May 26, 2023
5 min read

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

Employee credit cards recalled while the management is figuring out their corporate credit card policy
Quick summary

Corporate credit cards are a great tool for streamlining business spending and managing cash flow. However, they can lead to potential misuse without a sound credit card policy. Your policy should outline how your team can use the cards, who is eligible for what, and how your business will monitor any spend.

Table of Contents

    Effective business expense management is crucial for maintaining financial stability and maximizing profitability. A well-crafted corporate 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 for using corporate credit cards within an organization. It governs all the rules and regulations under which employees can use corporate credit cards to pay for business expenses.

    Usually, a sound corporate card 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 corporate credit card policy?

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

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

    1. Eligibility criteria for employees to receive a corporate credit card
    2. Instructions on how to obtain and activate a new corporate 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 unauthorized 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

    Improve spend visibility & control with Payhawk corporate cards

    Creating an effective corporate credit card policy in four steps

    Creating your corporate credit 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 finalizing 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 organization to ensure a pain-free adoption process and good compliance.

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

    Bringing in the experts

    Take some time now to create a comprehensive corporate credit card policy explicitly tailored to your organization's needs. This work will save you from any headaches if issues arise related to improper use of cards, overspending by employees or vendors, and human error.

    Plus, consider bringing 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 spend policy is built into the tool employees use to pay. This means that employees can stay compliant more quickly 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 favorite feature is having the ability to assign spend policies to employees. I like it because it empowers employees to perform their job function 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.

    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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