How to Track Advertising agency expenses with credit cards

Because of the nature of the industry, most agencies have employees who will need to make purchases or incur other expenses on behalf of the business. These might include conducting business travel, taking clients out to lunch or even ordering last minute supplies. Developing a proper system to manage these staff expenses can have a positive impact on employee morale, agency efficiency and even client retention. Proper accounting for advertising agencies starts with good expense management.

Develop a Robust Spending Policy

The first order of business is to implement a policy concerning transactions conducted by your employees. These guidelines apply to both personal credit cards and business credit cards.

• Define the types of eligible transactions. In general, these will fall into two categories: (1) Travel and entertainment - taking clients to lunch or traveling for business or (2) Operational expenses - ordering business supplies or paying for a service e.g. SaaS subscription.

• Establish spending limits. Most agencies will set a dollar limit on entertainment and travel (meals and hotel costs). Some may also set a daily, monthly and quarterly spending limit for certain employees which allows for easier forecasting. Other stipulations may include requiring employees to book economy flights instead of business or first class seats.

• Require pre-approval for all transactions. If you don’t have a large volume of transactions, then you may consider requiring pre-approval for all purchases or other expenses. However, this will become tedious and time-consuming as your agency grows.

 

Option 1: Issue Business Credit Cards for Your Employees

If you have several employees who consistently conduct business transactions or incur expenses on behalf of your advertising firm, then business credit cards will likely be a good solution because it offers convenience for everyone involved. Employees won’t have to worry about maxing out their own credit cards while waiting to be reimbursed and your agency can benefit from the following:

1. Building Credit History - Having an established credit history is important for agencies who need to access financing for future growth plans.
2. Easier Accountability - For taxes, auditing and reporting purposes, it’s important to keep personal and business expenses separate.
3. Bonus Rewards: If you have a high volume of transactions, then business credit cards are attractive because you can earn rewards on different categories including office supplies, travel and even gas.
4. Better Record Keeping - When employees use their personal cards, you will need to wait until they submit expense reports to have an idea of spending unless you require that all expenses be pre-approved. With business credit cards, you can track all expenditures on your monthly credit card statements. Some cards even allow you to set up spending alerts so that you can have real-time numbers to work from.

 

Best Practices for Tracking Staff Expenses - Business Credit Cards

Create a Credit Card Policy

This written policy should be reviewed by your legal counsel and should cover how to handle any misuse of the company’s credit card (e.g. if an employee makes personal purchases using the card). The employees that you wish to add as cardholders should also sign an agreement stating that they understand the rules and requirements of this policy.

Use a Card That Links Staff to Your Account

Some business credit cards allow you to link multiple staff members to a single credit account. This simplifies the process of tracking transactions and offers transparency to business owners responsible for the account.

Require Expense Reports

While your business credit card statements will provide an overview of spending, employees should still submit individual expense reports to substantiate expenditures and ensure accountability.

Don’t Forget About Cash Flow Management

Cashflow is the lifeblood of any agency. Using QuickBooks, you don’t need to wait for expense reports or statements to come in to see how credit card charges will impact your cash flow. Instead, this easy-to-use platform allows you to download them directly into the system, and apply them to specific projects for better accounting insights.

 

Option 2: Permit the Use of Personal Credit Cards

If you prefer to allow employees to use their own credit cards, then keep these best practices in mind.

Best Practices for Tracking Staff Expenses - Personal Credit Cards 

Understand IRS Rules for Handling Reimbursements

IRS Publication 15, (Circular E), Employer's Tax Guide, states that expense reimbursements do not have to be included in an employee's wages, if the business creates an “accountable reimbursement plan”. Said another way, once you have an accountable reimbursement plan, you can reimburse employees on a tax-deductible basis.

In order to satisfy the IRS requirements, the plan must meet the following requirements:  

1. Business connection: The transactions must be directly related to the needs of the agency
2. Evidence: Employees must provide document (receipts, etc.) to substantiate the business expense   
3. Excess amounts: Any excess reimbursements that are greater than the allowable amount must be returned

Choose User-Friendly Expense Management Software

While QuickBooks doesn’t offer its own expenses management solution, the software does allow for easy integration with many affordable third-party vendors like Expensify (compatible with QuickBooks Online). This cloud-based platform helps you save time by uploading expenses on the go while ensuring that costs are passed on properly. In addition to uploading receipts, users can also capture additional data such as mileage, parking fees, meals and other reimbursable expenses. Once you create an Expensify account, all Quickbook Online expense accounts will be automatically imported into Expensify as categories.  

Communicate Reimbursement Process Flow to Employees

Ironing out the various steps involved in the reimbursement process ahead of time and clearly communicating them to employees helps encourage an environment of transparency. In addition, creating open channels of communication will help to reduce the potential for employee frustration in the event of delays in processing reimbursements.

Here are some key points to communicate to your team:

1. Timelines for handling discrepancies
2. Expected payment schedule
3. Method of payment - check, direct deposit, etc.
4. Confirmation of payment - how will the employee be notified  

Expense management for an advertising agency is one of the most powerful ways to fuel growth and maintain the correct profit margins.  As your firm grows, you’ll need to give your staff the ability to make purchasing decisions that benefit your mission all while giving you transparency into how the cash is being used.