Company Credit Cards — Be Careful How They Are Used!
An interesting Supreme Court Case in Mississippi gives rise to knowing very clearly how company credit cards are used by employees.
In this case, company credit cards were used by employees for a variety of personal and other non-business related expenses related to their employment. The company owner condoned this practice, as was testified to in a court trial. The company found itself in significant financial trouble rapidly once the owner ceased to actively participate in daily business operations. The company owner alleged that if he had known the true financial condition of the company, he would have come back to “recover” the company.
An allegation was made about the quality of the Audit that was done by a Certified Public Accounting practice licensed to practice in the State of Mississippi. The Supreme Court of Mississippi found some errors in the audit process. However, what is most germane to readers of this blog is the fact that the company credit cards were allowed to be used for non business expenses. As such, significant tax implications arise that may or may not have been correctly treated and properly accounted for.
Our prior blog posts address that a clear and comprehensive business operations manual is of invaluable import in all facets of business operations. It makes no difference if the company has one employee or 55 — everyone knowing what is acceptable and what is not is important.
The court case is interesting to read — and just because it occurred in Mississippi does not mean it cannot and will not happen in your local jurisdiction. If you have any questions, now is the time to talk to a business consultant, company lawyer and company accountant. Careful reading of this case reveals that the company’s accounting staff was probably not as adequately trained as they should have been.
If the business is not making money, or said another way, not retaining as much money as you believe it should be, there is usually a problem. Unlike fine wine, bad news does not get better with time. Call us to set up a consultation if you believe that you may have an operational challenge.