Managing Business Credit Cards, The IRS Way

Businesses are just as liable for spending habits and managing finances as homeowners and individuals. Over the year, along with political turmoil and healthcare woes, the Internal Revenue Service (IRS) experienced a lack of financial responsibility. In late June, it came to light that through 2010 and 2011, IRS employees amassed $108 million in credit card charges. These charges were not all related to the facilitation of government services. During the investigation facilitated by the Inspector General of the Treasury it was discovered that over 200 thousand purchases were completed during the two year period. Included in that number was swag purchased for meetings, diet pills, wine, and pornography. For an individual, these purchases are common place and even appropriate; but for a business–a government business, they are unacceptable.

The IRS credit cards are backed and supported by the US Taxpayers. Meaning the US Taxpayers financed the purchase of these personal and illicit items. The issue isn’t that the government purchased the items, it is about the fact that the government office lacked the proper controls to prevent misuse of the credit cards.

What can the common credit card user learn from the government’s example?

  1. Ensure your credit cards have the proper controls and security measures in place to prevent misuse. This includes simply signing the back of the card or ensuring it says, “Ask for ID.” Along with this physical security, signing up for additional protections and checking statements will help alert you to unauthorized card usage.
  2. Businesses should have policies and procedures for approval of charges. Often, businesses can foresee the purchases they will need to make. Just as individuals should maintain budgets, adherence to a budget and agreeing to planned purchases will help keep purchases on the right track.
  3. If a card is stolen, report it immediately to avoid being responsible for charges. In the case of the IRS, there were five cards stolen, but the alleged theft was not reported until well after the fact.
  4. Purchases should only occur through secure locations; offline and online. No retailer is immune or impervious to attacks (search: “Target credit card hack”), but this doesn’t mean that unsecured or dangerous situations can be pursued without impunity.

Don’t be a government agency. Manage your credit cards properly and have a plan for your finances. Credit cards and banking accounts are tools; tools are only as effective and useful as the hands that wield them. Your management is the first step to finding success with credit.

About Kevin Williams

Kevin works as a independent consultant, helping people improve their financial situations. The author has a BS and Masters along with years of experience with credit cards, techniques for improving individual credit and life.

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