Corporate cards and expense reports: What you need to know

Which payment model works best?

There are several ways to handle payment liability for corporate cards. Here are the most common ones we see and how they work in practice.

Credit cards with individual billing where the employee receives the invoice work best administratively. The employee submits their expenses, is reimbursed by the company and then pays the invoice with the money they received. Ultimate liability for the invoice still lies with the company if the employee doesn’t pay, but in practice the set-up creates an incentive: receipts are submitted on time because reimbursement depends on it. Matching issues are greatly reduced compared with other models.

A common objection is that employees won’t be reimbursed before the invoice is due. The payment period on a credit card can be 15 days, and if reimbursements are only run once a month, the employee can end up out of pocket. However, this is a problem that can be solved. Set up fast, automated checks so that reports are processed without unnecessary delay, and run payments more often. Using bank integrations, it’s even possible to pay out immediately once a report has been approved. A widespread approach in global companies is to make reimbursements through accounts payable rather than payroll. Employees are then registered as suppliers in a separate supplier series.

Credit cards with central billing mean that the invoice goes directly to the company, and it obviously has to be paid whether or not the employee has submitted receipts. That sounds convenient for the employee, but it creates a well-known problem: without a clear financial incentive, employees tend to submit receipts late or not at all. The finance department is left with unexplained transactions and spends every month chasing receipts.

Prepaid cards are a model that has become popular among card-centred expense platforms. It’s based on topping up an account with the card provider, from which money is deducted when purchases are made. The set-up shares the same basic problem as centrally billed credit cards: the company has already paid, so the employee has no financial incentive to submit receipts on time. Prepaid cards also have an additional drawback: instead of using credit, the company has to keep topping up the account, which ties up capital and creates extra work.

If you choose a set-up where the company pays directly, system support is especially important. You need to be able to see exactly which transactions haven’t been reported yet, remind employees automatically and give approvers clear visibility of what’s waiting for them. How well this works depends directly on what data your bank provides, and how. More on that below.

What the bank actually sends and why it matters

When an employee makes a purchase, the transaction goes through a payment network, either Visa or Mastercard. Some banks send transaction data to the expense management system directly from the network, via something called Visa VCF or Mastercard CDF. One problem with this is that the network – Visa or Mastercard – has no visibility of the bank’s own fees and currency conversion mark-ups. This means the transaction amount sent to the expense management system sometimes doesn’t match what is actually charged on the invoice.

As a result, matching isn’t entirely accurate, so you’ll need to set up a process for correcting these discrepancies if your organisation uses centrally billed cards. Ask your bank whether they provide data in their own format that includes final amounts, bank fees and invoice data, not just the network’s standard file.

Real-time authorisation makes a big difference. Traditionally, card purchases appear in the expense management system after one to three days, once the transaction has been settled and sent in a nightly batch. However, every purchase generates an authorisation immediately, and banks with the right technical capabilities can deliver it to the expense management system in real time.

With real-time authorisation, the system can ping the employee to attach a receipt straight after the purchase, before they forget. Matching becomes easier, the employee experience improves and the finance department can see what’s happening almost in real time.

Ask your prospective card provider: can you deliver authorisation data in real time? And how is it delivered? Via API is best, and automated file transfers work, but manual downloads from a bank portal are a problem.

Geographic coverage: No solution covers the whole world

There is currently no provider that issues cards in every country. It’s worth finding out which markets your card provider covers and being prepared for different markets to need different card solutions.

This fragmentation is a strong argument for choosing a card-agnostic expense management system – that is, a system that can import transaction data from any bank, rather than one that is locked to a specific card provider. That gives you the freedom to choose the best card for each market without having to change expense management systems.

What the expense management system needs to handle

Your card programme is only as good as the system that handles its data.

Automatic matching. The system should match card transactions with receipts automatically – the employee shouldn’t have to do it manually.

Automatic reminders. Employees don’t always submit receipts on time. Automated reminders reduce the need for manual follow-up, and work best when the system receives real-time authorisations from the bank and can ping the employee straight after the purchase.

Visibility for the finance department. The finance team needs to be able to see which transactions are outstanding, where they are in the process and who is responsible for them. This is particularly important if you have a set-up where the company pays the invoice directly.

Card-agnostic approach. The system should handle transaction data from different banks and card providers, rather than being locked to a specific card issuer.

Questions to ask before you choose

1. hich payment model best suits our organisation and culture?
2. Does the bank provide real-time authorisation, or data in nightly batches?
3. oes the bank send data in the network’s standard format, or in its own format with full amounts and invoice data?
4. Which countries does the card provider cover, and how are markets they don’t cover handled?
5. Is the expense management system card-agnostic – in other words, can it receive transactions from any bank?