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Choosing Plastic – Corporate Card Programs

 

Choosing Plastic – Corporate Card Programs

Jun 20, 2019

Is your business operation ready for a corporate card program? Like many businesses, you probably give your employees the option to incur certain business expenses personally and then reimburse them after the fact. This is how a typical employee reimbursement plan works. These may include travel, event fees, meals & entertainment, office supplies, etc. While employee reimbursement programs have been present for years, many employers are moving toward credit cards rather than employee reimbursement. While there is a certain risk to issuing corporate credit cards to employees, there are also several benefits. We’ve put together a list of 7 reasons why a corporate card program might be right for you.

#1: Automation

In this day and age, we must always be looking for ways to work faster, smarter and more efficiently. Many accounting systems, including QuickBooks, allow for real-time integration of card transactions. Imagine cutting back on time relating to your traditional reimbursement processes. Not only can you save time with automation, but it can actually improve the accuracy and usefulness of your financials. This leads into reason #2 to establish a corporate card program.

#2: Timeliness

Under a traditional reimbursement plan, what is the delay between the time the expense is incurred and the time the transaction actually makes it into your accounting system? Is it a week, two weeks, or a month? I’m sure you all know of that employee or two who digs up receipts months after the fact, on the regular. Not only can this delay impair your matching principles, by recording a transaction in a period after the fact, but it can throw off your job costing, if applicable, as well. Imagine billing your clients based on actually expenses incurred, and your employee submits a receipt right after that invoice went out. Even if you don’t use automation with recording card transactions, at least with a corporate card program you know your transactions are getting recorded timely when you reconcile your accounts.

#3: Analysis

Along the lines of improving financial accuracy and timeliness, a corporate card program can provide you with additional information needed for analysis and data mining. Under a traditional reimbursement plan, you’re likely recording very little detail, if any. Under a corporate card program, it may be easier to bring in that data. For example, imagine being able to discover that all  your employees are buying from the same vendor. There could be an opportunity to request volume discounts or special terms. The interesting part about data mining is that you have no idea what types of patterns or relationships you could uncover until you start looking over the data.

#4: Control

This all sounds great, but shouldn’t we be concerned about handing over corporate cards to employees? Can we really trust them with this responsibility? Fortunately, there are programs, such as CenterCard, which allow you to build in measures to mitigate these risks. You have the ability to require pre-approval on all or only certain spending, set spending limits, whether per transaction or per month, and to cut the card off at any point. It’s also happens to be a great opportunity to establish clear policies and entrust your employees with more responsibilities in a way to keep them more engaged.

#5: Financial Burden on Employees

Speaking of employees, employers can be asking a lot of employees by asking them to foot the upfront costs of certain expenses, even if they get reimbursed. While it may not apply to all employees, requiring an employee to come up with these out of pocket payments can become burdensome and put them in an awkward financial position. This brings me back to my staff days, fresh out of college, when cash for many of us was a little tighter. While I had very few reimbursed expenses, given the nature of my work, I did have audit friends who traveled regularly to job sites. At times, these expenses could reach more than a thousand dollars in a month. If the reimbursement didn’t come through before their credit card bill was due, I could understand how this could be stressful to some. We don’t know the financial position of each employee, we don’t know what could be going on in their life. Whether you know it or not, a corporate card program could be a life saver for certain individuals on your team.

#6: Credit Card Float

While a corporate card program doesn’t have to be set up with credit cards, there are debit options available as well, credit certainly does offer some additional benefit. A credit card float is taking advantage of your grace period, the time between the end of a billing cycle to the next payment due date, which is usually going to be longer than the period that employees demand reimbursement. Let’s say your grace period is 30 days. If a charge hits your credit card on the first day of your 30-day billing cycle, you essentially get 60 days before you have to make a payment for that charge. Any opportunity to improve cash flow can help any organization.

#7: Rewards

We saved the best for last. Who doesn’t love credit card rewards!? If you’re an organization with large amounts of reimbursements, particularly travel expenses, you might be missing out on substantial rewards. These may include points, airline miles and/or cash-back. If you’re an organization that racks up tens of thousands of employee reimbursements in a month, the benefits can accumulate quickly! Under a traditional reimbursement plan, your employees are the ones receiving all these rewards. A corporate card program could be a great way to move those rewards directly to the benefit of your bottom line!

Conclusion

While there’s a lot to consider, your business might be ready to transition to a corporate card program. The key to any effective program is monitoring. Employees should be required to submit receipts and descriptions for each transaction and there should be extreme scrutiny on these transactions. There are going to be pros and cons to any business decision, however, what’s going to help keep you moving forward in the day of constant technological advances? What’s going to help streamline your processes, conserve resources, and ultimately save you money? Always be improving!

Author(s)

Nicholas Hammer
Nicholas M. Hammer, CPA
Senior Manager
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