Property management companies need to make purchases for repairs and maintenance and so is the case with construction companies. It is common for such businesses to enroll in a credit card program with a vendor of their choice. This removes the hassles of advancing funds to different employees and also can benefit the business with preferred pricing from the vendors.
1. Set expectations from the beginning
Establish a credit card usage policy which explains the responsibility of the user employees, the expenses they can incur using the credit card and the necessary supporting documentation and/or approval they need to provide with respect to each expense. The owner of the business or the Chief Financial Officer should review and approve the policy.
2. Ensure that expected rules are understood
Before issuing credit cards to employees, each employee who is to be issued a credit card should be explained the policy and the employee should formally acknowledge the receipt of the policy. Merely giving out a standard credit card agreement with all the legal fine print that most likely will be unread will not serve the purpose.
3. Monitor spending
Require supervisors or heads of departments to approve the monthly credit card statements of the employees on their teams.
4. Institute preventive controls
Establish spending limits on credit cards. Senior management personnel may have higher limits, if necessary. This will reduce the risk of unauthorized transactions, especially in cases when an employee loses a card or abuses his/her card usage privileges through purchases against policy. Also, prohibit cash advances on the credit card.
5. Do an annual check-up
Review credit card user entitlements for all employees at least annually. This exercise will allow department heads to align credit card spend limits according to the responsibilities of employees. If an employee no longer works in a repair function or on-site construction and does not need a credit card, then he/she may be removed from the credit card program.
6. Increase efficiency through management by exception
On a monthly basis, a designated person who does not hold a company-given credit card should present a summary to the owner or other senior management people a list of all the users who did not submit timely explanations, supporting documentation or approvals for their credit card expenses.
7. Monitor the outliers
Monitor the usage of credit cards for items that may be of personal nature. This should be strictly prohibited per the policy and any exceptions to this should be assessed and approved under instances of personal emergency of the employee.
8. Share the risk
Evaluate a credit card program where the employee user is personally responsible for the credit card balances and at his/her own credit risk. In such a scenario, the company typically reimburses the employee the amount of approved expenses before the due date of payment so that the employee has funds to make the payment.
9. Educate about privacy and protection
The policy should require employees to immediately notify the employer and the credit card company in the event of a credit card loss or improper charges. There is no need to wait until the month-end statement arrives since most employees will be able to access their credit card activity online.
10. Have a centralized coordinator
The centralized person will not make any approvals but ensure proper documentation and procedures are followed for the program. Such a person should report any issues to the CFO. As soon as a person is terminated, the credit card of the terminated employee should be immediately canceled.