When it comes to business expenses, there are a myriad of options for the company accounting department. From old fashioned petty cash funds to modern day virtual credit cards, the choices appear endless. However, in this article we’ll attempt to prove that using credit cards for employees is currently the best option available for business expense accounting. Here are three reasons to use credit cards for employees.
1. Credit Cards For Employees Are Better Than Petty Cash Funds
Petty cash funds aren’t just inherently insecure, they create a lot of unnecessary work. And in this day and age, security and efficiency are the name of the business game. Issuing credit cards to your employees removes the need for maintaining a pile of cash in your office that’s easily stolen or misused. And time spent filing expense reports, distributing reimbursement checks and tracking down errors can now be used for more productive work.
Petty Cash Funds Are Insecure
The fact is that a petty cash fund makes an office more prone to break ins. Not only can the fund be a target for outside thieves, it can also become a temptation for those who work within the office. By getting rid of the petty cash fund and issuing credit cards to your employees you immediately increase the security of your business.
Petty Cash Funds Are Inefficient
Petty cash funds require constant oversight for relatively small amounts of money. The manpower and paperwork necessary to keep track of petty funds can cost more than the expenditures and acquisitions themselves. Switching to a system of employee credit cards can improve efficiency by automating a large amount of the administrative work required.
Petty Cash Funds Can Cause Overspending
When faced with a drawerful of cash, it becomes very easy for an employee to consider a petty cash fund as an endless source of money. This delusion can cause people to overspend without regard for the financial consequences. By implementing a credit card expense system, employees will know that their expenditures are instantaneously recorded and can be monitored in real time.
Petty Cash Funds Are Prone To Errors
Because petty cash funds are typically accessible by several people, all it takes is for one person to lose a receipt or forget to return some change to throw the entire the bookkeeping system into disarray. Without automated statements such as those provided by a credit card, it can be tough to reconcile any discrepancies.
2. Credit Cards For Employees Are Better Than Debit Cards
Credit cards have several benefits which debit cards cannot offer. First and foremost is the access to a line of credit. This can temporarily increase a company’s cash flow and allow it to continue to pay the bills while waiting for receivables to be collected. Credit cards also provide more security when it comes to disputed transactions and lost or stolen cards. Finally, responsible use of a credit card account leads to a better business credit score which is something that debit cards cannot provide.
Debit Cards Do Not Increase Cash Flow Without Penalties
Because debit cards typically do not access a line of credit, they won’t increase a company’s cash flow in the way that a credit card does. If there is an overdraft available on a debit card, interest charges will begin to accrue immediately and an overdraft fee may also be levied. With a credit card, no extra fees will be imposed as long as the funds are repaid by the due date.
Debit Cards Can Create Security Problems
Debit cards need to be attached to a bank account which can create security problems if a card is lost or stolen. A compromised debit card can allow access to any funds available in the bank account and result in the account being depleted. Credit cards, on the other hand, aren’t attached to a bank account and only provide access to the card issuer’s credit facilities. For this reason, credit card issuer’s typically employ more aggressive security teams than those associated with debit cards.
Debit Cards Won’t Improve A Credit Rating
Since a debit card doesn’t provide access to a line of credit, the user’s credit rating isn’t affected by its use. For a business trying to improve their credit rating, debit cards provide no benefit. Conscientious use of a credit card, on the other hand, will improve a company’s credit rating over time and increase the possibility of access to other financial instruments such as loans.
3. Credit Cards For Employees Are Better Than A Shared Corporate Card
Having a single corporate card used by an entire company can be more inefficient and insecure than a petty cash system. Compared to individual employee accounts, a sole account used by multiple people is prone to abuse with no easy way to trace charges back to the appropriate person. Multiple cards allow charges to be easily made when necessary rather than relying on a single card being passed around on an as-needed basis.
Shared Cards Are Inefficient
When a single credit card is shared by a number of people, efficiency suffers. By transferring the card from person to person it also becomes harder to keep track of each individual’s expenditures which can create extra work for the accounting department. By issuing separate credit cards to employees, payments can be made easily without creating accounting inefficiencies.
Shared Cards Can Cause Confusion
When one card is used by a number of people, it can be difficult to discern who incurred each charge. This confusion can create extra work when it comes to authorizing expenditures and reconciling accounts. Separate credit cards ensure that each employee’s expense are attributed appropriately.
Shared Cards Are Inconvenient
When several people need to use the same credit card, conflicts can occur. A single card needs to be kept track of and passed from user to user. When each employee has their own credit card they can make their payments when necessary without having to rely on others to make the card available.
The Emburse Advantage
Emburse has added credit cards for employees to their line of expense management tools. The Emburse system uses built in expense management and budgeting tools to streamline the purchasing processes in your company. By making it easy for a company to issue extra credit cards, the Emburse system ensures each employee has immediate access to their own card. Contact Emburse today for a free demo.