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Effective Corporate Credit Card Policy Guidelines [With Sample]

Effective Corporate Credit Card Policy Guidelines [With Sample]

 

Corporate finance leaders and chief financial officers, especially at growing businesses, have the difficult task of setting their company’s first corporate credit card policy. It’s often the case that everyone has employee corporate cards ⁠— or no one does.

But where should the line be drawn for who should and shouldn't have employee business cards? How can finance teams solve for risk and hypergrowth at the same time? 

Before you issue corporate cards to employees or take them all away in your new finance role, take the time to define your company’s best practices for financial risk management. We’re providing you with the questions to ask and examples of corporate card policies in order to create one that works for your company.

As you create your policy, consider four key questions:

  • Who gets access to employee business cards?
  • What are the spending or credit limits?
  • What is the expense reporting process like?
  • How can out-of-policy purchases be reduced?

 

1. Decide who gets corporate cards

First you must think about who at your company can have access to a corporate card. Here are a few sample policy options:

  • All employees get a corporate card. This policy reduces friction but increases risk for abuse. A one-size-fits all approach might not actually fit your company. 
  • Only employees with certain seniority levels get a corporate card. For example, you could give all directors and administrative staff a corporate card. Risk is low in this case because card use of the card is limited, but friction is high if someone without access to a card needs to make a purchase and must go through a coworker who has one. However, by using spend management software, employees could request single-use virtual cards for these purchases.
  • All employees get access to a corporate card, but only for certain activities or business purposes. You could issue employee cards on an as-needed basis. This policy could work if a staff member who doesn’t normally need to make purchases on behalf of the company goes on a business trip or purchases supplies for a meeting. With end-to-end spend management software, you can issue a single-use virtual card to employees so that they can only make purchases when they need to. This keeps risk and friction low because staff can access their virtual corporate card from a mobile device.

 

2. Manage business expenses by setting restrictions

Next you must decide what those within the card program can spend money on and how much they can spend. Take inspiration from these sample policies.

Consider allowable purchases

So what can employees use their corporate cards for? Here are ideas for permissible corporate card purchases to include in your cardholder policy:

  • Software
  • Advertising (promotional materials, digital ad placements, etc.)
  • Office supplies
  • Meals and entertainment
  • Local transportation (e.g. gas to get to a local client meeting)
  • Travel-related expenses (hotel rooms, airfare, car rentals, etc.)

 

Depending on the business, including certain restrictions in the policy might also make sense. If the company’s definition of personal expenses vs business expenses is blurry, it's worth considering. Many policies have outlined restrictions against cash advances, even though this might seem like an obvious boundary to some.

Keep in mind that spend management software allows you to restrict purchases by certain merchant types and by department, so that only the marketing team can make advertising-related purchases, for example.

Make sure that your policy doesn’t leave out tail-end spend management. Tail-end spend consists of minor expenses that typically aren’t managed because they may not fall into a specific spending category. These seemingly minor expenses can add up to 20% of the total spend. Without spend control, tail-end purchases can take a toll on the budget.

Set spending limits

How much can corporate card holders spend? Again, you can base this daily or monthly limits off your T&E policy. Perhaps employees can spend up to $50 per day on meals for travel, and $300 on hotels.

Alternatively, you could have tiered spending limits, or exceptions, based on seniority. Perhaps you could allow your C-Suite to spend more than $300 on a hotel room, while everyone else can spend up to that amount.

Did you know that the best corporate cards can help you enforce card limits (and double as rewards business cards)? We’ll go into this later on.

Define an approval process

Do you want to require pre-approvals for purchases made via employee business card accounts?

You have a few options here. If the purchase falls within the limits outlined by your T&E policy, you may not require approval. 

You may require approvals for exceptions to that rule, such as if hotel room prices are higher than the T&E policy allows because a trip is booked at the last minute. 

In general, approvals lower risk, but they greatly slow down purchases  — often unnecessarily so, since many T&E purchases can be reversed (e.g., flights, which can be canceled within 24 hours). We want our process of managing spend to allow us to be agile, not painfully slow.

3. Create a spend reporting process

Your corporate card policy needs to include instructions for how to submit an expense report. This process will vary depending on whether you take an expense management approach or a business spend management approach to managing business spend.

If you use an expense management system, staff with corporate card access will need to collect receipts for purchases, and the accounting department will need to reconcile the purchases and card statements.

With end-to-end spend management software, expensing is automated with the help of digital receipts and apps. The accounts payable team gets real-time visibility into spending. 

4. Prevent out-of-policy purchases with end-to-end spend management

Out-of-policy purchases are inevitable. More often than not, these transactions occur accidentally or because an employee is confused about the corporate credit card policy. Disciplinary action, even for repeat offenders, is rarely necessary. As you create your corporate card policy, think about ways to mitigate out-of-policy purchases.

Business spend management software, paired with the best corporate cards, can help prevent out-of-policy purchases by acting as a spend control service. Spend management software can help you enforce spending restrictions. Purchases that are not covered by the policy, for example, will be blocked. 

If you find that staff are consistently trying to make out-of-policy purchases, ask them how you can make the policy easier to understand and collaborate with them to improve it.

Sample corporate card policy

Here’s a sample corporate card policy that we recommend for agile, growing companies:

* All employees have access to a corporate card, but many only for certain activities. Employees who frequently make purchases on behalf of the company will get physical corporate cards. Those who occasionally make purchases on behalf of the company will be given access to single-use virtual cards as needed.

Below you will find a list of permissible spending categories, approved merchants, departments that are allowed to make purchases from those merchants, and spending limits.

 

Spending Category

Merchants

Authorized Departments

Spending Limits (purchases over limits need approval)

Software

Lola.com, Divvy, HubSpot, etc.

Sales, Marketing, Engineering

$300 annual subscription

Advertising

Facebook, Google, VistaPrint

Marketing

$500

Office supplies

Staples, Wayfair

Admin

$100

Meals and entertainment

Panera Bread, Smith & Wollensky, LiveNation

Sales, C-Suite, Admin

GSA’s per diem rates

Local transportation

MBTA, Sunoco, Uber, Lyft

Sales, Marketing, C-Suite

$50

Travel

Marriott, American Airlines, Enterprise

Sales, Marketing, C-Suite

$300



Now you’re equipped with the right mindset to create a corporate card policy that lowers risk, friction, and will keep your company financially healthy. By using spend management software to create and execute this policy, you’ll achieve control and visibility without sacrificing agility.

 

Travel is likely to be one of your largest expenses, so it’s important to make sure you’re not overspending when instead you could be saving. Learn how you can save money on business travel with Lola.com.




About the Author: Jack Ablon
Jack is a Senior Growth Marketer at Lola.com, and his role includes managing our production of content and resources for finance professionals. He previously led Product Marketing at Lola, and is a Commercial Airplane Pilot.