The Pros and Cons of Corporate Credit Card vs. Expense Reimbursements
Updated: 7 days ago
Expense reimbursement has been around to manage business spending for a long time. Filling out forms and attaching receipts to explain why and how employees incurred business-related expenses. With all of it's given benefits like employees likely to be a better steward of charges, the increase and democratization of spending among companies led to the introduction of the corporate credit card or virtual pre-paid company cards.
Corporate credit cards, on the contrary, give businesses a standard way to let all employees pay for a wide range of work-related expenses and not have to worry about collecting receipts and filling out petty cash forms and therefore, save an immense amount of time from filling forms and attaching receipts to going back to work without any worries about being reimbursed.
Some companies use both methods and some companies use one of these options.
The question remains, which payment method is the most efficient and best fit for your business?
Let's begin by explaining what a company credit card is.
Company credit cards are not that different from a personal credit card, other than being linked to a company account. These cards come in variations of an actual credit card or a virtual card instead. Employees get to use their cards either online or in-store. The only practical difference is that they are usually required to provide proofs of purchase to their finance team - for tax purposes.
In fact, corporate purchasing cards were introduced simply as a workaround for businesses whose certain employees, had a high number of expenses. Rather than filing endless expense reports and waiting to be reimbursed, some employees who have large spending for the business are given their own card to pay with.
More than ever before, today, more expense management companies like Haslle, make it possible for the entire team to benefit from having a company card.
How does a company credit card actually work?
At first glance, the company credit card seems a good solution for CFOs and managers when it comes to managing business expenses.
It has the added bonus of cash flow flexibility since the card is not debited until 28, 30, or even 70 days after purchase.
With a company credit card, a monthly statement is usually sent to the cardholder (employee), to the company CFO of finance manager, and to the budget manager (employee's manager). The company can keep track of who's spending how much and on what, but only after the fact.
A final advantage is that banks offer a convenient range of associated services such as travel insurance, coverage for rental vehicles, legal support, medical assistance, or even rapid refunds in the event of fraudulent transactions.
With virtual pre-paid cards like Haslle, the company and managers are able to view all the expense statements data in real-time. This means they are notified as soon as an employee has made an expense. The employee on the other side can benefit from adding a receipt or description to their expense made on the go via a mobile app.
Pros of a corporate card:
The most important advantage of corporate cards is that it saves time that usually goes for the tedious reimbursement process.
Companies can easily avoid the draining of internal resources to process reimbursement and reporting by introducing company cards. By empowering employees to use company budgets allocated, the firms have removed the need for paying back employees altogether.
When an employee goes on a business trip, the company should cover all travel expenses. If the company relies on reimbursement management, however, employees would have to not only account for every expense they make but also make sure they have enough funds to cover their expenditure.
Instead, using a company expense card allows individuals to rely on company money. This way employees can see clearly how much budget they are allocated, how much money is left, and they don't have to have the worry to collect receipts for filling out petty cash form once they are back from their trip.
Issuing corporate cards for employees allows businesses to easily track spending.
For example, there are companies that use virtual cards to pay in all major Ads platforms such as Facebook, Google, etc. Since employees are using company funds, managers can easily track campaign expenditure with a budget and spend limits on each card.
Cons of a corporate card:
Due to the freedom given to employees, they may take advantage of the company card and overspend on business expenses. Since they know they won't have to wait to be reimbursed, they will spend mindlessly. They may also try to charge personal expenses on to their company card and wish for it not to get caught during a review.
Haslle comes in handy and allows managers to disable cards by one click if they feel the employee is taking advantage of it, they can set daily budgets and limits for each category of expenditure to ensure overspending doesn't occur.
Finally, they can keep a tab on their employee's spendings real-time and won't have to review all charges at the end of the month, and therefore any mistakes or overcharges will get caught at as soon as it happens.
Risk of Lost or Stolen Cards
As with personal credit cards, company expense cards may also get lost or stolen. Company credit cards issued by a bank may take some time to disable. Virtual or pre-paid company cards like Haslle, can be canceled or disabled with a click on a mobile app or web application.
Employees should still be turning in receipts to support the charges – this can be a hassle tracking down receipts. With company credit cards issued by banks, the managers can view the statements at the end of the month and they may ask to see extra proof for the purchases.
Why do some companies stick to expense reimbursement?
The corporate card seems like an attractive option, but why isn’t everyone carrying a business credit card then?
Lack of trust
People are far more likely to trust something that they can control. The reality is that companies are afraid to let employees using company cards because they don’t trust individuals to comply with the company’s spending policies.
Expense reimbursement, on the other hand, ensures that every expense is approved in advance.
Haslle ensures that employees comply with spend policies without using expense reimbursement.
Lower capital risk
If your company relies on reimbursement, that means that it is far more unlikely to overspend. When employees’ wallets are the primary source of spending, they are far more unlikely to indulge in spending or cross the line between personal and business expenses.
One of the common mistakes that companies make is sharing a corporate card among several individuals. This is done so that the company does not pay for additional cards. The problem is that in these scenarios, companies don’t have a way of proving who is the one spending.
Again, Haslle has thought of it all. You can get a card for a team but assign virtual cards for each individual so that the expenses will show the upper individual. Companies, therefore, have no trouble proving who was the one who spent the budget.
Let's face it: the company credit card is still a better payment method than the outdated expense reimbursements. It's a popular option for startups and growing businesses. But when it comes to managing office and employee expenses with convenience and security, there are far better options available.
One of these is Haslle, which combines flexible, secure payment methods and integrated expense management software into one clever package which you can benefit from.
Currently, we are offering free trials, so why not book a demo and learn more?