Credit card expenses: A potential ‘black hole’ for Finance teams

Updated: Apr 15

Glean AI CEO, Howard Katzenberg’s, three easy steps to handling business expenses charged to credit cards.


When it comes to processing bills through accounts payable, most Finance teams have a pretty solid set of procedures in place: invoice is received, is coded into a GL system (either automatically or manually), gets reviewed, gets paid, and then the payment is recorded in the GL system.


Decades ago, it would have been unheard of for bona fide business expenses to run through business – or even personal (gasp!) – credit cards. Now, however, not only is it accepted, but actually quite common, for a number of reasons.


First, many vendors just don’t have the cash flow to allow 30, 60 or 90-day payment terms for their customers. Credit cards allow for instant payment which is certainly preferable for them.


Also, many payments - most notably for software subscriptions - are monthly and recurring, making them ideally suited to be set up as automated credit card charges.

Finally, many small companies are no longer willing to accept the risk of bad debts. Payment in advance is required, and credit cards get this done easily and instantly.


The dangers of the ‘black hole’

However, because the use of credit cards to pay business expenses has been more of a slow creep versus a sudden change, many finance teams have not set up formal processes for dealing with these costs.


This is dangerous for a number of reasons:


  1. First, payments may not have accompanying invoices or receipts, and a credit card statement certainly does not suffice when it comes to auditors requesting backup for business expenses. ‘Legitimate’ business expenses are those with accompanying invoices or receipts substantiating the charges. Your auditors might cite a material weakness or deficiency in internal controls if proper substantiation is not maintained for your business expenses, including credit card charges.

  2. Second, with many recurring tech payments being ‘seat-based’ or ‘usage-based’, who is reviewing this information to ensure it is accurate and up to date? Without formal review and approval processes, these costs can quickly escalate and get out of hand.

  3. Third, what if the amount of the charge doesn’t match what was agreed with the vendor? What if the amount was increased by the vendor without authorization? Again, without scrutiny, overpayments could go unchecked for months.

  4. Invoices and receipts help your accounting team categorize bills. Without proper context on spend, expenditures may be improperly expensed vs capitalized or assigned to the wrong GL account.

Your 3-step solution

Here are some easy steps you can implement today to ensure the expenses charged to your company credit cards are getting the same level of examination as your regular invoices.


STEP 1: Set up a new email group named receipts@yourcompany.com. This email group should be utilized in the exact same manner your team uses its AP@ email alias. Add the relevant finance team members to the group. Communicate (via email) to your teammates instructing them to use the receipts@yourcompany.com alias as the billing email when signing up for new vendor services. Below is an email template that you could leverage:


EMAIL TEMPLATE
Subject: Billing email for when signing up new vendor services
Dear Team:
In order to ensure all business-related credit card charges are being properly reviewed and categorized, the Finance team has set up the new email alias receipts@yourcompany.com. Please use this email as the billing email when signing up for vendors services. If you have vendor services where you originally signed up using your personal company email, please can you make this change with the vendor.

STEP 2: When you receive a receipt via the receipts@ inbox, review and scrutinize it to make sure the figures are accurate. Just because the payment has already been made, it doesn’t stop your team from verifying charges and amounts. This review will also ensure that your credit card charges are included in your spend analytics, as opposed to being lumped together.


STEP 3: To the extent you have questions on the charges, send an email to the person at your company who manages the relationship. A lot of spending surprises often occur with costs charged to credit cards. You can limit them by asking questions about the bills you review and proactively aligning on spend estimates for the future.


By ensuring your company’s credit card charges are properly folded into your overall bill review and approval processes, you will be sure that your spend analytics are complete and your vendor payments are accurate. By taking control of spend, your Finance team will be better able to embrace its role as a proactive and strategic contributor within the organization.


For information on Glean.ai, please contact hello@glean.ai.





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