Challenges with Company Credit Cards
For most companies, these practices and policies have been in place for a while, so it's easy to just accept the process as it is. Yet traditional bank cards have big drawbacks, including issues with:
- Security Risks and Fraud
- Card Sharing and Accountability
- Getting and Managing Credit
- Labor Costs
- Bank Fees and Costs
- Managing Departing Employees
- Additional Expenses for Management Tools
- Limited Visibility
- Granular Controls
- Managing Teams That Travel
Security Risks and Fraud
Whenever you hand an employee a company credit card, you trust them to use it appropriately and safeguard it. While you want to trust your team members, the opportunity for misuse, fraud, and accidents exists.
Even well-intentioned employees can misplace or lose their company cards, opening the door to theft and fraud. Despite new advances in credit cards, such as embedded microchips, fraud and theft continue to be a significant problem, accounting for more than $28 billion in losses annually.
Company credit cards are high-value targets for criminals as they can often make multiple purchases before being discovered, and corporate cards usually have significantly higher credit limits than personal cards. Criminals also buy and sell credit card information online, spreading stolen card numbers all over the internet, which can quickly spiral out of control.
Cards can also be used for expenses that are not authorized or with vendors that are not acceptable to the company. In some cases, it is difficult to track down line items that do not conform to company policies.
Card Sharing and Accountability
Most companies limit the number of cards they issue to maintain tighter control over purchasing. However, this can lead to greater risk as employees then end up sharing cards. As soon as a card or card number is shared, accountability declines, and the risk of exposure increases. You may not know who’s making a purchase or whether they had the authority to do so.
Companies typically find unexpected costs, overspending, and misuse when cards are shared. This requires the finance department to track down spending to individuals, allocate transactions to specific accounting codes, and spend significant time sorting things out.
Employees may also hit spending limits more quickly when sharing cards, preventing legitimate expenses from being paid. When cards are shared, it’s difficult for individuals to track how close they are to spending limits. If cards are used for recurring payments, such as subscriptions or scheduled orders, this can cause important purchases to be blocked once the limit is hit.
Not only can card sharing prevent important supplies from being delivered or services provided, but it can also lead to embarrassing situations, like taking a client to dinner only to see the corporate credit card declined.
Getting and Managing Credit
For SMBs and startups, getting credit from traditional banks isn’t automatic. Many have trouble establishing credit. Newer, modern payment platforms have more flexibility to set credit limits and adjust over time.
The workflow to process employee expenses on traditional credit cards is cumbersome at best. According to the Global Business Travel Association, it costs companies an average of $58 and 20 minutes to process a single expense report.
And if things aren't submitted right the first time, it creates even more work for controllers and accounting teams. Nearly 20% of expense reports have errors or are incomplete, requiring even more time to track down what’s missing.
Bank Fees and Costs
Most bank card programs have management fees. Fees may be per account, user, or transaction. While these fees are likely tax-deductible options, they can add up over time.
Managing Departing Employees
When card carrying employees leave the company, it generally requires a call to the card issuer to shut off access. Without real-time visibility into transactions, you may also have to wait until the statement arrives to reconcile any final or last-minute purchases.
Additional Expenses for Management Tools
Beyond the card, traditional company credit cards may also require additional expense management tools to handle reimbursements and processing. This means adding on to a company’s tech stack, training employees on use, and enforcing usage.
If employees don’t turn in expense reports promptly, you may not even know about some expenses until the end of the month. Not only can this lead to surprises, but it makes it difficult to manage and control costs.
Visibility into spending is crucial to control. Yet, most traditional bank cards do not offer the visibility companies want or the control they need. You want real-time oversight on company spending, so you can react immediately to unauthorized expenses or misuse.
Credit cards without real-time visibility can lead to excessive spending. While you want to trust your employees to spend efficiently, overspending can go undetected in many ways. For example, an employee traveling on business may select an expensive rental car when a more affordable option is available. Without the ability to track expenses in real-time, you may not discover this until the monthly statement comes in — if you notice it at all. With the ability to set spending limits by accounts or vendors, you can remove the temptation to misuse funds.
This may be even more important over the next few years as the economy slows and budgets tighten.
Lack of Granular Controls
There is also a need for granular controls to manage credit use. For example, you may want to adjust credit limits on particular cards or limit spending to a specific vendor. Accounting teams should also be able to increase or decrease spending limits when necessary and even issue additional lines of credit to employees whenever they want.
Traditional bank cards don’t work that way. If you want to raise or lower a spending limit on a company card, that likely means calling the bank and waiting on hold until you can talk to an agent and make a change.
You also should have the ability to configure cards proactively. Limiting purchases to certain vendors or for specific amounts can ensure compliance with company policies.
For example, you can make sure card users use company-preferred vendors. Businesses often have special arrangements with preferred vendors to secure discounts or more favorable terms. Employees may not know this and instead choose an alternative supplier that winds up costing the company more money.
Managing Teams that Travel
Employees and sales teams that travel for company business are not always prompt in turning in expenses. It's often like herding cats for accounting teams to get what they need. It's common to hear employees on the road say they're too busy to get reports on time or lost receipts that validate their expenses.
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