Posted by Mike Smith :: May 26, 2009 @ 6:05 am

Having a corporate credit card through your employer is often a necessity and may even have some personal benefits. In many cases, though, employees are required to pay the credit card bill out of their own pocket and are then reimbursed by their employer. This scenario has a few downsides.

First, it disrupts your personal cash flow by tying up your money until the reimbursement occurs.
If your employer doesn’t approve a particular expense item or becomes insolvent before it can repay you, you could be out for the amount that you cover. Even if your company is just slow to process payments, this system could cause you to cover for your employer’s expenses for months at a time.

Second, it gives you the possibility to pay late or less than the full amount, exposing yourself to interest and penalty fees. We all know that the responsible use of credit means regularly paying our credit card balance in full and always paying on time. When the responsibility for those actions shifts to employees from employers, it’s more likely that an improper use of credit will occur.

Lastly, it adds more complexity to your budget. Since transactions are intermingled with your own personal money, you’ll need to track them closely. To handle this scenario, I have an expense category called Reimbursed Job Expense. I capture both corporate credit card payments and reimbursements received under this category. Ultimately this category should balance to $0 as I am reimbursed for my corporate purchases. Until that occurs, I can track the amount I have spent, which is also the amount I am owed.

Making your employer aware of the downsides of your current corporate card payment method might inspire your company to change. An alternative method is to have employers handle corporate credit card payments directly. That shifts responsibility back to the ones who are mandating the expenses.

How are corporate card payments handled by your employer?