Every business aims to make it big. You work hard and make your campaigns succeed. You bring in new talent and end up expanding your operations. Soon enough, you realize that your small business is now a corporation.
Upon reaching new standards for success, you’ll also get a new set of responsibilities. This especially applies to company expenses distributed among several team members.
Expenses can be easier to manage in a small business with fewer employees. But, when you have several key staff, you’ll need a better way of managing company spending. Corporate credit cards are an attractive option for many large businesses. But before you apply for one, here are some things you’d want to consider.
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Advantages of Company Credit Cards
Corporate credit cards are becoming a popular option for employee business expenses. Many are moving towards cashless transactions, with credit/debit cards leading the pack. After all, they do offer unique and helpful advantages for modern businesses.
The COVID-19 pandemic has pushed a considerable chunk of the population to go cashless. Credit card transactions worldwide went up by six percent between 2019 and 2020. In the United Kingdom, cash transactions dropped by 35% last year.
Issuing credit cards to employees can help them directly address any business expenses. For example, going on business trips wouldn’t need as many steps to get funding.
Sure, businesses can get only one card, but this can be an issue if several people need to make business expenses. Employees will need a lot of back-and-forths to make purchases. Individual cards often need a phone connection for one-time PINs (OTPs). This can be a hassle to communicate, especially for urgent purchases.
Individual credit cards can streamline these processes. This can save the company a lot of time and effort.
You won’t have to wait for cutoffs to know where your money has been going. Most credit card providers can give you the ability to track each expense in real-time. Mobile applications, emails, or text messages are all popular avenues for these notifications.
This way, you don’t have to wonder how often the cards are being used or who is using them. This can help assuage any fears or alert you to any suspicious banking activity.
Expense tracking capabilities can also push your employees into becoming more responsible. Knowing that management can see each transaction can help them become more conscientious. No one wants their credit card privileges revoked for irresponsible use.
Processing reimbursements can be a big chore. It involves a lot of steps spanning many people or departments. If a company has a lot of employees, the task becomes exponentially larger.
Without company credit cards, this can become even more tedious. Employees often use their personal funds for official business expenses. Then, they need to bring back receipts for the reimbursement process, which can take a while.
Using corporate cards can help cut down on reimbursement efforts. Each expense can be directly billed to the company. With a good number of reimbursements out of the way, accounting can focus on more urgent matters. It saves time, effort, and unnecessary paperwork.
Drawbacks of Company Credit Cards
Corporate credit cards can be very beneficial for many businesses. But, they may not be for everyone. Their benefits can help companies with specific needs and characteristics. Still, the same set of requirements can be a burden for others.
Like personal credit cards, it also costs to maintain a corporate credit card. And since corporate cards are for business purposes, they also tend to have higher fees. Most banks also have additional charges for each card your business wants to use.
These high charges will often come with dedicated software for card management. Still, an average of $100 per card can be a pretty steep price for smaller enterprises. Corporate cards are perfect for bigger businesses with higher budgets. If your business cannot afford this yet, it’s best to look for other options.
No Hard Control Over Spending
Your monitoring capabilities might deter reckless spending. But, corporate credit cards have little to no hard spending limits. As long as the amount spend still lies within the cutoff, employees can spend as much as they want.
An excellent solution to this is proper training and good company culture. It’s also wise to only issue cards to employees you can trust.
Difficult Application Process
Corporate credit cards are a significant investment. You’ll need to undergo a rigorous process to be able to get one from your bank of choice.
Banks will need concrete proof of your company’s good standing. After all, they will be investing in your company as much as you are in them. They will look at your company type, size, financial statements, credit reports, etc.
The Bottom Line
Corporate credit cards offer great perks, though they can be significantly expensive. It is a good option for managing your company spending, but it’s not the only one.
For example, corporate debit cards are pretty similar and suitable for smaller businesses. Exploring and weighing your options can help you better manage your business’ finances.