What’s the limit on the credit card that your travelers are using? Is it enough? You might think that $5,000 (for example) is more than adequate, but consider the following “true story” scenario:
You send an employee to Manhattan for a week. There, she rings up about $2,500 worth of traveling expenses in hotel, food, and transportation. The following week, you send her to San Francisco where she rings up another $2,800 or so. She’s a responsible employee who does her expense reports immediately after the conclusion of a trip and as the one who holds the purse strings, you help make sure the company is quick to reimburse her. In this example, the company directly reimburses the credit card company so some of the Manhattan trip is already being paid off. However, you then need to send your employee on a third consecutive trip, this time to Boston. When she checks into her Boston hotel, the hotel immediately puts a credit hold against her card to the tune of $1,500. This is standard operating procedure for hotels; they “anticipate” what you’ll spend for your stay and immediately place a hold for that amount against your card even though, technically, you haven’t even walked through the door to your room. In that instant, the $2,800 worth of San Francisco expenses, plus the $1,200 or so left over from Manhattan, and now the $1,500 hold in Boston, puts her $500 over the credit limit. That evening, her card is declined at dinner and she is given the pleasure of calling you, the company, to learn procedurally what to do.
Raising that limit is a difficult thing to do for an employee with a corporate credit card. A manager’s intervention on behalf of an entire department is much more likely to yield results than a single employee on a trip. And anyway, the employee will be told by the credit card company to call their corporate travel department to resolve the predicament.
Here are some questions to ask yourself when it comes to credit limits and your employees who live under them:
- Does the employee use a corporate card, or a personal card?
- What is the average weekly expenditure for your travelers?
- What is their current credit limit on their corporate cards?
- What are employees expected to buy with that card? (Plane tickets? Hotels? Food?)
- How frequently do your employees travel?
- Where do your travelers go? Do they ever leave the country?
Here are some questions that address the variables in travel reimbursement procedure:
- How do you reimburse your employees? Do you directly pay off their cards, or are they expected to do it?
- How often do your employees complete their expense reports?
- How long does it take to approve reports and to reimburse them?
You should help make sure your travelers don’t get caught with maxed-out cards. Having a card turned down while taking clients to dinner is extremely embarrassing. The rule of thumb should be: Take the average weekly expenditure for your travelers, and multiply that by 4. That’s where your limit should be. If your employees travel outside the country and have to expense airline tickets, then you should strongly consider doubling the regular limit. A flight to Indonesia, for example, can cost $3,000, and then there’s the cost of two hotel nights just to get there and to get home.( Australia isn’t cheap either.)
To help keep employees from bumping limits that are already enforced, you have to encourage them (strongly, through policy if necessary) to get their reports done in a timely manner. I’ve worked for companies who have no such rule and employees who put of doing their expense reports certainly aren’t doing anyone any favors when it comes to keeping the card paid down.
If your company asks their travelers to use their own personal card(s) for travel, make sure you coach them into dedicating one card for business travel only, and to ask their creditors for a stronger credit limit. The last thing you need is a stranded employee without enough buying power to expense their way around a client environment!