Developing your own “best practices” for charge card use in your small business is essential for maintaining financial control, preventing fraud, ensuring compliance, optimizing costs, fostering employee accountability, and enhancing the company's reputation. It provides a framework for responsible financial management and contributes to the overall success and sustainability of the business.
Here at Finfare, we’ve put together a list of “best practices” we’d suggest your company use as base and guidance in developing your own best practices for employees to follow.
Company Billing Address: It is essential to communicate to employees the importance of knowing the billing address details for specific purchases such as gas or online transactions. Ensuring that they use the correct and exact billing address as entered in Finfare software is crucial to prevent any potential issues caused by variations such as different street abbreviations or suite number formats. Educating your employees about this limitation will eliminate frustrations and ensure a smoother experience.
Examples of variations:
- Drive vs. Dr. vs. Dr
- Street vs. St. vs. St
- County Road vs. Co Rd
- Suite #100 vs. Suite 100 vs. #100
Clearly Define Card Usage Policies: Establish clear guidelines outlining how charge cards should be used by employees. Define acceptable spending categories, spending limits, and any restrictions or prohibited expenses. Communicate these policies to all employees and ensure they understand their responsibilities.
Have Employees Sign Internal Policies: Have Employees Sign Internal Policies: It is generally advisable that customers ensure that their Cardholder employees have signed internal spending and purchasing policies. Note that purchases that are outside of your own internal policies are considered authorized purchases when conducted by authorized Cardholders. You should have policies and procedures that cover card usage guidelines and procedures for reimbursements by employees that spend outside of your internal policy requirements.
Educate Employees on Card Usage: After defining card usage policies, provide training or educational resources to employees regarding proper card usage, expense reporting, and compliance with company policies. This empowers employees to use cards responsibly, improves transparency, and reduces the likelihood of errors or misuse.
Require Receipt Upload: We would strongly suggest including in your usage policies a requirement to upload receipts within X number of days. By implementing this practice, you’ll ensure proper documentation of expenses, facilitating accurate tracking, reimbursement processes, and financial record-keeping. Additionally, you’ll enhance transparency, reduce the risk of misplaced or missing receipts, and streamline expense management procedures.
Set Card Limits: During card creation, be sure to implement limits that make sense per card or user, including total amount, frequency (daily, weekly, monthly, one-time), transactional amount limits, as well as merchant categories that are allowed or blocked. Utilizing these limit tools will help businesses maintain control over expenses, prevent overspending, and ensure compliance with budgetary constraints and company policies. It provides a framework for responsible card usage and financial management, allowing businesses to effectively manage their resources and minimize the risk of unauthorized or excessive spending.
Pre-Authorization Charges: Pre-authorizations are temporary holds placed on a customer's payment card to verify the availability of funds before providing goods or services. Commonly used by gas stations, hotels, and restaurants, pre-authorizations help ensure that customers have sufficient funds to cover their expenses. For example, gas stations may place a hold to confirm the card's validity and more than the anticipated fuel cost. Hotels use pre-authorizations to verify funds for the stay and potential additional charges. Similarly, restaurants may perform pre-authorizations for large group reservations, high-value orders, or for the inclusion of a tip. These temporary holds are replaced by the actual transaction amounts, and they help businesses reduce the risk of declined payments and unpaid bills.
When setting card limits, it’s also important to consider how each card will be used. For example, if an employee will be using the card for gas purchases, having a card limit under $150 would not be advisable because of pre-authorization needs.
Limit the Number of Cards: Avoid issuing an excessive number of cards to employees (especially, physical cards). Assign cards only to individuals who genuinely require them for business-related expenses. This helps maintain better control over spending and reduces the risk of unauthorized or unnecessary charges.
Assign Cards Based on Job Roles: Assign charge cards to employees based on their job roles and responsibilities. Consider the nature of their work, level of financial responsibility, and the need for regular business-related expenses. This ensures that cards are distributed appropriately and align with employees' authorized spending requirements.
Regularly Review Card Limits: Periodically review and assess the assigned card limits for employees. Adjust limits based on changing responsibilities, business needs, or spending patterns. This ensures that employees have adequate limits for their authorized expenses while preventing excessive spending.
When managing card limits for any type of charge, it might be beneficial to avoid frequent changes (increases for large purchases, for example) unless there are foreseeable increases or decreases in spending. Instead, an alternative approach could be to leverage virtual cards for specific purchases or maintain a high-limit card for large transactions. Let's explore the potential advantages of this approach.
Monitor Card Transactions: Keep a close eye on card transactions through regular monitoring and reporting. Utilize expense management software or tools to track and analyze expenses effectively. Promptly address any suspicious or unauthorized charges and take necessary actions to rectify the situation.
Promptly Terminating Users & Cards: When terminating users and managing cards in Finfare Expense Management, it is crucial to designate a responsible individual to control access. This designated user will ensure that employees who have left the company or have been terminated no longer have access to active charge cards. It is essential to promptly remove access to both Finfare Expense Management and any associated active cards upon employment termination. Furthermore, to maintain responsible expense management and detect any misconduct, it is important to terminate or freeze cards immediately when any suspicious or unauthorized activity is identified. By implementing these practices, you can maintain security, prevent unauthorized card usage, and ensure responsible expense tracking.
Regularly Review and Audit Expenses: Conduct regular reviews and audits of charge card expenses to ensure compliance, identify potential misuse or policy violations, and maintain accurate financial records. This helps detect any irregularities and enables appropriate corrective actions to be taken.
Recurring charges: When managing recurring charges for your small business, it's advisable to assign them to charge cards held by the CEO/owner or a high-level administrative staff member, rather than individual employees. By assigning recurring charges to charge cards held by the CEO, owner, or high-level admin, you establish a reliable system that ensures payment continuity, reduces administrative complexity, enhances financial security, and minimizes the impact of employee role changes or turnover. This best practice can contribute to the overall stability and efficiency of your small business operations. Delve more deeply into best practices for recurring charges.
Will terminating a user also terminate the cards assigned to that user?
Yes, terminating a user in Finfare Expense Management automatically terminates the cards assigned to that user. To ensure continuity, it is recommended to change any recurring charges associated with the terminated user's cards to a new or existing card under the admin account. By proactively managing the termination of both users and their assigned cards, you can maintain control over expenses and ensure a smooth transition without disruptions.
Accounting Software Connection (e.g. QuickBooks): For optimal integration and data security, we recommend connecting Finfare Money to your accounting software (QuickBooks Online) using a designated service account. A service account should be linked to your company rather than an individual. By adopting this approach, you can safeguard your data in QuickBooks and maintain uninterrupted connectivity to your Finfare Money account, even if an employee departs from your company. This ensures seamless continuity and mitigates the risk of data loss.
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