Whether it's inadvertent overspending or intentional use of company funds for personal expenses, employee misuse of company credit cards can have significant financial repercussions on your business. Not only does it present an immediate financial burden, but it can create a ripple effect of issues, including compromised trust and potential legal complications. 

For this reason, it’s imperative to establish clear policies, processes, and tools to guide employees toward responsible card usage. While the goal is to minimize risks, it's essential to strike the right balance between enabling employees and ensuring expenditures are warranted. 

Let's delve into seven practical ways to achieve this equilibrium and curb the misuse of company credit cards to safeguard your business's financial health.

1. Establish a credit card policy

Establish a clear credit card policy before you hand out any credit cards. With a policy in place, the rules are clear for everyone, leading to fewer misunderstandings and less potential for unauthorized purchases.

First, make sure your policy explains what the company credit card can be used for; typically, this includes business-related expenses such as travel, accommodation, meals during business trips, and necessary office supplies. Make it clear that purchasing personal items with a corporate credit card is never allowed.  

Secondly, ensure you always place transparency at the forefront. Every employee should understand the policy so they can adhere to it. Therefore, discuss it during stand-up meetings, address any questions, include it in the employee handbook, and offer training sessions on responsible card use if necessary. Don’t forget to make the policy readily accessible, so employees can refer to it when they’re unsure about a purchase. For example, you could consider creating both a comprehensive policy that delves into the details and a more concise, user-friendly version employees can quickly reference. 

Lastly, your credit card policy should also include the steps the company will take if financial resources are ever misused. This could range from disciplinary action to termination, depending on the severity of the case. 

2. Enforce consequences of misuse

While having a credit card policy is important, it's equally vital to ensure that these rules are not merely guidelines but consistently upheld standards. 

Unfortunately, misuse, fraud, and unauthorized charges can happen, especially if you share credit card numbers across the organization — since there’s less visibility into who is making transactions, leading to decreased accountability. Therefore, follow through with the consequences outlined in your policy if an employee ever engages in wrongful payment practices or breaches the credit card policy in any way. This might include having the employee repay the charges, issuing a written warning, or even considering termination in instances of purposeful misuse. If this is ever the case, work with your legal team and conduct a fair and thorough investigation into any suspect charge and ensure you have all the facts before taking action. 

Remember, the goal is not to cultivate an environment of fear but to foster a culture of trust, transparency, and responsibility. Enforcing the consequences of misuse emphasizes that the company takes the responsible use of its resources seriously and underscores the potential repercussions of employee misuse of company credit cards. It also signals to other employees the importance of following the company's credit card policy.

3. Implement an expense approval workflow

Next, implement an expense approval workflow in your business; that way, employees always obtain approval from their manager or the finance team before making purchases with the company credit card. 

An expense approval workflow doesn't have to be complicated; in most cases, it looks something like this: Employees who need to charge a business expense submit a request, either manually or through an accounting platform, detailing the purpose of the expense, the amount, and any other relevant details. Once reviewed and approved by either their manager or the finance team, employees can then access the corporate card and proceed with the transaction. 

A well-implemented expense approval workflow not only prevents misuse of company credit cards but also helps the business manage its budget more effectively. It promotes accountability, reduces the chance of overspending, and ensures that each expense is necessary and beneficial to the business. 

But managing various manual requests for multiple employees simultaneously and tracking what has been approved or declined can quickly become a hassle, especially as your company scales. Therefore, consider using virtual cards to simplify this process. Through a virtual card app, you can set up a workflow where employees can send virtual card requests to the appropriate approver electronically, speeding up the process and minimizing the risk of unauthorized expenses.

4. Use virtual credit cards 

Unlike traditional physical credit cards, these digital alternatives offer an added layer of security, control, and flexibility for your business while reducing the risk of employee misuse of your company credit card.

Virtual cards are beneficial for various business purposes, including managing employee expenses. Since you can issue them instantly via a desktop or mobile app, there’s no need to share physical credit card numbers across the company anymore or depend on tedious expense reports that only delay reconciliation and create massive headaches for your finance team. 

Virtual cards come with various helpful features, like spending limits and expiration dates, that ensure each virtual card can be tailored to the exact needs of a particular business purchase — significantly reducing the risk of misuse and fraud. You can create as many virtual cards as you need, assign them to employees for ad-hoc purchases or business travel, and instantly equip them with an approved payment method when they need one. 

5. Set spending limits 

A proactive approach to preventing employee misuse of company credit cards involves setting clear spending limits. However, with traditional credit cards, it can be challenging to ensure spend limits are respected. Since constantly turning the spending limit on and off for regular credit cards isn’t practical, you have to rely on the goodwill and discipline of employees to stay within approved spending amounts. 

With virtual cards, on the other hand, you can set precise spending limits that can't be surpassed, providing a foolproof mechanism to control spending. Spending limits serve as a safety net, allowing employees to make necessary purchases while preventing expenditure that exceeds budgeted amounts. You can customize spending limits per card and according to your business needs. For instance, you might set a higher virtual card limit for an employee traveling for work and a lower one for an employee who needs to make a one-off purchase on behalf of the company.

By setting spending limits, not only will you prevent misuse but create a culture of financial responsibility within your organization. These clear boundaries help to instill a sense of accountability in your employees, reinforcing the appropriate use of company funds.

6. Monitor transactions in real-time 

As an employer, it’s important to actively monitor expenses to control spending and reduce instances of fraud and corporate credit card misuse. Real-time monitoring allows you to view transactions as they occur, providing an up-to-the-minute snapshot of your company's spending and ensuring all charges are legitimate and not personal expenses. 

With traditional credit cards, however, obtaining this information on time is challenging since you often have to rely on monthly statements or manual expense reports to get a comprehensive and accurate view of spending. Not to mention that if credit cards are shared, it’s very hard to trace transactions and identify which employees are responsible, leading to delayed reconciliation and never-ending back and forth between teams. 

By using virtual cards instead, real-time monitoring becomes a breeze. You can see who is spending money and how, granting you immediate visibility to promptly identify misuse and address any unauthorized transactions before they escalate.

7. Send receipt reminders and notifications 

Another effective way to deter any company card misuse is to remind employees to attach receipts for every business purchase they make. But reminding employees manually can be time-consuming and ineffective. Fortunately, with a virtual card app like Extend, you can create a cadence of receipt reminders and notifications that automatically send on your behalf. 

This means you no longer need to rely on employees to keep track of paper receipts. Instead, they’re empowered and reminded to digitize receipts and attach them as soon as virtual card transactions occur. This ensures every charge is accounted for and can be cross-verified with the associated receipt.

Leveraging receipt reminders and alerts will not only simplify expense tracking for your finance team and deter potential unauthorized purchases of personal items but also encourage accountability across the board. 

Prevent employee misuse of company credit cards with Extend

Preventing company card misuse doesn't have to be a complex task. With the right strategies and payment tools, like virtual cards, you can ensure control of your company's expenses. Learn more about Extend employee cards and how they can help safeguard your business finances while empowering your employees with the payment capabilities they need when they need them.