I'm going to go a little geeky today, if you'll pardon me.
You probably didn't aware that there are real advantages and disadvantages to utilising a company credit card or cost reimbursement for staff, etc. Oh, Charlotte readers, I'm going to lead you down a small rabbit hole today.
But first, a quick update on several previously discussed assistance efforts.
For starters, the SBA has ceased accepting new PPP applications because the majority of the program's funding have already been distributed. You won't be able to apply for a PPP loan for your Gastonia firm in this funding round if you haven't before.
Second, the Restaurant Revitalization Fund (RRF), which began on Monday, is now fully operational. So far, about 200,000 applications from pubs, restaurants, bakeries, and other similar companies have been submitted to the fund. This, in my perspective, is still a small percentage of individuals who require it.
If you own or know someone who owns a similar business in Charlotte, money are available to assist with payroll and rent. For qualified candidates, funds are awarded on a first-come, first-served basis. As all PPP loan applications, time is of the essence.
This is an excellent programme for the right company. Go here to read the SBA's RRF programme guide.
And, as I suggested last week, please forward this email to any Gastonia restaurant owners you may know. We want to make sure that all Charlotte restaurant and bar owners are aware of this programme because the money allotted to it are expected to be used swiftly.
Let's look at how to manage employee-paid company expenses now.
What Should Charlotte Business Owners Decide Between Expense Reimbursement and Company Credit Cards?
“The secret of getting ahead is getting started.” – Mark Twain
To make money, you must first spend money. To generate their own goods and services, all businesses require suppliers, materials, and services.
Your employees may be required to make independent purchase decisions on a regular basis, depending on the nature of your firm. Allowing your staff to make these purchases on their own can improve the efficiency of your company. Do you really need to be a part of the choice to purchase a new toner cartridge for your printer?
Common expense types your employees may need to pay for include:
- Office supplies
- Postage
- Parking and tolls
- Meals
- Small tools
- Small quantities of parts and materials
All of these costs, as well as a slew of others, are necessary to perform the chores that come with running a Charlotte business. The most important question to answer right away is whether you'll refund employees for expenses they incur or if you'll give them a business credit card to use to pay for them.
This decision has significant tax and accounting implications, and you, as the business owner, must be aware of the advantages and disadvantages of each method.
Time Savings
On the surface, giving staff a business credit card may appear to be the more time-saving alternative. There are no spending reports to fill out or reimbursement checks to write with a credit card. Doesn't it sound fantastic, Gastonia friends?
But consider this: do you really need to assign expenses to individual clients? If your staff, for example, use credit cards to purchase components and materials for a customer's task, those credit card charges must eventually be assigned to that customer's account for invoicing. This means that someone will have to reconcile credit card bills with purchases and job orders. Oops! That was the end of the time savings.
A company credit card might save you a lot of time if you don't need to track expenses back to specific consumers. Otherwise, having employees fill out expense reports and reimbursing them for business expenses they spent out of pocket can be a better option for your company.
Issues of Belief
When you give a company credit or debit card to an employee, you're putting a lot of faith in that person. You must have faith in your employees' ability to refrain from going on an Amazon purchasing binge.
If this is an issue, implementing a reimbursement programme may be preferable. This is especially true if you have a lot of employee turnover or if you have many sites in and outside of Charlotte where you don't know everyone. As your company grows, you won't be able to communicate directly with every person of your staff, which can increase trust concerns.
Use tax audits to your advantage.
Over the last year, as more employees have worked from home and carried their workplace credit cards with them, one problem has developed significantly. State budget concerns have exacerbated the problem, forcing states to increase their enforcement operations in order to collect more income. What exactly am I referring to?
Make use of the tax system.
When you don't pay sales tax on things used in your Gastonia business, you must pay use tax. If your workers work from home and obtain goods online, such products may be purchased from a company that does not collect or pay sales tax in our state. As a result, you must pay the use tax equivalent of the sales tax and file a separate tax return for this purpose.
When the state conducts a use tax audit, the state may seek the credit card statement that reveals the transactions your employee is making. They're looking for those online transactions for items used in your business that were shipped in from out of state, and you could be liable for a use tax bill or, at the very least, have to pay the cost of us representing you to fight that tax bill as they scrutinise purchases that you may not even be aware of.
This is a clear disadvantage of giving your staff business credit cards. For the record, these purchases don't have to be made at home; they may be made directly from your Charlotte office via the internet.
Plans That Are Accountable
If you choose reimbursement for out-of-pocket spending, you'll need to put up an accountable plan, as defined by the IRS. Your employees won't have to worry about reimbursed monies being considered as income by the IRS if you run your reimbursement arrangement as an accountable plan, and they won't face any tax implications. Furthermore, the accountable plan ensures that your business expenses are tax deductible.
You'll need to do the following to create an accountable plan:
- Establish clear guidelines for which expenses are eligible for reimbursement.
- Create a template for expense reporting.
- Establish reporting deadlines for spending and reimbursements.
- Define the substantiation requirements (e.g. paper receipts).
Some of the concerns highlighted previously can be avoided by using an accountability plan instead of business credit cards for each employee. You can keep a closer eye on sales and use tax payments to avoid unpleasant surprises in the future, rapidly assign expenses to customer jobs for faster billing, and minimise any potential trust difficulties.
What's the cost? Time and convenience are also important factors.
If you're unsure, we can examine the types of expenses your Charlotte company incurs to assist you in making a decision. In addition, if you desire to create an accountability plan, we can assist you with that as well. Let's take a closer look at it:
https://calendly.com/saragonzalez
Warmly,
Sara Gonzalez
