Company Credit Cards – Who do they Work ?
Company credit cards are a valuable financial tool that businesses can use to streamline their expenses and improve their cash flow. In this article, we’ll explore the benefits of using company credit cards and how they work.
It is common for entrepreneurs at the very early stages of creating their business, to rely on the credit card to finance the operations of the business. A popular statement among entrepreneurs is “I maxed my credit cards”.
Definition
A company credit card is a type of credit card that is issued to a business or organization rather than an individual. It allows employees to make purchases on behalf of the company, while the company assumes responsibility for paying the bills. Company credit cards typically come with a credit limit, which is the maximum amount of money that can be charged to the card.
Benefits of Company Credit Cards
Simplified Expense Management: Company credit cards can make managing business expenses easier. Instead of keeping track of receipts and manually recording spending, all credit card transactions are automatically recorded and classified on the statement.
Improved Cash Flow: Company credit cards provide a flexible payment option, allowing firms to pay for expenses on credit and defer payment until the end of the billing cycle. This can assist firms in maintaining a healthy cash flow and avoiding cash flow constraints.
Rewards Programs: Many company credit cards provide rewards programs, such as cashback or airline miles, which can benefit both the employee and the firm. These incentives can help offset business expenses while also improving staff morale.
How Company Credit Cards Work?
When a business applies for a company credit card, the issuer will evaluate the business’s credit-worthiness and determine a credit limit. Once approved, the business can issue cards to its employees, each with their own spending limit.
When an employee makes a purchase with the company credit card, the transaction is recorded on the credit card statement. At the end of the billing cycle, the business receives a statement that summarizes all transactions and the amount owed. The business then has a grace period to pay the balance in full or make a minimum payment.
Businesses should set clear standards and procedures for the usage of company credit cards to guarantee that they are used appropriately. Setting expenditure limitations, specifying which expenses are acceptable for reimbursement, and detailing repercussions for misuse are all part of this.