Many employers still allow employees to use private credit cards to pay for work-related expenses. “Most people probably think it's a convenient solution, not realising the risks that it entails for the company,” says Rikard Redin, Key Account Manager at Eurocard.
A comprehensive survey of Swedish and Norwegian companies shows that nearly half of employees use private cards for work-related expenses.
“My understanding is that this is still the situation. Most people probably think it's a convenient solution, not realising the risks that it entails for the company. Employers are also sometimes under the misconception that with a “real” corporate card, for which the company assumes the credit risk, invoices always go directly to the company. This is not the case; the company chooses where the invoice will be sent first,” says Rikard Redin.
He highlights three dangers in allowing employees to use private credit cards for work related expenses.
1. Increased risk of fraud
Private cards cannot be linked to business solutions that allow you to see purchases in real time (with associated transaction data that match the information on receipts), set purchase limits or block cards. There is also a risk of confusing personal and work-related expenses in the systems, which increases the administrative burden while being questionable from a privacy perspective.
“In addition, without this kind of interconnection, it becomes much more difficult to detect fraud and human error. The company also loses the ability to forecast upcoming expenditure.”
2. Increased costs for the company
Private cards cannot be integrated with expense and travel management systems that help to digitise paper receipts and automate expense management.
“This means you end up with a manual expense posting process that is time-consuming, complicated and costly. Just dealing with paper receipts costs businesses billions of kronor every year. Automating your receipt management can save you a lot of time and money.”
3. Risk of tax hits for both companies and employees
When an employee uses a private card that generates bonus points for work-related purchases, and puts these points to personal use, these are benefits in kind. The employer is then obliged to pay employers’ social security contributions on the value of the benefits and make tax deductions for the employee in the same way as when paying their salary.*
“Many people don't realise this, which can lead to both the company and the employee being taxed retroactively. If a lot of cards are involved, this can be very costly for the company. Employers also risk employees being unhappy about having to pay a tax they didn’t know about.”
Here is the solution:
Choose a corporate credit card for which the company assumes the credit risk; in other words it is ultimately liable for payment. This ensures:
- Better monitoring of expenses and transaction data.
- Reduced expense administration.
- More effective procedures to reduce errors and risks and detect fraud.
Did you know that...
from 1 July 2024, Swedish companies will no longer be required to keep paper receipts for accounting purposes if they have been converted into a digital format? Find out more here:
*Sources (in Swedish):
Kundtrohetsrabatter | Skatteverket
Förmåner - Företag och organisationer | Skatteverket
