Setting up a card program
Issue cards to people or to purposes (a card for engineering software, one for travel, one per founder) rather than sharing one card number across the team. Spend-management cards make this cheap: virtual cards per vendor, per-card limits, merchant-category restrictions, and a receipt prompt by text or email the moment a charge posts.
A per-vendor virtual card is the single most useful feature. When a subscription is cancelled, the card is cancelled with it, so the vendor can’t keep billing; and every charge on that card belongs to one vendor and one account, which makes coding automatic.
Coding card spend
Each card is its own liability account in the chart of accounts, not a bank account. A charge is recorded when it posts. Debit side: the expense it belongs to (software, travel, meals, office supplies). Credit side: credit card payable for that card. The card’s balance in the books is what you owe the issuer.
Code at the transaction level and use rules for the obvious ones: the same software vendor goes to the same account every month. Split transactions that cover more than one thing; a single hotel folio can carry lodging, meals and parking, and the tax treatment of each is different. Business meals are generally only 50% deductible and entertainment is generally not deductible at all, so keep them in separate accounts from travel and from each other.
What the IRS expects as proof
The rule comes from the Internal Revenue Code and the regulations under section 274, summarized in IRS Publication 463. For travel, gifts and the business use of cars, a deduction needs adequate records showing the amount, the time, the place and the business purpose. Documentary evidence, such as a receipt or a paid bill, is required for all lodging and for any other expense of $75 or more. Below $75 a receipt is not strictly required, but the written record of what, where and why still is.
The $75 figure is a floor for documentary evidence, not a reason to stop collecting receipts under it. Your own policy can and usually should be stricter: a receipt for every charge is easier to enforce than a rule that depends on the amount, and it is what an outside reviewer or investor will expect to see. Ordinary business expenses outside travel and gifts still need records that support the deduction, and a receipt is the simplest one.
Matching receipts as you go
Every card transaction should have its receipt attached in the accounting system or the card platform: the image, the merchant, the amount, and a line of business purpose (“Hotel, Austin, customer onsite with Ridgeway”). Card platforms that prompt the cardholder by text when the charge posts collect most receipts within a day. Forwarding email receipts to a dedicated address catches most of the rest.
Set a deadline in the policy, such as receipts within a few days of the charge, and enforce it gently but consistently: a reminder, then a second, then the card is paused until the backlog is cleared. A short list of missing receipts at the monthly close is normal. A long one means the deadline isn’t being followed.
A worked example: a card month, start to finish
In October the engineering card carries $12,840.00 of charges, including a $1,180.00 flight for a customer visit. The flight posts on October 9. Debit side: travel $1,180.00. Credit side: credit card payable, engineering card, $1,180.00. Every other charge is recorded the same way, so by October 31 the card’s balance in the books is $12,840.00 plus anything left over from September.
The statement closes on October 31 showing $12,840.00 owed, and it is paid in full on November 15. Debit side: credit card payable $12,840.00. Credit side: cash $12,840.00. No expense account moves; October’s spend was recorded charge by charge in October.
Reconcile the card the same way you reconcile a bank account: the balance on the statement, plus any charges that posted in the books but not yet on the statement, less any on the statement but not yet in the books, equals the card’s ledger balance. If they don’t tie, the usual causes are a duplicate from a manual entry, a refund that wasn’t recorded, or the statement payment coded to an expense.
A card policy that fits on one page
Have every cardholder acknowledge it in writing when they receive a card. It is the document you point to when a charge is questioned.
- Who gets a card, and the monthly limit for each.
- What it can be used for, and what it can’t (personal charges, cash advances, anything that needs a contract).
- Receipt and business-purpose deadline, and what happens when it’s missed.
- How personal charges made by mistake are reported and repaid.
- Who reviews each card’s spend each month, separate from the cardholder.
- What happens to the card when someone leaves: cancelled on their last day, subscriptions moved first.
Common questions
Is the card statement enough without receipts?
Not for most purposes. A card statement proves you paid a merchant an amount on a date. It doesn’t show what you bought or why. For travel and gifts the IRS expects documentary evidence such as a receipt for lodging and for any other expense of $75 or more, and for everything you need a record of the business purpose. Keep the receipt.
What do we do about a missing receipt?
Have the cardholder write a short missing-receipt note: date, merchant, amount, what was bought, who it was for and why. Ask the merchant for a copy if possible; many can resend one. Track how often each cardholder needs one; a pattern is a policy problem, not a paperwork one.
Should the card statement payment be coded to an expense?
No. Each charge is already recorded as an expense when it posts to the card. The statement payment only moves money from the bank to the card issuer: debit credit card payable, credit cash. Coding the payment to an expense counts the month’s spend twice.
An employee put a personal charge on the company card. How do we book it?
Record what the employee owes the company the moment you find it, then collect it. Debit a receivable from the employee, credit credit card payable. When they repay, debit cash and credit the receivable. Don’t code it to an expense and don’t net it against their next reimbursement without a record of both.
How should card rebates and cash back be recorded?
It is an accounting policy choice; be consistent. Many small companies treat cash back as a reduction of the expense it relates to or as other income. Whether a rebate is taxable income or a purchase-price reduction depends on the facts, so ask your tax preparer once and write the answer down.
Terms in this guide
Each one has its own page in the founder glossary. Hover for the short version, or open the full entry.
Keep going
From here: a free tool to try it on your own numbers and the lesson behind it.
- Free toolTrial balance checkerBalances — and then the harder question: is anything sitting on the wrong side of its normal?
- Free toolDifference diagnoserOut by 8,100? That is divisible by 9 — a transposition. This says which error fits the gap.
- Lesson 13 · 13 minClosing the monthStatements are not the end. The close proves every balance against something outside the ledger, then locks the period so the numbers can't quietly change.
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More founder guides
- ReimbursementsEmployee expense reimbursements and accountable plansHow to reimburse employees tax-free under an IRS accountable plan: business purpose, timely receipts, excess returned, mileage and sales tax on receipts.
- AccrualsAccrued expenses vs accounts payable: the differenceAP is a bill you’ve received; an accrued expense is a cost incurred before the bill arrives. When to accrue, and how reversing entries work, by example.
- Payment termsVendor payment terms and early-pay discounts, explainedWhat Net 30 and 2/10 net 30 really mean, the annualized cost of skipping an early-pay discount, and how to schedule payment runs around your cash.
- The closeWhy startups should close their books every monthA monthly close turns a bank balance into numbers an investor, an auditor or a 409A firm will accept. What it is, and why it gets expensive to skip.
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA before you act on them.