Small business credit cards for employees

Many small businesses are starting to take advantage of the ability of small business credit cards to have subsidiary credit cards available to their employees.

These subsidiary credit cards can have their own credit limits set, together with other conditions such as the prohibition of cash advances, and they do not need to be the same as the main credit card held by the small business.

The usual way that expenses are carried out in most small businesses without the access to administrative staff to book hotels and travel, is to get the employee to spend and then reclaim.  The advantage of subsidiary credit cards over this approach is that there is far less resentment.  Many employees dislike funding their employers when they incur necessary business expenses, even if it is for the month’s interest foregone.  There is also a worry among some employers that not all necessary business expenses will be paid off if, for example, they lose a receipt or ticket.  Subsidiary credit cards get around this issue.

Some employees can get rewards cards, particularly cash back cards, for company expenses.  This means that for all spending they make on the company’s account they get certain rewards either from their favourite shop or service provider or in the shape of a proportion of the cash.  While there is nothing sinister in this in itself it can distort decision making so that unnecessary trips are taken to get increased rewards.  With subsidiary credit cards this is no longer an issue.

It is important that there are some clear policies introduced before subsidiary cards are given out to employees.  Firstly it should be made clear either that no personal spending should be allowed on these cards, or that if there is personal spending that this should be accounted for at the end of every month.  This means that there is less chance of a misunderstanding.  It is also a false economy, at least at first, to spend less time checking the expenses than under a pay and reclaim system.

A good practice with subsidiary cards is to only use them for non-core expenses such as staff transport and accommodation.  Essential supplies should either be invoiced as normal, or if they are to be paid for using a credit card this should be through the owner’s credit card and not through an employee.  In this way the owner keeps track of the cash flow of the business.