards for business expenses (instant virtual cards, or physical cards)
    2. Set up custom, automated approval flows for financial managers
    3. Create separate spend policies across your departments
    4. Communicate the change in a company-wide announcement and onboard employees.

    This way, your team will better understand how to approach spending in a conscious, compliant and cost-effective way.

    In addition, expense management software can identify trends related to employee spending over time, such as areas where teams commonly go above budget or miss expense deadlines. Armed with this real-time data, you can devise effective budget plans and communicate spend forecasts to stakeholders effectively.

    With this insight, your organisation can adjust policies as needed and communicate updates to employees to ensure compliance.

    Separating personal and business expenses

    As we previously mentioned, personal expenses may sometimes go astray and end up on an employee's corporate credit card. The key to avoiding this is by ensuring that proper employee reimbursement policies are in place.

    Let’s say an employee needs to purchase office supplies for a project or incur business travel expenses for a work-related event. They should either pay on their corporate card or a personal card and expect to be reimbursed promptly, as the expense is 100% company-related.

    On the contrary, if their phone does not work well and they want to buy a new one, such expense should be charged strictly on their personal card, since it's not business-related.

    It might look obvious, but you might be surprised how many personal expenses go unnoticed on a traditional bank-issued corporate card. Using a more advanced solution with set expense rules can help you prevent that and make employee reimbursement policies crystal clear within your organisation.

    Moreover, with a smart spend management solution like Payhawk, the card controls are built-in, meaning it’s almost impossible for the employee to overspend. From auto-blocking overspending cards to customizing daily limits - the cards themselves make it difficult for employees to break the rules.

    If you drafted a stellar draft of your internal expense management procedures, but you're still having trouble enforcing these policies in your organisation, consider seeking help from experienced expense management professionals.

    Difficulty in documenting and reporting expenses for tax and audit purposes

    Poor business spend forecasting can cause difficulties in documenting and reporting expenses for tax and audit purposes. Without accurate spend forecasts (especially across multiple legal entities and departments), what you’ve suggested you’ll make and think you need to pay could be miles apart and create major problems for your business.

    Market-leading spend management solutions like ours come loaded with features needed to ensure tax compliance. With a little help from technology, you can dramatically improve your forecasting, keep trakc of all business receipts, encourage departmental spending within budgets, and never be worried about a potential tax audit again.

    Difficulty in identifying and preventing fraudulent activity

    36% of all company-wide data breaches involved some sort of phishing.

    From recognising fraudulent activity to ensuring records are secure, businesses must have a strong understanding of accounting and finance security techniques.

    In reality, identifying fraud is a challenge as criminals are constantly finding new methods and strategies to bypass security protocols. Furthermore, fraud prevention relies heavily on implementing multiple levels of protection within accounting systems and training all employees on financial protocol.

    Creating a secure environment, protected by multiple layers of security, can help you safeguard your financial activities. And doing this through an expense management solution with robust security features can help you sleep well at night.

    How to keep detailed records on corporate credit card expenses: Your next steps

    While it may be difficult to keep track of all of your credit card expenses, the benefits of clean, detailed records massively outweighs any burden.

    With a cutting-edge expense management solution in your arsenal, you can get better transparency and accountability for employee spending with mnimum extra effort.

    Learn more about leveraging smart spend management in your organisation to save time, money and sleepless nights. Get started today, book a demo.

    Trish Toovey - Content Director at Payhawk - The financial system of tomorrow
    Trish Toovey
    Senior Content Manager
    LinkedIn

    Trish Toovey works across the UK and US markets to craft content at Payhawk. Covering anything from ad copy to video scripting, Trish leans on a super varied background in copy and content creation for the finance, fashion, and travel industries.

    See all articles by Trish →
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