expense management tools

What is a corporate credit card?

February 11, 2020

There are many ways to pay for company expenses, from your own cash or card to one provided by a company. A corporate credit card can be a great way for companies to mitigate excess spending and track possible fraud—when implemented correctly.

Each business has its own unique way of implementing corporate credit cards. Used correctly, they can be a great expense management tool. However, not all companies are eligible for them, and they may not always be the best option.

To learn more about their unique intricacies, read on in our corporate credit card guide.

What is a corporate credit card?

A corporate credit card is exactly as the name implies: it’s a credit card for employees of registered corporations. These credit services are provided by banks. In Singapore, they’re available only to Singapore-registered companies that are fully owned by Singaporean permanent residents or citizens.

Corporate credit cards are usually designed for large companies with millions in revenue, multiple card users (at least 15), and hundreds of thousands of dollars in yearly expenses. They may provide special rebates and discounts for dining and travel expenses.

What are some common use cases of a corporate credit card?

Corporate credit cards are usually issued to high-level members of an organization, such as managers, directors, or executives in the C-suite. They’re used to cover the costs of purchases made on behalf of the company and are often associated with travel expenses.

Singaporeans make an average of 6.58 business trips per year and spend over US$1,600 per trip. This amount can be much higher for C-level executives of Singaporean startups and SMEs, who may juggle operations in multiple Southeast Asian countries and have to fly to a new locale every few days.

In such situations, it’s much easier for the accounting team to review automated lists of transactions rather than tens or hundreds of electronic screenshots and faded paper receipts.

Corporate credit cards can be used for any approved business expenses, including flights.

Corporate credit cards can be used for approved business expenses, such as hotels, flights, meals, transportation, and more. Because they are issued to the employer, the card will display the company’s name while also designating the individual as an approved cardholder.

How does a company get a corporate credit card?

Unlike small-business cards or personal credit cards, corporate credit cards don’t require a personal guarantor. Instead, corporations can submit their tax ID and have their finances audited. Once the minimum requirements are met, the issuer will develop a contract and open the credit card account.

Some information that you may need when applying for a corporate credit card:

  • Audited financial statements
  • Company’s internal structure
  • Tax information and legal tax ID
  • PIC contact information—could be the CEO, CFO, treasurer, or someone else

The minimum requirements and benefits will vary by card issuer, so it’s important to do the research to select the issuer that’s right for your corporation.

Who pays the bill?

The matter of who picks up the bill at the end of the month depends on the terms and conditions between the corporation and the credit card issuer. A corporation that seeks to have more control over the expense and reimbursement process may specifically request for individual liability; however, most businesses opt for corporate liability instead.

Individual liability

With this type of corporate credit card, employees must pay the monthly credit card bill, then request reimbursement by submitting an expense report to their employer. If your corporation prefers this type of payment workflow, then your expense policy should include specific report submission deadlines and receipt requirements, as well as spending limits and authorized usage.

One of the strongest benefits of an individual liability corporate credit card is that it requires employees to be more accountable for their business transactions. An employee that must pay for the bill at the end of each month will tend to be more careful about their spending, reducing the likelihood of card misuse or expense overages.

Corporate liability

A corporate liability credit card places the employer in charge of paying approved charges each month. These types of credit cards normally don’t involve credit checks of individual cardholders because the corporation is agreeing to be responsible for the payments.

A corporate liability card may seem more risky—how will a business ensure that all of the charges are legitimate? Not to worry: most expense policies have clauses that require corporate credit cardholders to file regular expense reports for monthly reconciliation.

Are corporate credit cards safe?

Like any spending tool, a corporate credit card can be safe when used correctly. These cards are usually only given to high-level employees within an organization, and spending can be carefully controlled with frequency limits, monthly caps, and individual restrictions.

At the same time, if corporate credit cards are implemented without a robust expense policy, they can introduce major risk. Some companies may prefer

Corporate credit card best practices

All businesses should outline clear policies when issuing corporate credit cards for employees. This allows each cardholder to fully understand the rules and regulations, liability, credit limits, and expense procedures.

Issuing credit cards requires trust and countermeasures should things go wrong.

Because corporate credit cards can be risky, companies should protect themselves by including the consequences for unapproved spending activity. Issue your corporation’s credit cards only to those who have proven themselves responsible with corporate funds, and never skimp on reconciliation at the end of each month.

Distinguish corporate expenses from personal expenses

Corporate cards should only be used for business expenses whenever possible. Employees may incur personal expenses with their corporate credit card and plan to pay the company back later. This should be discouraged; it adds more work for your accountants. If it absolutely cannot be avoided, then it’s best to use expense tracking software that can differentiate between personal and business expenses made with a single card.

Always ask for proof

Though one of the benefits of corporate credit cards are their automated lists of transactions, it is important to get as much information as possible with the actual receipts from the purchase. It can save your company from potential fraud and help you ensure that your employees are spending on what they’re supposed to.

Monitor employee spending habits over periods of time

As your employees use their corporate cards more and more, you’ll gain visibility into their individual spending trends. Pairing the corporate card program with a “smart” expense tracking platform can help you cut costs, spot incorrect expenses, and identify suspicious behavior.

Make use of every tool in your arsenal

As your team and business grows and you manage larger amounts of money, it’ll become increasingly important (and helpful) to use digital business expenditure management tools. They will save your team plenty of hassle at the end of each month and add another layer of protection against fraud, unintentional or otherwise.

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