As businesses grow, they often have multiple employees acting on the company’s behalf, whether they’re salespeople on the road or members of the leadership team. Many businesses find it’s far more employee friendly to issue corporate credit or debit cards to workers rather than have them pay for expenses on their own and ask for reimbursement.
But granting an employee access to your business accounts can be risky, especially if you’re trusting new hires. In addition to employee fraud, businesses also must protect themselves against lost or stolen cards, which can then be used illegally. Through the use of spending limits on each issued card, your business can block the amount that can be spent in a designated period of time. Here are seven benefits of setting those limits on your business accounts.
Reduce Expense Fraud
Even if your accounting team personally reviews every single line item that comes through, fraudulent charges can slip through. It could be anything from a fill-up just before the trip ends to a shopping spree. While spending maximums won’t completely prevent fraud, they will limit the damage that can be done.
Minimize Damage on Stolen Cards
Once a business starts issuing plastic to employees, its risk of fraud increases. An employee who uses a card to make purchases across the country could easily lose that card or have it stolen. With a spending limit, a business finds that the damage that can be done by someone who has the card illegally is minimized.
Control Your Budget
Having spending limits gives you the power to set your monthly budget, since you’ll know that your employees can’t spend over a certain amount over the course of that month. This will give you the oversight you need to allocate money to travel expenses, office supply purchases, and other items commonly charged as expenses, while keeping the rest of your budget free for other bills.
Knowing they have a limit may lead some of your employees to curtail their daily spending. They might have gone for an expensive dinner while out of town on a business trip, but knowing the purchase might be denied will stop them. You can also add internal policies to your credit card-imposed limits, including allowing only a set amount each day for food and lodging.
Build Business Credit
If your accounts have high balances on an ongoing basis, it can eventually damage your credit, even if you’re paying the balance each month. A credit limit can help keep those balances low, protecting the business credit you’ve worked hard to build.
Save Time for Approvers
If you’ve assigned personnel to monitor and approve expenditures each day, having a limit will cut down on the work they have to do. This is especially true if the limit is fairly low.
There are alternative ways to curtail employee spending and catch fraud, including setting up notifications every time a charge is made. But this type of monitoring can cause undue stress for business leaders, who should be investing their time in more important activities. Spending limits allow them to avoid this type of behavior without taking the risk that comes with not having any protections in place at all.
With today’s tech tools, businesses can easily place spending limits on the cards they issue employees for expenditures. By putting maximums in place, they can cap the amount an employee can spend each day, week, or month. This will help reduce fraud while also cutting down on the amount an employee without limits might spend. When combined with accounting tools, spending limits can help improve productivity and make budgeting more predictable.