Benefits of Corporate Credit Cards
In the previous article, we have already studied what corporate credit cards are and why they form a very important part of the commercial banking business. Over the years, the number of corporate credit cards being issued has increased rapidly. This has happened because of the fact that corporate credit cards provide several distinct benefits to the corporations which use them.
In this article, we will have a closer look at some of the main benefits which accrue to corporate clients when they utilize corporate credit cards.
- Eliminates Expense Fraud: Several studies have estimated that expense fraud is rampant in multinational companies. After all, multinational companies often ask their executives to travel to different parts of the world for business visits.
Ideally, employees are supposed to spend money as per the policies of the company and then later get it reimbursed from them. However, in practice, it is common for employees to collude with vendors and produce fake receipts with higher amounts in order to pocket the difference.
When companies introduce the corporate credit card system, such expense frauds get eliminated. This is because it becomes very difficult for employees to misrepresent any expenses once they know that these expenses can be tracked back using a digital trail. The money saved by eliminating these expense frauds and the resultant audits can be quite significant.
- Easier Management of Expenses: Management of a companys travel-related expenses can be quite challenging. This is because such management involves a lot of paperwork and reconciliation.
For instance, companies have to maintain records of the various bills and invoices which they reimburse in the form of expenses. However, if companies start using credit cards, then such expenses can be easily managed since companies do not have to maintain records.
Since the tracking of the expenses is automatic, companies can also provide a list of pre-approved vendors which would further ease the process of management of corporate expenses.
- Spending Limits: Corporations are forced to employ a lot of people whose job is to check whether the amount of money spent is as per the policies specified by the organization.
Companies have internal spending limits based on the type of expense as well as the job level of the concerned employee. Adherence to these spending limits is difficult to enforce and ends up creating a lot of administrative work. This is where corporate credit cards come in handy. It is possible to have these limits built into the credit card system.
Commercial banks are able to provide credit cards that automatically enforce such spending limits. As a result, the additional administrative effort which is spent on maintaining spending limits can be reduced.
- Automation: Corporations have to deploy accountants who enter these expenses into the ERP system of the company and then they are formally posted as expenses of the company. This requires a lot of manual effort. However, when it comes to corporate credit cards, these expenses can be posted automatically. This is because commercial banks can send credit card-related data electronically to the company.
It is possible to build a system that integrates the system of the commercial bank with that of the company. As a result, the entire process can be automated up to a large extent. This helps the company in saving a lot of administrative expenses. Also, this helps the company in building more process efficiency.
- No Need for Advance Cash: Companies have to pay their employees cash in advance if they foresee large expenses coming up in the future. For example, if the executives of the corporation are expected to make an international trip, the company needs to pay them to cash in advance. Sometimes, they also need to have their foreign exchange ready so that they give the cash to their employee in the correct currency. All this is not required when a corporate credit card is used.
The company is not required to pay any advance cash or hold on to different currencies in order to pay the employees. All this can be taken care of by the commercial banks. This facility is very important for many corporations since it helps them better manage their cash flow and lower their working capital requirements.
- Travel Benefits: Last but not the least, corporate credit cards provide their users with several benefits. Corporate credit card users are able to access facilities such as travel lounges and obtain travel miles on their corporate spending. These benefits can later be used by the employee for a more comfortable travel experience.
The fact of the matter is that corporate credit cards are a very important tool for any corporation. This tool helps the company to manage its travel and employee-related expenses in an easy and efficient manner.
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