It was once a sign of prestige and trust, a right of passage for employees to be granted a company credit or debit card for any business expense. These days, with technology on the rise and online payment becoming more accessible, owning a corporate card has almost become a necessity.

When corporate cards weren’t offered, companies used to ask the employees to pay out of pocket and front the costs, which would later be processed through a manual reimbursement and approval process. Not only did this cause employee frustration, but it also increased labour costs and lengthened a task that could’ve been automated in a few seconds. It can usually take a significant amount of time just to track down the employees, collect all the receipts, check for errors, sign off the approval, and finally, issue the payments.

Now, when a simple and easy option presents itself, who’d dare to resist it? Which is why, so many businesses, whether it is a large enterprise or a startup, have transitioned to the modern and flexible corporate credit and debit card age.

However, of course, when you discuss the pros, the cons need a separate list of their own. This article provides full clarity and transparency of all the challenges that come with such a corporate card so you can make the best decision for your business:

  • Security Risks and Fraud:

Entrusting employees with company credit cards involves trust in their responsibility and integrity. However, even among well-intentioned individuals, there’s always a risk of misuse, fraud, or accidents. Despite the implementation of advanced security features like embedded microchips, such threats of fraud and theft might continue to persist.

Company credit cards are prime targets for criminals due to their high value and the potential for multiple purchases before detection. Criminals exploit stolen card information by buying and selling it online, exacerbating the problem and creating widespread financial havoc.

  • Card Sharing and Accountability:

While many companies limit the number of issued cards to maintain control over spending, this practice can inadvertently lead to card sharing among employees. When cards or card numbers are shared, accountability diminishes, increasing the risk of unauthorized purchases. This sharing often results in unexpected costs, overspending, and misuse, necessitating extensive efforts from the finance department to track spending and allocate transactions accurately.

Additionally, shared cards may lead to quicker spending limits being reached, potentially obstructing legitimate expenses and causing embarrassing situations, such as declined transactions during client dinners.

  • Getting and Managing Credit:

For startups and small businesses, obtaining credit from traditional banks can be challenging. Many struggle to establish credit, but newer payment platforms offer greater flexibility in setting and adjusting credit limits over time.

  • Labor Costs:

The process of handling employee expenses with traditional credit cards is cumbersome and costly. If documents and receipts are not submitted right or in order the first time, it creates more work for the financial team. Constantly needing to track down expenses that have gone missing is simply complicating the process that could be efficiently automated with a corporate card and online expense management.

  • Bank Fees and Costs:

Most bank card programs entail management fees, which, despite being tax-deductible, can accumulate and impact a company’s finances over time. These fees, whether per account, user, or transaction, represent ongoing expenses.

  • Managing Departing Employees:

When employees with company cards depart, shutting off access involves contacting the card issuer. Without real-time visibility into transactions, reconciling final purchases may require waiting until the statement arrives.

  • Additional Expenses for Management Tools:

Traditional company credit cards may necessitate additional expense management tools for reimbursement processing, which would add to a company’s tech stack and require employee training and compliance enforcement.

  • Limited Visibility:

Delayed expense reporting complicates cost management and control, leading to surprises and challenges in managing expenses effectively. Real-time oversight is critical for detecting unauthorized expenses and ensuring compliance with spending policies.

  • Lack of Granular Controls:

Traditional bank cards lack granular controls, such as adjusting credit limits or limiting spending to specific vendors. This hinders proactive credit use management and compliance with company policies.

  • Managing Teams that Travel:

Employees travelling for business may delay expense submissions, creating challenges for accounting teams. Timely reporting is crucial for accurate financial tracking and compliance.

To conclude, while traditional corporate cards offer convenience, they also come with their fair share of inherent challenges. These challenges can hinder financial control and expose businesses to potential fraud, overspending, and compliance issues. In the end, however, the decision to adopt traditional corporate cards or embrace modern alternatives depends on each business’s unique needs and priorities.