The strict control of the corporate credit card is essential for the tool to be used with advantage in financial management. Increasingly present in small businesses, the instrument is valid for monitoring expenses, but if there is unruly spending, cash can be severely compromised.
The strict corporate credit card control It is essential for the tool to be used with advantage in financial management. Increasingly present in small businesses, the instrument is valid for monitoring expenses, but if there is unruly spending, cash can be severely compromised.
You may have heard of the corporate credit card in the news, as this tool is quite common in the public, including surrounded by controversy motivated by non-standard spending. But it’s not just the federal, state and municipal governments that make use of it. In the private sphere, small companies mirror large organizations to adopt the instrument.
If you are not yet familiar with the theme, it is worth understanding the modality as similar to credit card intended for individuals, but with some differences . The main one is that it is used by the business owner and other employees to cover specific expenses or pay company bills.
Credit cards for business travel
Among its most common uses are business travel , where it acts as the payment tool for hotel nights, for example. Modern solutions make it even easier by allowing only one code to be used by employees in place of the physical card.
Thus, in the month following the expenses, the company receives a single invoice, which shows the expenses ratio, with values and locations, just like the credit card document for individuals.
But why can your business benefit from this kind of tool? Besides agility in purchasing, organization, practicality and security are some of the reasons to bet on it, as highlighted by the financial advisor Jose Ferdinand Molena:
- ecurity : With the card, you don’t have to carry large amounts of cash or even checks, which would end up exposing you to greater travel robbery risks, for example.
- rganization : Without this tool, the business owner or his employee would pay the expense on the spot, spending it from his own pocket and assuming a momentary loss, as reimbursement would occur later, depending on the arrangement between the parties.
- racticality : Small businesses can use the card in a variety of situations, in addition to the aforementioned travel and attendance of events. Covering food expenses, purchasing replacement parts and car supplies are some of the options.
About this last advantage, in order for it to really benefit the company, Molena warns: we must have an effective and strict control of the corporate credit card. Otherwise, the tool will bring inconvenience to the business.
The consultant also points out that companies from all sectors can benefit from the instrument, but especially those that work with external vendors, sales representatives, whose employees travel on company service and who have vehicle fleets.
How to control corporate credit card
If you would like to know the potential benefits of the tool for your business, you can find out more about hiring them from banks that offer it. But before hitting the hammer, it is worth following some of the tips adopted to open corporate account, such as researching rates and tariffs and observing if the services offered fit your need.
After this step and with the corporate card in hand, you need to know how to use it to your advantage, so that you can experience only its advantages. The following tips, built with the help of Molena, are also valid for those who use a business (non-corporate) credit card to pay the business bills.
Create your rules
This first recommendation goes for everyone from the owner to the company’s employees. Without clear rules known to those who will use the card, there is a risk of runaway spending. Define, for example, who can use it (avoiding uncritical distribution or lending to unauthorized third parties) and how to use it (to pay what kind of expenses).
Rate the expenses
For the corporate card to be an efficient financial management tool, all expenses related to it must be posted and classified according to the chart of accounts. “This way, the company will know where it is spending and can analyze whether spending is growing or decreasing,” he says.
To ensure the previous step, it is best practice to closely monitor how the card is used. By conducting regular monitoring , you readily identify unnecessary expenditures and are not surprised by a high bill the following month.
Card-related rules are there to be complied with. If he is used to pay an unforeseen expense, even though he sees such an act as an exception, there is an unforeseen injury that he will have to deal with. As a way to regulate the use of the tool, Molena recommends cards of the prepaid type, which are effective to limit the amount of spending and may even stipulate the places where it is accepted.
Bank reconciliation improves control
The entrepreneur who adopts manual means of financial control often loses twice: by allocating precious time for a non-operational task and by being exposed to errors that can mask potential cash losses. This is a risk that is assumed by setting aside best management practices.
If you want to prevent problems, bank reconciliation may be the best solution. Such automated process consists of comparing your internal cash (inflows and outflows) with the bank statement.
With regard to the corporate card, a specific process for the invoice can be created, which allows not only to know the expenses better, but also to monitor them in time to make the necessary adjustments.
All this can be done with the minimum effort through an automated system integrated with other management tasks. Adopting an Excel spreadsheet is useful, but there are easy-to-use, inexpensive software that can be accessed from your computer or mobile devices. This is a good time and money saving tip – a daily search for small businesses.
You have seen in this article that a corporate credit card can be a useful tool for making financial management more efficient in your business. But achieving this positive result depends on how it is used. To adopt the tool, then, it is worth remembering the main steps to take:
- nderstand how the corporate card works and value it
- Look for banks offering the card and compare their rates and services.
- Create and follow rules to discipline and control their use.
- Monitor expenses so that your company’s cash is not compromised
- Adopt a management system to perform automatic bank reconciliation.