Most companies require at least some of their employees to travel on a regular basis. To do so, those employees need access to a credit card. Companies often choose a standard corporate card, partly because it provides good reporting tools and often because it provides rebates to the company. At this point the company has a choice to make -- it can provide a card to each employee and be the guarantor, or it can require each employee to apply for the corporate card using their personal credit with the employee as the guarantor. This is where things get interesting. On the one hand, by forcing each employee to be the ultimate guarantor for their own card it decreases some of the company's risk and encourages responsible management of the card. On the other hand, the company can play a role in doing significant damage to the credit standing of its employees in several ways. First, some top-level managers can improve their own compensation by refusing to approve expense reports with legitimate expenses, and the employee has little recourse but to pay the bill or risk his or her own credit standing. Second, by delaying approval for legitimate expenses thus forcing the employee into temporarily covering the expense of their own pocket. Third, by delaying payment to the employee or credit card company.
On the other hand, employees can abuse the card and their employers by making non-authorized purchases or using the card for personal purposes. A recession leaves a lot of damage in its wake, including the creditworthiness of potential employees who may have been unemployed for months or even years and therefore may have fallen behind on mortgages and other payments. And if in the course of their being laid off their final expense report was not approved, the unemployed person may not have been able to pay their credit card bill. This may force a new employer to act as guarantor for such employees.
If companies are going to be able to demand that employees travel, it seems logical that the company provide the credit to make that possible. Likewise, if employees abuse the corporate card, they should be appropriately disciplined up to and including termination. Unfortunately, companies often fail to hold their employees accountable for their actions including abuse of travel card policy because they fear the loss of revenue that the card abusers produce. The result can be an approach to card management that leaves employees frustrated, confused and feeling taken advantage of, and companies in a position where they distrust their employees but feel powerless to make the system work.
Travel expense management is a critical supply chain function, but if management won't equally enforce its own policies, it is the same as not having any policy at all. If companies are going to insist that their employees be their own guarantors, they should at least have a policy that requires a budget for each proposed trip and written approval for the budget from their manager prior to it. Then the employee could file a pro forma expense report. After the trip, the employee would then update the pro forma expense report, and as long as the trip came in at or under budget no additional approvals for payment would be necessary. If the employee chose to go over budget or added personal expense items to the expense report, he or she would then have to wait for approval and therefore reimbursement from the company, paying the personal expenses out of their own pocket.
Lynn James Everard