What are corporate cards, and how do they work?

Remember the time when you treated your sales team to a well-deserved brunch? The food was great, and the company was even better, but then came the tricky part: you forgot to file the expense report on time. That was a significant amount on the pocket. This oversight left you wishing for a simpler way to manage such business costs.

Corporate cards are modern financial tools that streamline expense management for companies. They are changing the way organisations handle work-related expenses, making the process easier for both employees and finance teams. But what exactly are corporate cards, and how do they work?

In this blog, we will cover different features of corporate cards, how they work, their benefits, best practices to optimise their usage, and more.

What is a corporate card?

A corporate card is a prepaid card companies issue to employees specifically for business-related expenditures. Every card is linked to a payment network like Visa, American Express (AMEX), Mastercard, and Citi to ensure convenient transactions. 

These cards provide a convenient and efficient way for employees to manage work-related expenses for travel, client dinners, office supplies, and others. 

The primary purpose of a corporate card is to streamline the expense tracking process. Instead of employees having to pay out-of-pocket and then wait for reimbursements, all expenses are directly charged to the corporate card. This flexibility eliminates reimbursement and enhances financial control within your company.

Corporate cards offer a clear and consolidated view of all business-related expenses. This transparency benefits your finance team as they find it easier to monitor, categorise, and manage company-wide expenses. 

Many corporate card issuers offer expense management software along with the cards. The software helps in easy transaction tracking and overall management of the issued corporate cards.  

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How does a corporate card work? 

To optimise the efficiency of your corporate card program, you first need to identify the right corporate card provider and then develop a comprehensive system to issue and manage the cards effectively. 

Identifying the right corporate card provider

Here are the key aspects you need to evaluate while choosing the right corporate card provider for your company:-

• Licensing and credibility: Ensure that the corporate card provider is licensed and regulated by relevant government authorities. Also, try to learn more about their reputation by looking at reviews from other businesses.

• Integration capabilities: Check if the corporate card system integrates seamlessly with your accounting software. Prefer providers that offer APIs that can connect with your internal systems for automated data flow and reporting.
• Ease of use: The card management platform's user interface should be intuitive and easy to navigate. This can reduce the learning curve for employees and administrators. You should also consider the availability of mobile apps for flexibility in managing cards.

• Regional availability: Ensure that the corporate card provider operates in the region where your company and its employees are based. Prefer providers that offer support for international transactions if your business operates globally.
• Rewards and benefits: Evaluate the rewards programs offered by different corporate card companies. Some corporate cards provide cashback, travel points, or other incentives that can add value to your business.

Issuing and managing corporate cards

Here are the steps you can follow to ensure a streamlined process for issuing and managing the corporate cards:

• Issuing corporate cards: Partner with a trusted regional provider to issue a combination of physical and virtual cards, tailoring them to your company's needs. Virtual cards offer instant issuance for faster employee access.
• Setting usage limits: Set custom spending limits per card based on employee roles. Restrict purchases to approved vendors with merchant locking. Implement transaction approval workflows for larger expenses, ensuring oversight and budget adherence.
• Monitoring transactions: Integrate the corporate card system with your company's accounting software for automatic transaction recording. Utilise real-time monitoring tools to track card usage and identify potential fraud or unauthorised activity. Receive instant alerts for out-of-policy spending.
• Reporting and Analysis: Leverage comprehensive reporting features to generate detailed expense reports. Analyse spending patterns to identify cost-saving opportunities, such as negotiating better vendor rates or optimising expenses in specific areas.

Corporate cards can be used to pay for various business-related expenses. For instance, you can issue cards for employees to pay for travel-related costs like hotel stays, flight bookings, and fuel charges; marketing-related expenses like ad costs and software subscriptions; and office-related expenses like snacks, stationery, and other supplies. 

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Corporate cards vs business credit cards vs Purchasing Cards

Corporate cards are different from business credit cards and P-cards. Here is how they differ:

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Factors to consider before choosing a corporate card 

When it comes to selecting a corporate card for your business, there are several key factors you should consider. Here they are: 

1. Fees and costs: One of the first things to consider is the various fees associated with corporate cards. This includes annual fees, transaction fees, and any hidden costs. It’s important to understand all the costs as they would directly impact your finances.
2. Rewards and benefits: Corporate cards often come with rewards programs and benefits. These include cashback, travel points, or discounts on services. It’s worth considering what perks and benefits are most valuable to your business. 

For instance, some cards offer air mile benefits, some offer milestone benefits, and some offer reward points. At Alaan, we offer up to 2% unlimited cashback on corporate card transactions.

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3. Expense management: A good corporate card should offer tools and features to track and manage expenses. This includes integration with accounting software and real-time reporting. These features can help streamline your expense management process and provide valuable insights into employee spending.
4. Credit limits and spending controls: Another important factor to consider is the flexibility and customisation of credit limits and spending controls. With a corporate card, you can set spending limits for every card, controlling where and how the card can be used.
5. Robust Security: Stringent safety measures are essential to protect your money against fraud or misuse. At Alaan, we ensure your funds are always secure in a Tier-1 Licensed bank. We also add a layer of security to your transactions through OTP and multi-factor authentication.

Benefits of a corporate card

Using corporate cards for business expenses offers a range of benefits for the employees and the company. Here are some of the noteworthy advantages of these cards:

Benefits for employers

• Enhanced financial control: Corporate cards offer better control over the business by setting specific spend limits for each card. You can ensure that expenses stay within budget.

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• Improved cash flow management: Corporate cards provide a clear overview of all expenses, letting you track spending in real-time and make informed financial decisions.
• Administrative efficiency: Corporate cards reduce administrative burdens, such as reimbursements and petty cash management. All transactions are automatically recorded and consolidated in the linked software, thereby saving time and reducing paperwork.
• Fraud prevention: With real-time monitoring and alerts for suspicious activities, you can ensure that your company has an additional security layer protecting it from unauthorised transactions.
• Cost savings: Corporate cards often come with rewards and benefits, delivering considerable cost savings. These include cashback on qualifying purchases, discounts on plane tickets for corporate travel, and offers on different business services. Over time, these savings can add up to a significant amount, reducing your overall business expenses.

Benefits for employees

• Convenience: Corporate cards offer significant convenience for employees and businesses. At Alaan, we  support contactless payments through Apple Pay and Google Pay, allowing employees to make quick and secure transactions without needing physical cards, ensuring smooth and efficient payments.
• Time savings: Corporate cards also save time by automating many aspects of expense management. Alaan, for instance, leverages AI capabilities to streamline the process. Employees only need to upload a receipt, and the AI automatically categorises the expense, matches it with the receipt, and records the transaction in the accounting books.
• Flexibility: Corporate cards allow employees to easily handle business-related purchases without using their personal cards or cash, thereby eliminating the need for any type of reimbursement. For instance, purchasing office supplies like snacks, stationery, and other essentials becomes hassle-free, as employees can directly charge these expenses to the corporate card.

Best practices to optimise corporate card usage 

Here are some best practices you should follow to maximise the benefits of your corporate card programme: 

Setting clear and comprehensive spending policies

Your corporate card spending policies should outline the allowed expenses, the spending limits for each category, and the approval process for expenses. This will help prevent misuse of the card and ensure that all expenses align with company rules. 

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Regular monitoring of expenses

By closely monitoring the expenses, you can identify unusual activities early and take corrective action. Regular monitoring helps make informed decisions about your budget. For instance, if there is a sudden increase in travel expenses, it could indicate that your employees are probably booking last-minute flights, which are often costlier.

Employee training and awareness

Employees should be aware of the company’s spending policies, the approval process, and the consequences of misuse. Regular training through seminars, webinars, or in-person meetings can help ensure compliance with company policies and prevent unauthorised transactions.

Periodic review and adjustment of corporate card programs

Regularly review your corporate card program to ensure that it continues to meet your needs. This might involve adjusting spending limits, updating spending policies, or switching to a different card provider that offers better benefits.

Leveraging spend management tools

Reliable spend management tools can help you track expenses, identify spending trends, and better understand the cash outflow. Leveraging these tools can help you manage your expenses effectively and identify areas for cost savings. 

For instance, if you learn that a significant portion of expenses for different employees is going towards office supplies, it is a good idea to negotiate for a bulk discount with the supplier.

Optimise your business spend with corporate cards

The right corporate card can help you manage your business expenses by keeping a close eye on how and where the money has been spent.

At Alaan, our corporate cards come with spend management software, which lets you monitor expenses in real time.

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Our corporate cards can also be integrated with your accounting software, ensuring VAT and corporate tax compliance. Additionally, our cards are accepted by merchants in over 200 countries. 

If you are looking to optimise your business spending and streamline your expense management process, book a demo with Alaan today.

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