In the late 19th and at the start of the 20th-century merchants introduced charge coins, medallions, and charge-plates for their regular customers. Handwriting mistakes were reduced, record keeping and accounting became easier. In the ’50s this concept was enhanced with the first general-purpose, multi-merchant cards. The group profiting most from them were (sales) travelers. The company card enabled them to pay without the limitations and problems of cash at places where they could not directly use their bank. It is a story of innovation that facilitated simplicity and process optimization for the company and the end-user.
The payment optimization grew even more with the rise of the internet and the associated online payments. Today you can buy everything, from toilet paper and software to satellites, with a card. One would have thought that the corporate process automation and simplification will be increased many folds. This was the promise of digital banks. What we have got is the same old company card in fancy clothes. Looking at the internal processes and the effort needed to manage corporate cards it is like there are no APIs (digital interfaces), mobile apps and automation options.
Who is involved internally when a corporate card is used?
The process starts with the decision who is allowed to have a company card, which limitations are enforced and how. The next step is ordering a card from your bank. When the employee starts using it he/she needs to bring back all receipts, categorize them (most of the time in a written or excel based expense report) and give them over to accounting in a week. The accounting will check all documents one more time and in most cases will do the bookkeeping manually at the end of the month. Up to 45 days later controlling gains access to the data and can analyze budget vs actual states, project spend, etc. This is the very light and lean version of this system. For the sake of my argument it is enough as it directly shows the pain points of the current state:
Pain points with the current state
High process and administration cost: The sales team spends its time filling in their expense reports instead of directly starting to follow up with potential buyers and partners after a conference. The opportunity cost of more deals closed faster is very high. Sometimes they lose their receipts. Some expenses need an explanation. Your accounting team performs a full-scale investigation for the missing receipt for 4,99 EUR instead of optimizing and analyzing your finances. Moreover, a lot of the time the receipts and travel invoices need to be entered manually into your accounting system. Although in 99% of the cases the invoice categorization stays the same, your bookkeeper has to do all the work again and again.
High financial cost: Depending on your bank you will have yearly card fees. Fees for paying in different currency on top of special currency exchange rates. Fees for withdrawing cash. Fees for every change you want to make to card limits or other parameters.
Slow fraud detection: Unfortunately, company cards getting hacked is already a normal occurrence. Most of the time you will find out that something is wrong with the next bank statement. This could be a month or more after the fact. (This is going to change with 3DS from December this year. However, the bank charges you for every SMS you get.)
Auto-renewal: Most of the time paying online for software means subscription. The (unconscious) overspend problem with auto-renewals is already so big that it is a business model of its own.
These factors lead to three very common scenarios:
One company card for the whole company: The company has one or two company cards. Most of the time for its CEO, sometimes for the traveling sales staff. The card of the CEO is also used for all online and software purchases. A real-life extreme example of this was a company with 40 people and only two corporate cards. All of the employees had a photo of the CEOs card on their phones and were using it more or less freely. You can imagine the nightmare this caused by the accounting department. Moreover, they found out that they are spending over 5000 EUR on monthly subscriptions that they were not using anymore. The employees responsible for these purchases have left the company a long time ago.
The side effects of reimbursement practices: On their travels, the employees have to pay with their own money and then get reimbursed. A lot of companies use this method as a disciplinary measure. They view these rules as the “only” way for accounting to get the needed receipts and invoices at all. And hopefully on time. This practice has undesired side effects. Highly skilled and highly paid professionals handle low-level admin work. This 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 reduced employee morale, productivity, and loyalty.
A mix of tools optimizing single tasks: Let’s take traveling employees as an example. They pay with a card from one company. Then they scan the receipt with an app from another company. After that, they attach it to a document from a third source. 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 not addressed in this scenario. The result is often a better-structured process that leads to additional work for all participants.
How can this process be optimized and simplified for all stakeholders?
The interesting part is that in this process every stakeholder has the information needed for the next one in the process chain.
The paying employee knows what is being paid and why. For example, she pays for her lunch on a sales trip to Berlin. When she attaches this information to the payment and the invoice, accounting has everything they need to do the bookkeeping.
Even better in 99% of the cases, the invoice categorization stays the same. For example, on a trip, the employee will always stay in a hotel or pay for a taxi. The SaaS subscription or the rent is a repeatable expense. Hence, the accounting team needs to set up the match between categories and bookkeeping software/ERP once. Thereafter, all they need to do is to check the data and click on a button. The data then flows automatically between the systems.
The categorization system provides the controlling team with everything it needs to analyze the actual spend. And change direction if needed. And the best part: instead of waiting for the bank statement and the end-of-the-month report, you track and control your company’s spending in real-time.
Solving the company card process
With Payhawk we are going back to the roots. We are putting the customer first. Our goal is to make the experience for stakeholders as seamless as possible. This is not an easy task. In addition to the multiple stakeholders with different needs, we also have different software solutions and information medium breaks (from digital to paper to digital). But we have cracked it. +60-year-old accountants are using our product on par with hipster twenty-something startup people. Now we are starting to optimize for the needs of the different stakeholders.
Coming back to the original question: How a company card stands at the forefront of less administration and happier employees? It enables you to treat your employees as trusted adults without losing control over their spend. You gain 100% transparency over your non-payroll spending while reducing low-level admin tasks up to 70%. Your team can now focus on the company’s growth. Try it out.