Ah, here we are, the ever-popular debate on the pros vs the cons of corporate card programs! Why should businesses allow employees to have corporate cards? Some feel that they have the potential to increase the organisation’s financial exposure, risk employees racking up large bills, and are potentially tricky for finance teams to both implement and manage on an ongoing basis. Done right, however, corporate credit and payment cards can offer wide-ranging financial, operational and security benefits.
Read on for enlightenment…
What types of cards are there?
First, a quick primer on what options are out there. There are many types of cards that companies provide their employees depending on their role and spending requirements. However, the three most common are:
- A corporate card, which is used to pay for travel and entertainment expenses incurred on behalf of the organisation. These can either have 100% corporate liability (for payments) or can have liability shared between the organisation and the individual. They can be used at any location.
- A procurement card / purchasing card (commonly known as a “p-card”), which is used for B2B purchases. Some cards have the ability to be used with a pre-defined set of vendors or types of locations (such as office supply stores or preferred suppliers). These cards are the most restrictive for employees in terms of where and how they can be used, and are typically used for business (as opposed to individual) purchases.
- A “one-card,” which can be used the same as a corporate card, but has the ability for the organisation to implement spending and vendor restrictions. These cards are effectively a hybrid of p-cards and corporate cards.
As each of these types of cards operates differently and has varying levels of restriction and oversight, they also have different target markets. For example, a p-card could be most appropriate for someone purchasing office supplies or small equipment, while an employee who incurs significant travel expenses would use a corporate card. They key point is that, as card programs have continued to evolve, most organisations can find the right program for their needs.
Now that that’s been cleared up, what are the benefits of these programs to the companies that use them?
- Cash rebates
The most visible benefit of corporate cards is the annual cash rebate on purchases. Cash back rebates differ for each provider and their partners, and can vary from 1% to 5%, depending on the card issuer and the type of purchase made (items such as office supplies, airline tickets and gasoline typically see higher rebates).
Business expenses related to travel and entertainment typically comprise approximately 10% of most organisations’ budgets, a figure which can rise significantly when items such as office supplies, laptops, mobile phones, etc., are added. For example, for a company with £20 million overall operating expenses, and £3 million in travel and other expenses being paid with cards, a cash rebate of £50,000 or more per year is not unrealistic. This alone could pay for the subscription for expense claim software, which, when combined with the cards, can vastly increase the efficiency of an organisation’s expense management process.
- Better control of spend
Accurately classifying all transactions, by simply importing card statements into an expense claim makes it significantly easier for spend analysis reports. Centrally storing this spend information, in the same format for all employees across an organisation, delivers significant improvements in a finance team’s ability to analyze the data accurately and efficiently. Transaction data pulled from the system can be easily analyzed using visual dashboards, to provide actionable intelligence for financial decision-making.
This data can be used in a variety of ways, from tracking spend versus budget, to negotiating volume discounts with vendors, to identifying areas where spend is inefficient, in order to make organisational changes.
- More straightforward processing of expenses
Integrating corporate cards and expense management solutions makes the entire expense management process significantly more straightforward and efficient. Directly importing credit card statements into the expense claim allows granular transaction detail to be collated. The card users add in relevant details on their expense claims (billing code, client data, etc.). The expense management system can then export this data directly to the ERP, allowing clients to be billed more accurately and rapidly.
- Reduce expense fraud
When employees pay for items themselves and submit expenses with images of receipts, there is always potential for expense fraud. Adding larger tips on restaurant receipt copies; purchasing items, submitting the receipts for reimbursement and then returning them; and buying business class seats and then downgrading them to economy once the expense has been processed are all examples of how legitimate purchases can become fraudulent expenses.
Providing employees with corporate cards will eliminate all of these possibilities in two ways. First, by directly importing credit card statements, the exact amount charged is always included, so it is impossible for employees to fraudulently manipulate receipts. Second, there is no way for refunds to be processed onto a different card to that which was used for the transaction, it’s simply not possible for employees to benefit from any of these schemes.
Organisations should also have a clause in their card policies where any unauthorised purchased are the responsibility of the employee.
- Team happiness
Employee satisfaction is another useful benefit that shouldn’t be overlooked. Staff who travel frequently or need to book conferences can accrue thousands of dollars in expenses each month. Providing a corporate credit card will eliminate the need for them to pay for items out of pocket. This is particularly important for organizations who only run 1-2 expense payment reimbursements per month, where any delay in submission could lead to the travelers needing to pay their credit card bills before expenses are reimbursed.
A less tangible, but often equally important, benefit of providing corporate cards to employees is the message that it sends to the individual that the company trusts them and cares about them.
In an era when employee happiness is such a hot button for many organisations, this is a key reason in itself to consider the adoption of employee card programs.
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Our choice of Chrome River EXPENSE was made in part due to the very user-friendly interface, easy configurability, and the clear commitment to impactful customer service – all aspects in which Chrome River was the clear winner. While Chrome River is not as large as some of the other vendors we considered, we found that to be a benefit and our due diligence showed that it could support us as well as any large players in the space, along with a personalized level of customer care.
We are excited to be able to enforce much more stringent compliance to our expense guidelines and significantly enhance our expense reporting and analytics. By automating these processes, we will be able to free up AP time formerly spent on manual administrative tasks, and enhance the role by being much more strategic.