Cash & Liquidity Management

Question Answered: Corporate cards

Published: Jul 2018
Credit card laying on table

This issue’s question:

“How can I make the most of my corporate card programme?”

Deven Somaya

Head of Commercial Cards, Asia Pacific, Treasury and Trade Solutions

Corporate card programmes provide a level of convenience to companies and their employees by means of increased controls and compliance for their travel and entertainment spends. Through a myriad of card solutions available – virtual, travel and entertainment, purchasing and B2B – a programme can best be maximised by ensuring the optimal balance of form and function of card usage.

Let’s look at both viewpoints:

  • Cardholder:

    A corporate card provides the employee of a company with a payment tool to use for business-related expenses in the most convenient manner. Choosing a card issuer that provides a solution with high acceptance points ensures that employees are never out-of-pocket and by digitising spends on the card, transactions can be tracked against company policies.

  • Company:

    An efficient corporate card programme enables the company to analyse and optimise its policies. By digitising transactions, companies are able to acquire enhanced visibility of its card programmes to ensure a higher level of adherence to its policies and also leverage the data for supplier negotiations.

Here are a few basic steps to get the most out of your corporate card programme:

  • Data:

    Start by getting a good view of your existing card programmes. If the programme is global, having a single global provider facilitates easy and consistent access to big data.

  • Policy:

    Define a consistent policy across the organisation. An issuer with the right system controls can support your programme, resulting in better adherence to policies and provide data and audit tools to ensure stronger compliance.

  • Processes and programme management:

    Embark on a journey with an issuer with strong digital capabilities to simplify programme management through online platforms. Many successful programmes leverage a shared service centre and thus access to digital tools becomes even more critical in overall management and execution.

  • Negotiate and partner:

    Leverage the data collected over time to maximise relationships and negotiate prices with strategic partners to drive economic value. Card programmes provide a great deal of data and issuers that form the right partnerships can augment that data further to implement cost-effective partnerships.

  • Optimise:

    By benchmarking your programme with industry data, companies can further maximise their opportunities and drive financial and operational efficiencies of a corporate card programme. Companies can get more value out of a programme by implementing expense management systems to further enhance the data capture of a cards programme.

The value of a corporate card programme can be further enhanced by extending the programme beyond the travel expenses to include other supplier payments, typically non-strategic and indirect. A procurement card programme is a great complement to the corporate card and in the digital age, the procurement card has gone virtual with enhanced capabilities and controls. An example is Citi’s Virtual Card Accounts (VCA) for corporate clients; we are the only bank to launch this across 11 markets in the Asia Pacific region.

A powerful electronic global payment solution that offers unparalleled control and flexibility without the need to issue plastic cards, VCA allows clients to generate unique 16-digit virtual card numbers with transaction-level controls, enabling additional security and improved reconciliation to a client’s purchasing process.

It provides enhanced card transaction data that enables streamlined programme reporting, improved audit capabilities and automated back-end reconciliation processes. Collectively, VCA’s flexible, real-time capabilities empower organisations to improve transaction management and reduce risk, while driving greater spend to their existing commercial card programme.

Stefanie Koh

Head of Enterprise Platforms and Solutions, Asia Pacific

As the global economy continues to grow, cross-border economic flows and business travel are also forecast to rise sharply. According to data from the Global Business Travel Association, annual business travel is expected to increase by 25% between 2013 and 2018, reaching US$34bn.

On-the-rise business travel brings with it increased demand for solutions to manage travel and entertainment expenses (T&Es). Companies are constantly looking for ways to reduce the costs of managing numerous trips by employees and corporate cards have been the solution-of-choice as they help to alleviate the hassles of organising cash for business trips. This, in turn, helps to reduce administrative costs associated with cash and treasury management.

A study by Fraedom, a spend management system and technology provider which was recently acquired by Visa, showed that 86% of all corporate cards issued have been used in the last 60 days. Companies in different sectors are also increasing their issuance of corporate cards to employees, helping to make multi-currency transactions more seamless.

Beyond the convenience of being just a payment tool, corporate cards backed up by spending management solutions make it easier for employees to streamline expense reporting and monitor adherence to corporate policies.

The complexities of business travel can give rise to a range of compliance issues. For example, business travellers can, unknowingly, trigger additional and unexpected corporate and individual tax obligations. In some cases, taxes and payroll withholdings may be required. It is essential for companies to actively manage or plan ahead of business trips, as penalties and interest can start to accrue, and lead to significant financial impact.

To this end, the use of corporate cards coupled with relevant controls, reporting and expense management solutions allow more control and visibility into T&Es and enable companies to keep track of business travel activities closely. Features such as improved reporting systems can analyse spend data by category, such as expense type and Merchant Category Code, as well as monitor employee compliance with corporate travel policies. They can also create usage parameters to meet strict compliance and regulation requirements.

Concerns over leaks of company information and online payment fraud may also arise as more business trips are booked through online travel and metasearch platforms instead of traditional travel agents. To minimise the risk of exposing company information during online transactions, companies can deploy one-time virtual card solutions which allow for a wide variety of spend controls so the card can only be used for its intended purpose once.

While business travel continues to gain importance, using corporate cards to monitor and control spending helps companies work smarter. This is how companies can minimise the costs incurred and reap the benefits of business travel.

Amit Sharma

Head of Southeast Asia Treasury Products, Cross Currency Product and Commercial Cards, Asia Pacific
Bank of America Merrill Lynch

Helping companies meet their go-green targets, enabling organisations to reduce their carbon footprint, and supporting organisations to drive their employee satisfaction scores are some innovative ways in which clients can use their corporate cards. Rather than purely limit the use of corporate cards to the traditional T&E or Business to Business (B2B) procurement programmes, here are some ways in which companies are making the most of the corporate card programmes:

  • Monitoring/reducing carbon footprint and meeting go-green targets:

    Companies have been known to use the rich business intelligence provided by corporate cards to help their environmental and social governance targets through a variety of mechanisms. From mandating public transport (such as train or plane travel) over car hire for long-haul trips, and reducing the use of paper by going electronic (think about how much paper is used in a manual procure-to-pay process), companies can reduce the carbon footprint incurred by business travel and customer statements.

  • Driving employee satisfaction scores by adapting policies to suit traveller needs:

    A leading eCommerce organisation was looking to better manage its business travel expense, while also addressing employee feedback around better work-life balance at the same time. The company changed its travel policy to promote ‘bleisure’ travel, ie to combine business travel with personal time, which brought forward two benefits – i) cheaper weekend business class rates for the organisation and ii) the flexibility for business travel for employees, resulting in significantly improved employee satisfaction scores.

  • Bridging the consumer/corporate divide:

    As the world grows increasingly electronic, Corporate treasurers demand more of the same experiences on their corporate cards that they can benefit from with their consumer cards. Take, for example, the fact that transport organisations in a number of countries around the world are discouraging or have simply stopped accepting cash. Consumers simply ‘tap’ their contactless credit cards to have the accurate fare deducted on buses and train/subway stations. A natural extension of this need is for business travellers to have the same experience. Another example is the increasing ubiquity and convenience afforded by mobile payment digital wallets to consumers. As the world moves from physical to digital currencies, from physical to digital tokens, so are cards moving from physical to digital formats. Not only are organisations embracing virtual cards, they are also becoming increasingly invisible by being embedded in the travel booking or procure-to-pay process.

  • Maximising the visibility and spend on cards, reaping greater benefits:

    Security and fraud remain top of mind for organisations. However, organisations regularly ‘leak’ millions of dollars in legitimate card usage through the use of alternative payment methods, losing on not just the visibility but also the rebate. The number one reason (by far) for card declines is not fraud, but rather insufficient credit. By simply monitoring usage via a report, companies can drive greater efficiencies in their card programme.

Corporate cards have been around for over half a century and have been a strategic tool in the treasurers’ toolkit to help achieve their goals. As issuers, we owe it to our clients to be more vocal about how corporations and treasurers are making the most of their corporate card programme so that the benefits can be reaped by the entire industry.

Next question:

“My business is struggling with working capital and payments are often too slow for our suppliers. What can I do?”

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