Corporate Credit Cards vs Employee Expense Reimbursements Pros and Cons from a Risk Assessment Perspective
There are a lot of approved, business-related expenses that employees incur as a function of doing their jobs.
Some examples include:
–Meals and entertainment
–Fuel (in lieu of mileage)
–Membership/event registrations
–Other travel costs
–Miscellaneous office supplies
How management monitors these expenses whether using reimbursement method or company cards is a key internal control of the business. There are some pros and cons for both options and they have slightly different nuances when it comes to monitoring the controls over these expenditures.
Company credit cards – employees of the company have a credit card that is billed directly to the company and not a reimbursement format.
Pros:
- The company gets all statements directly and (typically) directly to accountant vs the card holder
- The company can get perks – cash back, miles, etc.
- Could save employees time in the record keeping process
Cons:
- Internal Control risk around management review and approval of charges.
- Personal charges can be charged to a company card and not caught during review.
- Could encourage overspending (opting for a pricier hotel or restaurant).
- Risk of lost or stolen credit cards.
- Employees should still be turning in receipts to support the charges – this can be a hassle tracking down receipts.
Control:
- The charges have already been made in the company’s name by the time they are reviewed, a review should be thorough and require proper supporting documentation to ensure that no personal charges are being made on company accounts.
Expense Reimbursements – employees pay for expenses using their own card/cash and then submit a weekly (or periodic) expense reimbursement form to get reimbursed for those business expenses.
Pros:
- No company credit cards – bypass associated risks of lost/stolen cards.
- Employees can earn their own perks on charges using their personal cards.
- Employees likely to be better steward of charges.
Cons:
- No perks for the company.
- More time consuming for employees/administrative time to complete reports, track down missing receipts/documentation, etc.
Control:
- Review is done at the front end before the employee is reimbursed. The review should be a thorough review of supporting documentation to ensure proper approval before reimbursement is made.
What if there are hundreds of charges a month?
In instances where there are high volumes of charges monthly and a thorough review is not deemed to be a best use of time and resources there should still be a monitoring of charges. Consider doing an analytical review of charges with a same dollar amount, recurring charges or vendors, vendors that are typically personal in nature, etc. Select those items deemed to be higher risk to complete a more in depth review but keep the employee guessing on what is reviewed each cycle.
Who should review the boss’s charges?
A member of the board (if a board is in place) or an independent member of management should be reviewing the CEO/President’s charges or reimbursement requests.