Growing companies spend more. And when your business is doing well, it’s human nature to slack off a bit in expense management: Cash can seem easier to part with when it’s easier to accumulate. Even when careful about new expenditures, a small or midsize enterprise’s (SME’s) spending profile changes as it evolves, often in unexpected ways.
But if you’re like most SME owners and managers, you know all too well that expense management is crucial to the long-term health of your business budget, and is among your best tools for mitigating risk. Here are three ways experts have identified that business cards can help an SME improve control over spending without adding expense management complexity.
Strengthen Expense Management With Employee Cards
Using employee cards offers multiple ways for companies to streamline expense management and monitoring.
For example, modern business card solutions provide timely reporting on many categories of expenditures. Using this reporting, expense managers can quickly detect increased spending in specific areas, understand why it is occurring, and potentially identify new ways to reduce it—perhaps by consolidating vendors and/or negotiating volume discounts.
With the right business cards, SME owners and managers can set individual limits on each trusted employee’s purchasing and spending, based on their role and responsibilities within the organization. Cards that offer these individualized limits typically also allow you to make changes as needed—for example, to increase payment limits when an employee should be empowered to make a larger purchase or to immediately freeze an individual’s ability to charge on the company’s behalf.
If you use business cards to improve expense management you may be pleasantly surprised at the complementary management benefits. For example, some cards also offer mobile apps that allow employees to upload receipts by photographing them and add notes or labels to clarify the reason for the payment. That improves spend control while reducing inefficient paperwork.
The stronger your expense management capabilities, the more profitable you’re likely to be.
So, too, business cards can reduce the need for time-consuming cash advances and reimbursements, improving productivity of internal finance teams and freeing them for higher-value tasks. Business cards can also be linked to receipt tracking in SEM-oriented financial systems like Quickbooks or Freshbooks.
Use Card Spending Alerts
Built-in spending alerts can further strengthen expense management as SME owners and managers come to rely more on business cards. Some cards let you set spend-tracking alerts to let you know when employees hit a specific threshold or has a transaction blocked because they’ve exceeded their monthly limit.
If you see alerts triggered repeatedly, you can review individual employee spending patterns in detail, counsel the employee, or change spending limits, if necessary. You can also get up-to-the-minute information online earlier in the monthly billing cycle, to avoid surprises.
Some business cards also allow cardholders to preapprove spending in certain categories, such as domestic shipping, while sending notifications to the account holder if charges are made outside these categories.
Gain Finer Control With Purchasing Cards
More sizable SMEs with traditional purchasing processes may wish to consider adopting corporate purchasing cards.
As CFO Edge notes, conventional procure-to-pay expense management processes can be woefully cumbersome, involving generation of requisitions, purchase orders, invoices and payments—each with their own costs. When applied to the repeated purchase of relatively low-cost items such as office supplies or even travel and entertainment, these overhead costs can sometimes exceed the size of the payment itself.
Corporate purchasing cards can streamline these processes, eliminating paper invoices and checks. According to the National Association of Purchasing Card Professionals (NAPCP), using processes based on purchasing cards can cut transaction costs by 55 to 80 percent, or an average of $63 per transaction.
Corporate purchasing cards can provide exceptionally granular control over expenses. For example, cards may use Merchant Category Codes or Preferred Supplier Lists to specify which merchants may be paid within a given category. That’s a powerful tool for enforcing your supplier preferences and fully leveraging quantity discounts associated with them.
Corporate purchasing cards may also increase flexibility over cash flow by enabling you to automate supplier payments on a schedule they specify. For some companies, this can help improve the key Days Payable Outstanding (DPO) cash flow.
To make sure business or corporate purchasing cards deliver on their full value, business owners should consider taking the time to carefully onboard all authorized cardholders on how to use them, and on the rules they must follow. Provide this information both in writing and in person.
Others emphasize taking advantage of the tracking tools card providers offer. For example, monitor and review recurring payments and that only the right people are authorized to make each type of payment.
The Takeaway
The stronger your expense management capabilities, the more profitable you’re likely to be. Business cards and corporate purchasing cards can be powerful tools for enhancing spending control.
Photo: Getty Images
The information contained in this content is for generalized informational and educational purposes only and is not designed to substitute for, or replace, a professional opinion about any particular business or situation or judgment about the risks or appropriateness of any approach for any specific business or situation. THIS CONTENT IS NOT A SUBSTITUTE USED FOR PROFESSIONAL BUSINESS ADVICE. The views and opinions expressed in this content do not necessarily represent the views, opinions and/or judgments of American Express Company or any of its affiliates, subsidiaries or divisions (including, without limitation, American Express Global Commercial Payments or American Express OPEN). American Express makes no representation as to, and is not responsible for, the accuracy, timeliness, completeness or reliability of any opinion, advice or statement made in this content.
