Big Card For Big Ambitions

Corporate cards are taking the business world by storm. Yet they are not for everyone, and not every company or business owner qualifies for one. Elite Business examines the pros and cons of this fast-growing phenomenon.

Big Card For Big Ambitions
Corporate Cards are currently all the rage, one of the rising stars of the business world. 
They are popular with both company bosses and employees alike and, over the past decade, the number of Corporate Cards in circulation has risen exponentially. 
But before every large business owner decides to sign up to this phenomenon, it is vital to understand they are not for everyone. 
The Corporate Card was designed to attract, and be used, by big companies and large corporations. 
As yet, there is no credit card in existence where one size fits all and Corporate Cards should not be confused with Small Business Credit Cards – the clue is in the name. 
This article examines the benefits and pitfalls of owning a Corporate Card, while also spelling out when best to use one. 

First Things First 

Before getting into the nitty gritty of highlighting the benefits of having a Corporate Card, it is important to point out that a company requires an annual revenue of at least $4m to be eligible for such an account. 
The company must show that it is likely to have a projected credit card charge of $250,000 or more per year, with a minimum 15 users. 
And before these little gems are handed out, the card provider needs to be in possession of some serious facts. 
These include: 1) A company’s recent financial statements; 2) Tax information, along with the company’s Tax ID; 3) Comprehensive details about the organisation’s structure; 4) Contact details about every person being issued with a card. 

Card Liabilities 

There are three different types of liability available although, as you will discover, one stands out from the crowd. 
First, there is Individual Liability where the employee settles the bill and is later reimbursed by the company. This, however, is a highly unusual choice, due to its associated risk and largely lengthy reimbursement process. 
Second, there is Joint Liability where both employee and company – which he or she works for – are responsible for clearing the debt. Providing the bill is paid within 180 days, an employee’s credit score will not be affected. 
Finally, and most popular, is Corporate Liability. In this case the company pays the debt. This is particularly good for diligent and responsible employees who don’t have to wait weeks, and often months, to be reimbursed. 
For company owners who are in the privileged position of being able to choose between a Corporate Card and its small business equivalent, the next three paragraphs need to be digested. 
In a worst case scenario, when a company goes out of business, for those holding a Corporate Card the provider will seek reimbursement from the company – and chase after whatever assets it still owns. 
But with a Small Business Card, the issuer will seek repayment by going after the owner’s personal assets in order to collect the money owed and, of course, this could run into many thousands of dollars, pounds, euros etc. In this case, assets usually mean bank accounts and property, such as a private house. 
In short, with a Corporate Card, it is usually the company which is liable for the debt. Meanwhile, with a Small Business Card, it is more personal and the liability rests with the business owner whose credit score may be severely affected as a result. 

Other Benefits 

In this wonderfully technological world that we live, the card issuer may also offer an additional facility to provide important detailed information regarding how Corporate Cards are being used. 
For example, the company boss or owner will be provided with analysis highlighting the business’s spending patterns, as well as keeping track of an employee’s purchasing habits. 
And since Corporate Cards have a lot of stipulations attached, most providers offer customer service to ensure smooth functioning. 
Although there are additional cardholder charges for a corporate account, these are usually considered minimal for a company that is trading healthily. 

Moving Forward 

As a successful company slowly, but confidently, climbs the corporate ladder, it is necessary to keep track of every transaction, and this is where Corporate Cards come into their own. 
Because employees don’t have to reach deep into their own pockets to settle a bill, this reduces paperwork regarding expense claims. 
Although there are a plethora of benefits for signing up for one of these cards, companies must weigh-up their options and select a provider that meets their needs. 

Order Of Play 

Once your mind is made up, and you have decided it is best for your company to take the Corporate Card route, then selecting the right one for your business is vital. 
The most popular card providers are Visa, Mastercard, Amex, and Diners Club. And if you need advice, make an appointment to speak to a financial advisor at your own bank who will assist you in making your all-important decision. Remember, not all banks work with every card issuer. 
At this stage, it is imperative you read all the small print carefully, and more than once, especially when your employees may be required to drive hire cars on their business trips around the globe. 
Look out for information regarding auto rental collision damage waiver; replacement services; as well as travel and emergency services. 
Make certain to analyse the specifications regarding auto rental collision damage waiver, as most card providers have restrictions on vehicle type and collision liability. 
It is a minefield at times but could save you thousands of pounds, dollars and euros in the months and years ahead. 

Decisions, Decisions, Decisions 

If most of your employees’ expenses relate to travelling costs, then Corporate Cards are definitely the best choice. 
This is where reading the fine details are so important. For example: If your company spends a lot on client entertainment, then select a card program which enables you to take advantage of reward points at restaurants. 
It might sound obvious, but if you decide to give Corporate Cards to a few hundred employees – maybe thousands in the case of multi-nationals – just think how much money the business will save in restaurant bills alone. Now you’re getting the picture. 
But before you allow trusted company officials to get their hands on one of these cards, it is vital they are educated about your company’s guidelines and rules for using them. 
Without an effective expenses policy, it is a recipe for disaster. Giving credit is universally one of the easiest modes of increasing expenditure – this is true for all types of cards – but is also susceptible to fraud. 
Include in your expenses policy designated responsible spending limits, mandatory attachment of receipts (for every purchase) and perhaps set penalties for failing to declare expense details by a certain date each month. This is purely administrative 
and quite a simple procedure to implement, but it is vital for all companies to maintain a coherent and fair accounting system which is transparent to all those using it. 

Staying Ahead Of The Game 

One thing is certain. Corporate Cards will continue to grow in the years ahead, and skimping on software could hold your company back. 
With this in mind, you will require a robust expense management software at your disposal. 
This will enable the company to quickly analyse spending habits, handle corporate card reconciliation, assign cards to employees – plus a whole lot more. 
By possessing a top notch management system, it will provide your CEO and directors with instantaneous reports about workflows, outgoings and reimbursements, and give peace of mind that your company’s accounts and expenses are in safe hands. 
A Few Words About Small Business Credit Cards 
These are usually a better option for an entrepreneur or small business owner where annual revenue is less than $4m. 
Unlike Corporate Cards, business card payments are the responsibility of the business owner and not the company. 
With Corporate Cards, it is usually the company which is responsible for the debt, protecting the owner’s personal credit score. 
But because business cards often require a personal guarantee, a company’s owner is liable to settle the debt. 
And employees of these companies may also have to undergo a credit check before becoming an authorised business card holder. 
Business credit cards, similar to customer credit cards, carry an interest charge if the balance is not paid in full during each billing cycle. 
They also offer higher APRs than personal cards, and the holder is required to sign a personal liability agreement. This means if you default on your repayments, it may result in a negative personal credit report. 
Finally, it is worth pointing out that Corporate Cards are generally more flexible when it comes to rewards structures, and it is not uncommon for providers to sit down with companies to design a specific card to meet that company’s needs. But customisation is not yet an option with small business cards. 
This article comes courtesy of the Fyle HQ, who provide effortless expense management for all business spends.

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