What are corporate cards and how to use corporate cards effectively? A guide to understanding their purpose.
What are corporate cards?
Corporate Cards is a Payment Cards Issued by Companies to Facilitate Employee Business Expenses, Covering the Benefits of Corporate Cards as an Alternative to Personal Finances and Reimbursement Processes. The term "corporate card" encompasses both credit and debit cards, but in current usage, it is commonly associated with corporate credit cards. These cards are also known as company cards, purchase cards, or corporate business cards.
Corporate card advantages and disadvantages
Corporate card advantages:
- Reduced Personal Liability: While employees may potentially misuse or commit fraud with corporate cards, unlike business credit cards, the company is accountable for any outstanding debts. While this doesn't eliminate the possibility of misuse, it does provide a safeguard for your personal finances."
- Streamlined Expense Management: As your business expands, keeping track of expenses can become more complex. However, with the right corporate card program, this can be simplified. KSV’s card dashboard, for instance, is tailored to help businesses track, monitor, and regulate company expenses.
Corporate card disadvantages:
- Potential for Increased Expenditure: Corporate cards can sometimes incentivize employees to exceed reasonable spending limits, leading to unnecessary expenses such as luxury resort visits or extravagant dining experiences.
Corporate card advantages for employees
- No Personal Responsibility: Generally, the company is responsible for making payments, and not the individual employee.
- No Upfront Payment Required: Certain companies necessitate that their employees pay for expenses from their own funds and await reimbursement, which could leave the employee accountable for payment if the company declines to reimburse them. Corporate cards eliminate the need for employees to lend money to the company or wait for reimbursement.
Corporate card disadvantages for employees
- No Rewards Offered: When employees cover expenses using their personal cards, they can earn card points and miles that can later be utilized for personal purchases. However, this benefit is not available when using corporate cards, as they typically do not offer rewards programs.
6 Best Practices for Corporate Card Policies
- When handled proficiently, corporate cards offer a host of advantages. Below are some best practices for corporate card policies to help reduce costs and deter employee fraud.
- Establish Explicit Guidelines: Establishing explicit guidelines regarding spending limits and acceptable purchases for corporate cards can lead to cost savings in the long term. For instance, it should be made clear that only the individual named on the card is authorized to use it, and that corporate cards must not be used for personal expenses.
- Employ Tools: Partnering with a service provider such as Neat can provide access to a dashboard that facilitates oversight, regulation, and direction of employees' corporate card expenditure.
- Establish Limits and Restrictions: It is crucial to establish tailored limits for each cardholder. For instance, an executive travelling overseas for business will require a higher spending allowance than an account manager who occasionally takes clients out for dinner.
- Enable Spending Alerts: Consider utilizing immediate spending alerts to closely monitor corporate card transactions.
- Mandate Approval for Significant Purchases: It can be beneficial to require approval for significant expenses such as lengthy flights or costly events. Enforcing authorisation will help guarantee that these larger expenses are warranted.
- Mandate Receipts: In the absence of reimbursement requirements, some employees may indulge in excess spending. Requiring receipts can help hold employees accountable for their expenses.
- Simplify Expense Reporting: To gain a comprehensive understanding, it's beneficial for employees to provide additional details about their expenses, including vendor name and business purpose. However, if you want your employees to track their expenses diligently, you need to make the process easy. For example, the Neat App enables employees to upload snapshots of receipts.
Summary: What is a corporate card?
Companies issue corporate cards to their employees for business expenses such as airfare, meals, and supplies, to avoid employees having to pay with their own money and wait for reimbursement.
To effectively manage corporate cards, here are some best practices for a corporate card policy:
- Establish clear spending rules and expectations for employees
- Utilize tools like Neat to monitor and manage corporate cards
- Customize spending limits and restrictions for individual cardholders
- Set up spending alerts for real-time monitoring of purchases
- Require approval for large purchases to control expenses
- Demand receipts to ensure employees are accountable for purchases
- Make expense reporting easy with tools
If you are interested in enhancing your cash flow, streamlining expense management, utilising multiple currencies, and more, consider exploring the benefits of KSV corporate card.