At some point your employees will probably need to buy something while they're on the go —whether it's an extra ream of paper for the office printer, gas for their trucks or lunch for a customer. Should you ask them to put the expenses on their own credit card and submit a request for reimbursement or issue a business credit or debit card to them?
That's a difficult question for business owners and managers to answer. Assuming you trust your employees to handle credit or debit cards responsibly, here are some key considerations to think about as you create an expense policy.
1. Ask Your Team for Their Preferences
The best company expense policies
are those both managers and employees find fair. If you haven't issued cards yet, ask employees how they would feel about putting expenses on a company card, rather than their own personal cards. Some may prefer to use their personal credit cards and pocket the points. In that case, it may be hard to get them to switch over to a company card.
However, employees may have a different opinion if they have had to put substantial personal charges on their cards, or if you have been slow to reimburse them for personal charges in the past.
“From an HR perspective, employees love it if they get the rewards on their personal card —but they hate it if the reimbursement isn't fast enough that they have to float the money to the company essentially," says Caroline Ceniza-Levine, a former associate director of staffing at Time Inc. who is now an executive recruiter in New York City.
Slow reimbursements can be especially problematic for employees who are on the lower end of the pay scale and may need every penny of their paychecks to stay current on their personal bills. They could easily fall behind on their credit card payments and suffer harm to their credit score.
2. Consider Your Record-Keeping Needs
Putting all business charges on company-issued credit or debit cards will make it easier to keep track of expenses as the company grows. “It is always more appropriate to have work expenses on a work card," says Jaime Klein, president of Inspire HR in New York City.
Using company cards can also prevent tricky paperwork problems
if, for instance, you end up needing to lay off someone who still has outstanding charges for work-related purchases on a personal credit card.
“Say, for example, a company had someone put a work expense on their credit card for the month of January and then the employee got let go in February," Klein says. “How do you pay back someone who isn't even on your payroll anymore? From a payroll perspective, it feels cleaner to have it separate."
3. Look into Tax Implications
If you will issue company credit cards and allow employees to keep the rewards points, ask your accountant if those points will be taxable income, recommends Ceniza-Levine. Typically, credit cards that offer cash back or redeemable points are considered rebates and are not counted as income. However, sign-up bonuses may be considered taxable. When in doubt, ask a pro.
Toffer Grant is PEX's Founder and CEO. He founded PEX in 2006 as a prepaid card solution for small businesses. His background in the prepaid industry began at Clarity Payment Solutions, where he initiated 65 prepaid card programs in consumer, corporate, and emerging verticals of the prepaid card industry.
For an alternative to company credit cards, consider the PEX Visa Prepaid Card. Learn more about our expense management solution by downloading our Fact Sheet.
The PEX Visa Prepaid Card is issued by The Bancorp Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted. The Bancorp Bank; Member FDIC.