How to prevent the abuse of a small business credit card
A FLOATING company credit card is possibly one the most popular facilities at many workplaces. However, employers, especially small and mediumsized businesses, can no longer afford unlimited access to a company credit card because of the risks involved.
This is the view of Lee Bromfield, chief executive of core lending at FNB Business.
“There is a fine line between use and abuse, but the bottom line is that its misuse could have dire consequences for a small business. One of the simplest ways to differentiate between proper usage and abuse is by monitoring the spending habits of employees entrusted with a company credit card.”
Bromfield says the basic principles of managing a company credit card are no different from handling a personal credit card. He warns that the most challenging part is ensuring that everyone assumes equal responsibility.
He provides guidelines on how to manage one:
Rules: It is important to set ground rules to ensure that every employee knows how and who is allowed to use the card. Every business can set its own rules.
Ensure accountability: Small businesses tend to operate in an agile and flexible manner; so systems are often less stringent compared with big business. To ensure accountability, it is advisable to task the financial manager or controller with the overall responsibility of managing the company credit card. This person should have the relevant skills to differentiate between proper use and misuse.
Keep financial records: Business credit card statements should be properly scrutinised with the view to continuously improving cash flow management. This should be part of the business’s overall financial management.
Not every business errand requires a credit card.
Most small businesses often operate with petty cash so this can be useful where only a small amount is needed to settle a bill.
“The proper management of a company credit card is an important part of a business’s financial management structure. For small business owners, it is essential to keep in contact with your financial manager and not simply delegate all financial management duties.
“The key fact to remember is that the success or failure of your business could be as easy as abusing a business credit card,” says Bromfield. – FNB Corporate Communications