The days when employees had to dip into their pockets for business expenses and endure the tedious process of reimbursement are fading away. Modern businesses seek advanced expense management tools to gain control over spending and streamline financial operations.
Outdated practices such as supplying petty cash, drowning in paperwork for financial approvals, and laboriously consolidating monthly expense reports have been replaced by instant digital spending, streamlined financial approvals, and the seamless management of expenses through corporate cards equipped with expense management tools. These cards have become catalysts for operational efficiency, enabling companies to thrive in a fast-paced business landscape.
To determine whether corporate cards are the right next step for you, it's worth understanding how they work, their different types, the benefits they offer various stakeholders, and the application process.
What is a corporate credit card?
Corporate credit cards are provided to the employees of an organisation for business-related expenses such as business dinners and travel fares. These cards offer a controlled method for employees to make purchases, eliminating the need for out-of-pocket payments and lengthy reimbursement processes. They are designed to help organisations effectively manage business expenses, and certain cards may offer extra benefits and tools for expense management, further improving financial management capabilities.
How does a corporate credit card work?
Corporate cards operate similarly to regular credit cards, but with specific features tailored for business use. Here's how they typically work:
Issuance: Corporate credit cards are issued under a company's name and distributed to employees as authorised users. Conversely, personal credit cards are issued to individuals.
Payment Responsibility: Typically, the employer is responsible for paying the corporate credit card bill, but some cards may hold individual employees accountable.
Credit Limit: The credit limit on corporate cards is determined by factors such as the company's creditworthiness, financial records, and tailored to meet business requirements. While corporate cards are generally designed to accommodate larger business expenses, there may be instances where personal cards have higher limits.
Rewards and Benefits: Corporate cards may offer rewards that align more with business needs, such as travel perks and higher cash back categories in business spending.
Expense Management: Modern corporate cards often include expense management tools to streamline overall financial management. These features can encompass granular spend control, automated reconciliation, and integrations with accounting tools, enhancing bookkeeping efficiency.
Corporate credit cards, being designed for businesses, have specific requirements for corporate eligibility. This includes requirements such as the type of corporation - either an S corporation or a C corporation. The corporation's minimum revenue, the number of card users, and projected business volume are also considered. Approval is based on the company's financial health, typically independent of the owners' finances. The issuer often requires robust financials, good liquidity, and steady cash flow.
Like traditional banks, Reap also adheres to Know Your Business (KYB) and Know Your Customer (KYC) practices to ensure clients' legal compliance and financial health. However, unlike traditional banks, Reap adopts a more flexible evaluation of a company's financial performance. Furthermore, we offer an alternative method to newly established companies needing a lengthy financial history, providing an opportunity to obtain a credit card via a collateral approach.
Types of corporate credit cards
There are two primary types of corporate credit cards: individual liability and company liability.
Individual Liability Cards
An individual liability card holds the employee accountable for paying any charges or fees, after which they can submit an expense report for company reimbursement. The card issuer reviews the employee's credit before issuing it, but this check does not affect their credit score.
Company Liability Cards
A company liability card assigns the company responsible for paying for approved charges. However, should an employee incur fees due to misuse or unauthorised expenditures, they may be required to pay these directly to the credit card issuer or reimburse the company.
Benefits of corporate credit cards
Benefits for the employer:
Streamlined Expense Management: When integrated with expense management tools, corporate cards simplify business expense tracking, offering enhanced control and visibility over company spend. This integration reduces the reliance on cash advances and reimbursement forms.
Improved Cash Flow: Businesses can improve cash flow management by leveraging the grace period between purchasing and paying the bill when using corporate cards.
Enhanced Spending Control: Employers can prevent unauthorised spending by setting individual limits for employees, monitoring transactions in real time, and restricting card use to specific merchant categories, ensuring that employees comply with the organisation’s expense policy.
Benefits for the employee:
Simplified Expense Reporting: Modern corporate cards are often equipped with digital tools that streamline the expense reporting process, including features like uploading receipts with automated reconciliation. These tools significantly reduce the time and effort needed for report submission, enhancing efficiency and accuracy.
Improved Cash Flow for Employees: Employees don't need to wait for reimbursements or bear the cost of business expenses on their credit cards. This can benefit their personal cash flow and credit utilisation.
Rewards and Perks: If the corporate card program includes a rewards system, employees can enjoy benefits such as earning points, miles, or cash back. Additionally, corporate cards frequently offer travel-related perks like airport lounge access, priority boarding, travel insurance, and rental car insurance.
How do I apply?
Corporate credit card issuers usually require a company's recently audited financial statements, details about its structure and organisation, tax information, and the contact information of an authorised company officer. This process involves preparing documentation, including your business's financial statements, business licence and possibly personal financial information if a personal guarantee is required. Then, issuers will conduct a credit check and apply for approval.
If bank account necessities and other requirements like minimum annual revenue and card user quotas are blocking your corporate card access, consider Reap's solution. Reap offers access to traditional financial infrastructures, including corporate cards, without the traditional prerequisites. This simplifies the corporate card acquisition process through the following methods:
No bank account required:
Unlike traditional card issuers, Reap does not require businesses to have a specific bank account, offering flexibility in how you manage your funds and payments.
No revenue or size barriers:
We believe everyone should have access to superior payment tools, and thus welcome businesses of all sizes without setting minimum revenue or size requirements, making it accessible for all.
Collateral option:
For businesses that need to meet traditional credit requirements, Reap offers the option to use collateral to secure a corporate card, providing a unique solution for newer or smaller enterprises.
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If you’re looking for an accessible corporate card for your business, learn how the Reap Card offers fewer requirements and more flexibility. Discover the benefits of our unique corporate credit approach for easy expense management.