Corporate cards serve as a lifeline for businesses because they make expense management simple and provide flexibility for employee spending. They are indispensable to any modern corporate operation. But, if used wrongly, they can become inefficient and lead to unnecessary costs and even financial risks. To maximize the potential of a corporate card, one should be aware of the pitfalls and take measures to steer clear of them. These are 5 common mistakes and steps to avoid them:
Failing to Set Clear Spending Policies- Failing to implement a proper, definite spending policy regarding corporate cards is a major failure on the part of a company. Lacking these rules may cause unintentional misuse on the side of the employee either for unwanted items or more than required budgets.
What to Do Instead:
Establish a detailed policy outlining the allowed and prohibited expenses. For example, acceptable categories might include business travel, client entertainment, or office supplies. Set spending limits on all the categories and communicate the policy to all the employees.
Neglecting to track or monitor expenses- A corporate card’s ease of use can create complacency in expense tracking. Unless transactions are periodically reviewed, there is a risk of over spending, failure to detect errors or fraudulent charges.
What to do instead:
You can use tools to track expenses in real-time. Many corporate card providers offer online dashboards which show instant transaction details. You can also assign someone within the company to keep track of these transactions and catch any inconsistencies.
Allowing Unauthorized Users Access- If too many people have access to corporate cards, or failing to review who has access, can lead to misuse. This happens due to a lack of oversight or delegation.
What to do instead:
Only provide corporate cards to limited employees, and carefully screen those who will need it for their roles. Regularly update the list of card users to make sure access is given to only those who require it. For better security, ask employees to record transactions with descriptions and receipts, making it easier to track spending.
Overlooking Rewards and Benefits- Corporate cards often give a variety of rewards and benefits, such as cash back, travel points, or even discounts on various purchases. However, many businesses fail to capitalize on these offerings completely, and thus missing money-saving opportunities.
What to do instead:
What to do instead:
Understand the card’s reward structure and align it with your business’s spending habits. If your employees travel often, look for a card that offers travel perks such as airport lounge access or free miles. If your company makes large purchases, a cashback card may be more suitable. Strategically using these rewards can offset costs and contribute to the company’s savings.
Missing Payment Deadlines:
Late payments on a corporate card can lead to very high financial costs, like interest charges or penalties. Also, chronic late payments could damage your company’s credit score, which would mean that it will be harder to secure favorable terms for future financial needs.
What to Do Instead:
Set up automatic payments or calendar reminders to keep track of due dates. Assign a dedicated employee or team to take care of payment schedules and reconcile transactions. Reviewing statements monthly will also help catch any errors and avoid unnecessary fees.
Poor Management of Personal and Corporate Expenses:
A common issue arises when employees use the corporate card for personal expenses, intentionally or unintentionally. This can create complications for the finance team.
What to do instead:
What to do instead:
Strictly prohibit personal use of corporate cards in company policies. If exceptions are allowed (such as during emergencies), make it mandatory for employees to report such instances and reimburse the company promptly. Educating employees about the importance of separating personal and corporate expenses can significantly reduce such occurrences.
Conclusion:
Corporate card is a powerful tool for businesses, but it require proper management to be effective. Try and avoid the above common pitfalls—like neglecting to track expenses, mismanaging access, and missing out on rewards—and you can harness their full value. Clear policies, consistent oversight, and strategic use of benefits can make corporate cards a valuable asset in managing your company’s finances.
Corporate cards can facilitate companies to achieve greater transparency, control, and efficiency in the handling of their everyday expenses with the proper approach toward the system.
