"Charge It": Such A Small Phrase For Such A Big Disaster

A few days ago The Non-Profit Quarterly reported on an Executive Director who attempted to quell his anxiety by charging over 26,000 dollars (in “naughty” purchases no less) on his company credit card. Because he, along with one other person in cahoots, had complete oversight over the cards no one really knew what purchases were being made and the extent of their cost.

Which begs the question, should he really have had a credit card in the first place?

There are proponents for both sides. On the one hand, having a credit card can make tracking expenses easier. At the end of month you receive one neatly categorized statement detailing every purchase. This definitely beats juggling dozens of different receipts for each individual employee.  Budgeting is also simpler as costs can be estimated with greater ease. Moreover, payments can be allocated equally throughout the year. So if a big purchase is made, payments can easily be spread within a certain amount of time.

On the other hand, all it takes is one transaction to place a non-profit in serious jeopardy. Even if a rouge or unapproved purchase is made, that non-profit will still be on the hook. Luckily, in the case cited above the Executive Director was able to return 25,000 dollars of the purchases but most organizations may not be this lucky. Also, what if a credit card is used for an illegal purpose? What if the ED above decided to purchase narcotics of some sort? Depending on the organizations oversight (whether or not reasonable protections were put in place atoledo.com to prevent such events from happening) a non-profit could possibly be held responsible as a result of the staff member”s acts.

If your organization is looking to into using company credit cards, Creditcards.com and Merchant Account Guide have good articles and guidelines on their use and implementation. If your group is more partial to the reimbursement model then the Minnesota Council of Non-profits, The Society of Corporate Secretaries and EmployeeHandbook.org have good articles and templates on the subject matter.

At the end of the day, I think the takeaway is that an organization must think long and hard before implementing credit cards. Does the number of staff and purchases warrant taking the giant leap of faith? Or are you just trying to keep up with the joneses? Could you possibly implement a strict and efficient reimbursement policy to effect the same result (i.e. making sure staff members aren”t left holding the buck for the organization”s purchases)?

If there is a need, just remember there could be serious legal implications if a non-profit does not take the time to ensure that proper oversight is put in place. Organizations could also find themselves held responsible for a variety of other liabilities they did not originally sign up for.  If you have an interesting policy in place, or have found a way to solve many of the common problems associated with credit cards, then please feel free to share.