Tracking business expenses is a task no business owner enjoys, and yet staying on top of how your company's money is being spent can make the difference between profitability and bankruptcy.
When you're the sole person in the company responsible for making purchases, tracking expenses is easy. But, when the company starts growing, you can't continue to be responsible for everything. You need to share the load. That goes for business purchases as well.
When employees start making purchases on the company's behalf, the easiest way to track those expenses is through a monthly expense report that staff members submit. Employees can use a personal credit card or check to buy something the business needs, with your approval, and then submit proof to be repaid. Using a standard expense form, employees can attach receipts and an explanation for their purchases in order to request reimbursement for those business expenses.
However, when you get to the point where several employees are routinely making purchases on the company's behalf each month, requesting a corporate credit card in their name can reduce a lot of reimbursement paperwork. Employees who only occasionally make purchases may not need their own card.
Many financial institutions now permit business owners to issue credit cards to employees linked to the corporate account. This is convenient for a number of reasons:
However, there are some downsides to sharing company credit. Fortunately, you can reduce those with clearly stated policies.
The biggest downside associated with issuing employees their own corporate credit card is that you, the business owner, are then responsible for everything charged on that account. To minimize that risk, consider creating credit card usage policies that:
Creating rules around how and when employee credit cards can and should be used can reduce unexpected charges.
While employee credit cards can cut down on a lot of paperwork, using free or low-cost apps that allow employees to immediately categorize expenses and upload them for tracking and processing will reduce paperwork even more. Some of the best expense apps include:
The more you can enable employees to automate expense reporting, the easier expense processing and tracking will be for you — and the lower your tax prep bill next April.
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