Take charge. (Insurance & Financial Services Directory 2003).

For staff who travel, credits cards are easy and efficient. Still, some association leaders fear abuse or toss of control and refrain from supplying credit cards to their staff. But even for the reluctant, credit card products are becoming more appealing. Increased automation in monitoring and reporting systems make credit card use an efficient accounting tool for nonprofit organizations and relieve them of much of the worry about misuse of company cards.

POLICIES, PROCEDURES, AND PROTECTIONS

The first step in instituting credit card use in an association is to decide who will be issued cards and for what purposes. "As obvious as it seems," says Greg Hammermaster, vice president of commercial card services for SunTrust Bank, Orlando, Florida, "the most successful association programs have the senior management's involvement in setting policies and procedures and guidelines for technical applications." Usual candidates for cards include

* CEO, vice presidents, and directors;

* meeting planners;

* field managers;

* publication sates representatives; and

* anyone else whose job description includes travel.

In most cases, written guidelines and procedures for credit card use are similar to those for cash reimbursement and include restrictions on certain types of spending, expense reports, coding to budget lines, and approval procedures.

Ann R. Cox, CAE, executive director of the American Association of Occupational Health Nurses, Atlanta, issues cards to all directors and one or two managers--about 6 of her 25 staff. Most of these people travel, and Cox says the card is not only for their convenience but also for the association's ease in documentation. Travel and expense reports are due within 15 days, and individuals must code, initial, and date the line items on their billings. "It's never been abused," Cox says, "because there is immediate monthly oversight." Bills are checked and cross-referenced to expense reports, if necessary, by Cox and her director of business affairs. Cox and the director check one another's billings and expense reports.

At the National Association of Manufacturers (NAM), Washington, D.C., about 50 of 180 staff have corporate credit cards. Tim Rogers, controller for the association, says, "Any exempt staff is eligible for a corporate card, with the approval of the department head. All airline, train, and rental car expenses are centrally billed to the association, but hotel expenses, meals, and other charges are billed to individuals, who then file monthly expense reports with receipts."

Rogers says NAM asks staff not to use their cards for personal expenses but there isn't strict adherence and occasionally a staffer will have to reimburse the association for a personal charge. Only on rare occasions--"maybe five times in my 14 years here," Rogers says--have employees defaulted, but even then the association's liability was capped at $150.

Janet Farrell, senior vice president, not-for-profit banking group, Allfirst Bank, Washington, D.C., issues both Visa and MasterCard. She notes the stringency of policy enforcement varies among association clients. To some, an accidental misuse simply means the employee reimburses the association. In other cases, it can cause the association to revoke privileges or may even lead to an employee's dismissal.

All card issuers have active fraud-detection programs, Farrell adds. "However, banks are focused on unusual spending patterns that may indicate a lost or stolen card and typically touch base with the cardholder--not the organization--if there is a blip on the radar screen. That doesn't protect the association against a fraudulent employee, but the one-month window does limit the exposure."

Most credit card programs now offer automatic controls to help employers monitor credit card spending and prevent abuse of policies. For example, BB&T's mid-level Visa corporate card includes daily and monthly variable spending limits per cardholder, single-transaction dollar limits, and daily transaction limits. Another popular automated control is blocking purchases in specific categories. Merchants are grouped by standard industry codes, so cards can be programmed to accept charges for airlines, hotels, and restaurants but not for department stores or salons, for example.

Association CEOs or board members should not have to personally guarantee a credit card, Farrell says, although she's seen that scenario with smaller organizations. Her advice: "If you're asked to do that, the bank does not understand the nature of not-for-profit and it is best to seek another banker."

PURCHASING CARDS 

A newer category of credit card is the purchasing card. Purchasing cards are preprogrammed to work with restricted merchants, often where an association has negotiated discounts or contracts, or with vendors classified by standard industry codes, such as office supply stores. A card's limit can be programmed to coincide with a department's annual budget for specific areas, making it easy to track expenses.

Purchasing cards allow automation of the purchase order and payment process, says Hammermaster. "It eliminates the requisition, approval, interoffice mail time, invoicing, purchase order matching, and check writing for things that are already acceptable budgeted purchases," he says. "It's an electronic alternative to paper, and the reporting systems that go directly to the accounting department give an association the chance to apply business logic, simplify workflow, and ensure audit process checks."

BB&T studies claim that purchasing card programs can reduce invoicing costs by more than 70 percent. Of course, the efficiencies an association can realize are relative to how efficient its purchasing processes are to begin with. Additionally, says Rich Luttrell, BB&T's vice president of association and nonprofit banking in Washington, D.C., Web-based applications allow 24/7 monitoring of spending and other accounting advantages. When a charge is made, it is automatically logged to the organization's accounts, which are viewable on the Web in real time--no waiting until expense reports or monthly invoices come in.

Committing to a bundled program with the accounting technology is the best way to benefit from a credit card implementation. According to Hammermaster, the association market has adopted purchasing cards and the complementary technologies faster than the general marketplace. Associations may be more focused on streamlining and efficiency because their operations are more "visible," he speculates.

Purchasing cards' automatic controls, back-office tracking, and electronic reports are an advantage, especially in larger organizations, says Farrell. "Clearly, in the environment we're in, accountability is key for associations using credit cards. Oversight is critical."

THE CUTTING EDGE

It hasn't taken long for both users and issuers of purchasing cards to see additional applications for business expenses. Hammermaster says a commodity review can identify other purchases that are "P-cardable" and SunTrust cards are flexible. American Express calls this new category the corporate-defined expense program (C-DEP). Melissa Abernathy, manager for public affairs, American Express Corporate Services, New York City, says one of the first corporate applications for C-DEP cards was for relocation expenses.

In the association market, Abernathy sees relevance to areas such as continuing education. "Suppose an employee has an annual allotment of $2,000 for professional development. A C-DEP card can be issued for a one-year term with a monthly or annual limit. The employee could then pay for subscriptions, seminars, or membership renewals."

Among the advantages: registration online would not be a problem; there would be no waiting for a check to be processed and mailed; and all the expense information would be automatically forwarded to the accounting department, with information supplied by line item, individual, or department. Of course, internal controls such as getting a supervisor's approval beforehand might apply, but the rest of the process would be paperless.

One of SunTrust's nonprofit clients is using defined-expense cards to help manage spending under multiple grants. Hammermaster says general ledger mapping, coding, reconciliation, and daily tracking are integrated into the reports that interface with the general ledger. Issuing cards to contractors for approved out-of-pocket expenses is another potential use for defined-spending credit cards.

Computerization has enabled issuers to customize limits and time frames to whatever parameters the association sets for whatever projects and individuals the association approves. Reports can be as sophisticated and complex as the accounting department requires to optimize efficiency. American Express even offers online expense reporting spreadsheets. Charges are recorded automatically; employees enter their cash expenses; and when they sign off, the accounting department receives immediate reports.

BEST PRACTICES

Banks are interested in expanding in the association market. "When clients use a bank card, they identify with the bank brand, just as they identify with their operating account bank. The brand is reinforced every time the card is used," says Luttrell. But especially in a tight economy, he warns, nonprofit organizations must use credit wisely.

Savvy associations will use the new technologies in reporting to get insights into where and how money is being spent, so they can negotiate better deals with vendors based on their spending habits, Abernathy says. Plus, associations should take advantage of any special cardholder discounts, such as the American Express "savings at work" plan that offers discounts at preferred vendors for office products, computers, wireless phones, and overnight delivery services.

Hammermaster adds, "Credit and purchasing cards are the only payment vehicles by which you can cut costs and have access to rebates and cash back. You don't get that using purchase orders, invoices, checks, and the usual paper trails."

RELATED ARTICLE: FIVE BASIC FACTS

* American Express and banks that issue Visa and MasterCard make no distinctions between nonprofit organizations and corporations. Associations usually fall into "small business" or "mid-sized" categories, with mid-sized generally defined as 10 or more cards.

* Traditional benefit of corporate card programs, such as travel insurance, preferred vendor discounts, and rebates, are available to associations.

* Small business customers may carry a revolving balance, while mid-sized and larger customers usually are required to pay the balance in full each month. Associations can request centralized billing or arrange for individual cardholder to receive monthly statements.

* Lines of credit are based on each association's needs, potential uses, and credit checks. (Bank card suppliers usually rely on the association entity's credit report, but American Express does credit checks on individual prospective cardholders as well.)

* Some credit card programs totally indemnify the organization against employee (or terminated employee) misuse. Others may impose a small ($150 or so) deductible or indemnify losses ranging from $5,000 to $15,000 per card.

GOING CARDLESS--ALMOST

The California Building Industry Association, Sacramento, does not distribute credit cards to any of its 32 staff members. About 15 years ago, the association had a treasurer who objected to staff credit cards and convinced the board to eliminate them.

"At the time," says CEO Robert H. Rivinius, CAE, who has been with the organization 23 years, "we thought it would be temporary and the policy would change back when that member left the board." As it turned out, the alternative plan to deal with staff spending has worked effectively and has continued.

Most staff have accommodated by securing separate personal credit cards on which they charge only business expenses. The accounting department processes payables twice a month, allowing staff to pay their balances without incurring interest charges. Supervisors and the CFO approve expense reports for staff and the elected treasurer approves Rivinius's expenses. His monthly bill is paid directly by an association check.

Spending guidelines are routine: no in-room movies or mini-bars but usual travel and entertainment expenses are reimbursed. Timely expense reports are required.

The association does keep one institutional credit card for convenience. Staff who need to register for conferences or make office purchases over the Internet are allowed to use that card.

Linda C. Chandler is a freelance writer based in Dallas. E-mail: [e-mail].