Title: Personal Charges on the Corporate Card
This solution describes the best practices to use when employees have charged personal expenses to a corporate credit card or when company management allows this practice.
What’s covered in this document:
Personal charges on the company credit card is a fairly common occurrence at many companies. However, it should be addressed in the company's policies and procedures. Employees, whether in the course of corporate travel or due to ease of use (e.g. lack of a personal credit card), will make charges of a non-corporate/personal nature. In Unanet, you will want to set up a process to segregate these costs at the expense report level so the company can maintain oversight of these costs and obtain reimbursement from the employee.
Option 1 - Set up an Employee Receivable Expense Type (PREFERRED METHOD)
1) Set up an Expense Type for employee personal credit card charges. This can be done under Admin > Setup > Expense Types.
2) Set up a new GL Account to capture the employee receivable for the personal charges. This can be done under Admin > Setup > Accounts.
3) Map the Expense Type for all labor categories to the Employee receivable account. PTO was not mapped as there should be no corporate card charges while on PTO.
4) Employee selects this Expense Type for personal credit card charges on expense report, selecting Corp Card as the Payment Method.
5) After the normal review and posting process, the following entries are created in the GL, allowing visibility into the amount and employee who owes the company for the personal expense. The total amount owed on the corporate credit card, inclusive of the personal amount, is recorded in the credit card payable account.
6) When the credit card bill is received and entered into Unanet, it is debited against the credit card payable account.
Option 2 - Utilize an Unallowable Expense Type
1) Set up a separate unallowable Expense Type for the personal credit card expenses.
2) Map this Expense Type to an unallowable account.
3) Employee selects this Expense Type for personal credit card charges on expense report, selecting Corp Card as the Payment Method.
4) Upon posting and finalizing the expense report, the following entries are recorded in the GL.
5) When the credit card bill is received and entered into Unanet, it is debited against the credit card payable account.
Please note this method is not recommended as the expenses that need to be reimbursed by the employee are co-mingled with other unallowable expenses and are more difficult to track.
In addition, the expenses will sit on the P&L until they are reimbursed by the employee. If not monitored closely and reimbursed by period end, they could end up reflected in the company's financial statements.
Option 3 - Utilize an Advance Offset
1) The employee will prepare the expense report per normal Unanet procedures.
2) For the amount of an employee's personal charges, the employee sets up a positive advance amount as an employee payment method (reimburseable) and an offsetting (negative) advance amount as a credit card charge payment method (non-reimbursable).
3) The employee advance washes out and the ER liabilities post for the correct amount.
4) The employee advance nets out against the total amount due to employee (AP Voucher).
Please note that while this method will work, it adds several steps to the employee expense report entry process and could result in an increase in data entry errors and disapproved expense reports.
Option 4 - Utilize separate credit card Liability Accounts for each cardholder
Another method of accounting for these transactions would be setting up individual credit card liability accounts for each cardholder. This would work best in small companies or those with only a small number of cards to track.
1) Set up an Account for each person in the chart of accounts. For example, if account 20.03.02 is your credit card payable account, you might set up 20.03.02.01, 20.03.02.02, etc. for each employee. Another option is to have the Account number and then the employee number. So for example employee 353 would be account 20.03.02.353. These accounts would roll up into 20.03.02 and you would likely run the Financial Statements at a roll up level where these would not show in most cases.
2) Set up an Expense Type for employee personal credit card charges and map the Expense Type for all labor categories to the employee receivable account (as in Option 1 above).
3) Set up a Payment Method for each employee. Best practice would dictate that you begin each payment method with "z_" for example "z_Buster_Posey". This payment method will be made available for expense reports and it will NOT be reimbursable. In the event the charge is personal in nature, the amount should be entered under the "personal credit card charges" expense type on a separate line.
4) Set as the default Payment Method in each person's Person Profile their specific "z_" payment method. This way it will be the starting payment method when they go to enter expenses.
5) Set up each employee "z_" payment method with their specific General Ledger account.
6) Steps 1-5 should be adequate in most cases for Option 4. However, if you want to truly complete a reconciliation for each employee to the credit card statement then you would also go to Admin > Setup > Bank Accounts and create a Bank Account for each Employee Credit Card account. Remember that the balance on the credit card billing is entered as a negative number in the Bank Reconciliation.