For accounting, tax, legal and economic reasons, there are some payments that we should never charge to company bank cards. In addition to separating operating expenses from personal expenses, here are some considerations to decide when to pay or not with the business card.
Company bank cards are a practical and useful payment instrument. With them we can manage the operating costs and expenses of representation of our business, as well as face contingencies and unforeseen events. However, not all consumptions can or should be charged to corporate cards.
In the first place, it is necessary to separate the expenses and costs of operating the business from the personal consumption and purchases of partners and employees, as we discussed in this article. In addition, for accounting, fiscal, legal and economic reasons, there are other series of expenses that should be excluded from the balances of our company cards. We will tell you.
High value purchases
If we have a high credit limit, it can be tempting to buy that expensive tool or item that our business needs with a credit card. However, it would be an onerous credit, since commercial cards have higher interest rates.
Payroll
Payroll is one of the highest expenses of any company. Charging it to the credit card could indicate that we are running out of liquidity and that we should evaluate our business model. As with high-value purchases, it is preferable to find a more affordable business credit alternative.
Luxuries and extras on business trips
Travel and representation expenses are among the most common uses for a business card. However, transfers, stays and maintenance are normally covered for reasonable amounts, according to established spending policies.
Lavish meals, parties or personal walks should go to the beneficiary's card. Thus, if we travel to a conference and want to stay a few more days with our partner, the hotel and the extra ticket should be charged to our personal account.
Significant cash advances
It is one thing to take out some cash during a business trip and another is to use the card to inject working capital into our company. As with payroll, always appealing to the cash draw card can indicate that something is wrong with our business model.
Business cards are an expensive source of money. Also, cash advances in the ATM network often do not have a grace period.
Legal expenses
Paying the costs of legal settlements with credit cards can give the wrong signal. It could be a sign of very tight budgets, questioning our ability to pay. In addition, it implies having to pay the associated interests, making the operation more expensive.
Gifts and excessive customer service
Inviting a customer or supplier to a meal with the corporate card is totally legitimate. The Christmas basket or other gifts for commercial purposes that fall within reasonable limits are also accepted. This according to the billing, spending policy and regulations of each sector. However, luxury gifts, parties and other excessive entertainment should not be paid with the business card.
Members' personal expenses
If it is not representation expenses, the personal consumption and purchases of the members should not be paid with company cards. If this happens, the movements must be considered in the accounting, but the amount should be returned by the beneficiary. This by means of discounts in the payroll or considering it remuneration in kind and including it in the personal income tax declaration of the holder.
Purchases for domestic or non-business use
Many entrepreneurs and partners in small and large companies mistakenly use corporate cards for private purchases; the most unusual expenses that have been attempted to strain include cosmetic surgeries, lottery tickets, adult movies, and speeding tickets.
In general, business card lines of credit are not an asset, nor should they be thought as working capital. It is always advisable to evaluate less expensive financing alternatives and negotiate based on the actual cash available.
