Company cards: What you need to know

Background

In the 1950s, the first general-purpose, multi-merchant credit card further enhanced ease of payment. Travelers, or the good-old salesmen, benefited the most. Company cards let them pay without the limitations and challenges of cash at places where they couldn't use their bank directly. It's a story of innovation that increased simplicity and optimized processes for both the company and the end-user.

Later on, payment optimization grew further with the rise of the internet, smartphone access and online payments. Today you can buy everything with a card, from toys and toilet paper to software satellites. And with digital wallets on the rise, you don't even need to carry plastic anymore.

One would have thought that the new technologies would also increase corporate processes, automation and simplification. Digital banks certainly promised this. However, what we ended up with was the same old company card with just fancier clothes. If you look closely at internal processes — and the effort needed to manage company cards — it's like there are no APIs (digital interfaces), mobile apps, or automation options.

The process today

These days, to issue a company card, the process starts with deciding who's allowed to have a company card and what its limitations will be. The next step is ordering the company card from your bank. Then, when employees start using it, they need to send back all the receipts, categorize them, and send them over to the accounting team. Following this, the accounting team will check all the documents one more time and, in most cases, will do the bookkeeping manually at the end of the month. FORTY-FIVE days later, finance control can finally access the data and analyze the budget vs actual states, project the spend, etc. This is the antithesis of simplification and process optimization. Let's look into the main pain points of this process:

1. Time wasted and high administration costs: Your sales team spends more time filling in expense reports than making new deals. Sometimes they lose their receipts; other times, expenses need a thorough explanation. Your accounting team performs a full-scale investigation for a missing receipt of 4,99 EUR instead of optimizing and analyzing your company's finances. Moreover, often these receipts and invoices need to be entered manually into your accounting system. Although in 99% of cases, the invoice categorization stays the same, your bookkeeper has to do all the work repeatedly.

2. High financial cost: Depending on your bank, you'll have yearly card fees. Fees for paying in different currencies on top of special currency exchange rates. Fees for withdrawing cash. And fees for every change you want to make to card limits or other parameters.

3. Auto-renewal: Most of the time, paying online for software involves a subscription. The (unconscious) overspend problem with auto-renewal subscriptions is already so big that it's a business model of its own.

How do teams have access to company funds today?

Although things have changed tremendously due to the pandemic and the rise of remote working, when we talk to our customers, we find the way they handle company expense management is generally one of the below models.

• One card for the whole company: The company has one or two company cards — most of the time for its CEO and sometimes for the traveling staff. The CEO's uses their company card for all online and software purchases. One of our clients, a company of 40 people, had only two corporate cards. All 40 employees had a photo of the CEO's card on their phones and were using it as needed. This scenario was an absolute nightmare for the accounting team. Moreover, they found out they were spending over 5,000 EUR on monthly subscriptions that they weren't using anymore, as the original purchasers had left the company long ago.

• Personal cards and reimbursements: Employees have to pay with their own money and then get reimbursed on their travels. A lot of companies use this method as a policing measure. They view this method as the "only" way to get all receipts and invoices for the accounting team. And hopefully on time. This practice has undesired side effects. Highly skilled and highly paid professionals handle low-level admin work, which is financially inefficient. It also causes employee frustration. Moreover, it creates feelings of unfairness as the employee is effectively giving credit to the company. The result is employee's morale, productivity, and loyalty down the drain.

Finally, yet another caveat, employees need to use a mix of tools to optimize single tasks. Let's take traveling employees as an example. They pay with their company card; then, they scan the receipt with an app from another provider. Following this, they fill in the expense report, generally in Excel or a cloud doc. The employee suffers the complexity of managing different tools for a single task. Furthermore, the pain points for the accounting and controlling teams are still massive.

How can this process be optimized and simplified for everyone?

One simple answer. Give everyone the information they need. First, the employee who's paying knows what they're paying for and why. As an example, your head of sales travels to Berlin for a meeting; when she pays for her lunch, she attaches this information to the payment and the invoice, and your accounting team has everything they need to do the bookkeeping in real-time.

Second, in 99% of the cases, the invoice categorization stays the same. Another example, on a trip, your head of marketing always stays in the same hotel or takes a taxi to the airport; these are repeatable expenses. The accounting team simply needs to set up the match between categories and the bookkeeping software/ERP once. After that, all they need to do is to check the data and click on a button. The data then flows automatically between the systems.

Third, the categorization system gives the financial control team everything it needs to manage company spending and change direction if needed. Plus, the best part: instead of waiting for the bank statement and the report at the end of the month, you can, and your stakeholders can track and control your company's spending in real-time.

Solving the company card process

At Payhawk, you, our customers, are at the center of our business. We want everyone in your team to have a seamless experience when it comes to company expense management — which is not an easy task. In addition to the multiple stakeholders with different needs, we also have to juggle software solutions, payment methods and information medium breaks (from digital to paper to digital). But we've cracked it.

If you're still in doubt, check out our latest feature, Reimbursements, which allows your team to experience the benefits of both worlds: a Payhawk company card and the option for employees to pay with their personal card. Those who use their personal cards can scan the receipt with the app and add their personal bank account information, so reimbursement is complete in no time. If you're interested in knowing more about this, you can schedule a demo with us here.