Choosing a Company Card

Doing business incurs expense, and often it is your employees who are doing the spending. Traditionally, they do so in one of three ways:

• They spend their own money; and submit a claim for reimbursement. 
• They are given cash advances, reverting to the previous option if it falls short. 
• Finally, and perhaps most conveniently, they are granted access to a company credit card.

While old habits die hard, the first two are rightly losing popularity among progressive small businesses. They’re both alarmingly manual, plus staff morale isn’t going to go far when a late expenses reimbursement leaves an employee scrabbling to pay their rent. And though cash is fine for topping up the biscuit tin, business travellers understandably want a more convenient solution with less paperwork and less anxiety. Cash is almost as outdated as travellers’ cheques!

Which leaves the company credit card. Traditional credit cards for small business come with none of these disadvantages. On the contrary, they are convenient and widely accepted. 

Problem solved, right?

In this guide we will examine the options – because there are many; and using traditional credit cards for expense management is, in fact, deeply out of step with modern business culture. 

While plastic is indeed convenient and widely accepted, and cash an accident waiting to happen, some credit cards add little strategically to the running of your business – and run the risk of encouraging the rapid accumulation of debt. By contrast, modern alternatives like prepaid business cards backed by powerful expense management tools – offer a simpler, safer and more holistic solution.

Chapter 1

A New World of Options

The old world

Many small businesses continue to rely on a credit card for expense spending. If you can get one – and not every small business can – the cost of using a business credit card depends on the interplay of a number of factors that are affected by (and affect) your credit score, from how much you spend to how quickly and completely you pay that spending back. 

At the same time, giving your small business credit card to employees travelling for work is an exercise in blind faith. Debt can quickly rack up, even with limited spending controls in place. Research suggests that people spend more on credit cards than they would with cash. 

This is why most businesses only give credit cards to their senior leadership team – Partners, Directors and trusted VPs. The rank and file are then locked out of the opportunity to seamlessly travel or otherwise provide value – and some of those rank and file, the majority in fact, will be honest and only too happy to contribute to the business. So you’re missing out.

Alternatively, of course, rather like the horror of passwords shared between users of the same machines and services (which never ends well), there’s the less frequent but equally challenging scenario whereby credit cards and their PIN codes are shared around employees, making it impossible for administrative teams to figure out who made individual purchases, let alone to understand the business more deeply. Paradoxically, this is a control system which, when subverted  for convenience’s sake, makes the business vastly less controlled.

And don’t think that debit cards are any easier – they come with many of the same management risks, but fewer safeguards because they deal only with money that’s already in your bank.

The new world

Happily, fintech innovation has given small businesses a wealth of new options, both in terms of financing and digital experience, including expense management. In particular, prepaid cards for small business give companies a new and powerful tool with which to control spending, target it more effectively and give more staff more freedom to spend wisely. At the same time, they drastically reduce the time and frustration associated with manually managing expenses.  

Prepaid cards for small business mean that handling expenses is no longer just about cash flow. They give you:

• Visibility. Digital technology means you know exactly who is spending what, the moment they spend it.
• Scalability. As you grow, prepaid cards let you give more staff the spending power they need, without the risk of snowballing debt.
• Data. Match expense spending to results. Identify potential savings. Make expenses part of your business strategy. 
• Empowerment. Give your teams controlled access to funds. Speed up the expense approval process and supercharge your business.

Pain relief. Expense management is a headache. Powerful solutions like Soldo save time and patience for employees submitting expense reports – and the managers who have to approve them. 

Chapter 2

Counting the Cost – or Trying to…

There are three key trends we’re seeing in the business banking landscape:

Banks are building experiences, not just products

Like running an old car, sticking with outdated ways of spending on expenses can be pricey. The situation is not helped by the fact that fees and costs associated with business credit cards are somewhat opaque, blurred by short-term offers, variable interest rates and obscure perks. 

Choosing the right one for your business is surprisingly complex. Credit card variables include:

• Interest rates: many credit cards for small business offer an introductory 0% APR. This is enticing but will revert to a standard rate after usually six or 12 months. 
• APRs differ between cards and providers, but the true cost of credit cards for small business can’t accurately be gauged without taking introductory offers, spending rewards and other factors into account. 
• Fees and perks: Some business credit cards charge an annual (or sometimes monthly) fee, and some do not. The ones that do might try to balance the pain with perks, like Air Miles or cashback rewards. Whether freebies outweigh fees will depend on your likely usage.  
• Foreign transaction fees: If you travel abroad for business, foreign transaction fees can quickly add up. Not all cards charge them, and some waive them for Europe but not further afield. Again, the ones that charge foreign transaction fees will often balance the pain with perks.

Even the most comprehensive price comparison websites can’t tell you which card is right for your business – because it will depend on your purchasing and payment strategies. For example, those who pay off a card every month will have a very different credit usage profile from those who habitually keep a chunk of debt.

Card one

This basic card comes with no monthly or annual fees, no foreign transaction fees and not even a charge for using ATMs. On the other hand, it includes no introductory offer, no cashback or rewards, and ties you to an initial APR of nearly 40%. It’s aimed at new businesses and startups without a lot of cash in the bank to pay fees, and not enough expense spending to earn meaningful rewards. But beware, the high APR means that debt can quickly accumulate.

Card two

Card two is fancier, offering plenty of bells and whistles. It offers 1% cashback on fuel and hotels, as well as other rewards. Its APR is lower, at 29%. But it comes with an annual fee of £70 per card, a sum which is enjoyably predictable but which can quickly add up if multiple employees need access to funds. It is aimed at larger SMEs with enough travel expenses for the rewards to offset the fees. Be careful withdrawing cash though – high fees will quickly add up.  

Can you truly tell which card is better value? Most businesses can’t – which means that simplicity and ease of use will often be the differentiating factor.

Choosing the right credit card for your small business means weighing various fees, interest rates and perks against your likely usage. 

It’s no surprise that many SMEs end up with the wrong credit card for their business needs. Needless to say, if you carry debt on your credit card, interest will quickly add up, a situation that can spiral out of control if you’re also struggling to chase late payments. This can lead to a snowball effect, as late payments incur penalty APRs, dramatically increasing the cost of your business spending.  

There is a simpler way. The best prepaid cards for small business charge a standard monthly fee per card, have no influence on your credit rating and (as you load your own money onto the cards) avoid any possibility of spiralling debt.

What is Open Banking?

Under Open Banking, the UK’s big nine banks are now obligated to share your data in a secure, standardised form with other financial institutions, and vice versa. But – and this is important to remember – they will only ever do it if they have your explicit permission.

To be clear, Open Banking doesn’t mean third parties will be able to dip into your business bank account at will. It does, however, mean you can allow them access to relevant data on what you’ve been spending, lending and borrowing. They can then use this to create new products, improve their services and, ultimately, help you take control of your finances.

Banks are embracing a fintech ecosystem

It’s become clear that seamless financial experiences are the future, and big banks are finally realising they need help to make them happen.

As it stands, traditional institutions are too big and too set in their ways to adapt to their customers’ needs quickly enough. So their best bet is to embrace the ecosystem that’s emerging around them, and to establish themselves as the beating heart of it all. And to help them do that, they need to collaborate with, partner with or acquire fintech startups.

In practice, this could mean any number of things. But in the early stages, you can expect to see business banking integrate software that enhances your cash flow, manages your expense reconciliation and fast-tracks your accounting. All the while, this new generation of innovators will likely spur a higher standard for UX and UI experiences from the banks they work with. 

Expect to see this trend toward ecosystems become more pronounced as time goes by. Eventually, banks are bound to look past fintech and partner with healthcare, insurance, and retail industries. Just look at Chinese giant WeChat, which started out as a mobile messaging platform and is now a leading FS provider, a scheduling assistant for doctors’ appointments and even a portal for paying off traffic fines.

Chapter 3

Card Benefits: What do Businesses Really Want?

The standout benefit of the old system is rewards. Many business credit cards typically offer physical rewards in the form of points towards air miles, travel insurance, access to airport business lounges, or cashback on spending. 

But even these limited benefits are not guaranteed. Some may be time limited, while others only kick in after a certain amount of card use. And – not surprisingly – many business leaders find they have better things to do than battling bureaucracy to claim back reward points. According to Forbes, just 29% of small business owners who have a credit card actually use the rewards to pay a business expense, and only one in 10 use rewards to help their business’ bottom line! 

Prepaid cards for small businesses don’t offer perks. Instead these new world solutions offer something potentially far more valuable: a significant contribution to agile and efficient company culture:

• Easy management: Modern digital tools make management easier. Soldo, for example, comes complete with a fully-featured management platform, meaning you can change spending limits and permissions in a couple of clicks. Turn individual cards on and off in seconds and top up cards automatically or manually.
• Stay in control: Soldo lets you set sophisticated spending rules. Allow or prevent online or contactless transactions, and limit or prevent cash withdrawals. If necessary, restrict spending to certain countries and even categories. Want to allow training but not entertainment? No problem!
• Look after your team – because nobody likes admin: Soldo means your staff never have to spend their own money on company business, and never have to wait for reimbursement. At the same time, in-app receipt capture and expense automation takes away the burden of manual expense administration.
• Make the life of your finance team easier, too: Soldo integrates seamlessly with accounting software for small business, like Xero. And if you’re not using one of the major players in accountancy software, that’s still not a problem: Soldo can export to a spreadsheet (or CSV); so unlike many legacy card operators, there’s always a way to cut out the frustration and error of manual labour. That doesn’t just mean saved time, it means expense data can be used for better decision-making.

Soldo and your CFO

Instead of a monthly overview of company-wide spending (monthly at best, likely a month out of date and manually generated by a finance professional who could do better things with their time), your CFO now has real time visibility of expenses, down to the level of department, group or individual. They know what is being spent where, by whom, and on what, almost as it happens.  

Why is that important? Oversight is a deterrent against overspending and inappropriate purchases, and spending rules can quickly be tightened. Perhaps more crucially, Soldo lets your CFO identify efficient and inefficient spending patterns, and the expenses that bring more bang for your buck. A powerful reporting tool produces valuable insight, helping you to make better spending decisions. 

With this information at hand, your CFO can set targets to reduce expense spending, or focus expense spending on the best performing departments or individuals.

Soldo and your finance department

Just as Soldo automates much of the drudgery of submitting expense reports, so it simplifies the process of reconciling payments, reports and receipts. The days of manually entering figures into a spreadsheet are over, which will be music to the ears of your finance team and anyone who recognises that repetitive admin has no place in a business where staff should be deployed on more value-add work. Soldo gives your team back the time they need to focus on more worthwhile and stimulating projects.

Soldo and you

No entrepreneur starts a business dreaming of the magical hours they’ll spend managing expenses. But as a business grows, monitoring spending on multiple expense cards comes with the territory. A solution like Soldo lets you empower staff to spend money responsibly without the need for constant monitoring. You can get on with growing your business, safe in the knowledge that your spending can never spiral out of control.

Chapter 4

Power User Masterclass

Company cards for small business aren’t just about managing cash flow. Or at least, they shouldn’t be any longer. In the new age of company expense cards, they are about empowering staff, freeing up time, reducing drudge work and helping your business make better data-based decisions. So how can you make the most of this new potential?

Move to a mobile world

Modern digital solutions let staff manage expenses wherever they are and take care of trivial tasks (receipt capture and upload, for instance) in hitherto unproductive moments. Research shows that both employees and employers see the value of flexible working, if the right technology is in place to support it. Digital solutions which mean nobody has to “get back to the office” help to create mobile-first working conditions that enhance both job satisfaction and productivity.

Extend your reach

Many company expense cards are used to pay for travel, hotels and entertainment. That’s understandable, but with categorisation, you can extend the use of your cards and give your employees more freedom. You can set different spending rules for different employee roles, projects, clients and cost centres. This means that every employee can get both the freedoms and the controls they need to do their jobs properly. Relevant staff can manage self-administered training budgets, for example, organise departmental days out, or cater to last-minute subsistence needs while on the road for a big project. This flexibility means you will find new ways to use your cards based on your own unique needs – and those of your team.

Create “controlled freedom”

As you extend the use of company expense cards, you create “controlled freedom” for employees. More staff are empowered to make more decisions – with the peace of mind that comes from knowing they cannot violate company spending policy. Instead, they can spend when they need to, to get work done. Freedom for your staff is freedom for you too, as the burden of overseeing countless trivial spending decisions falls away.

Integrate your systems

Ultimately, a good expense card should integrate fully with your back end systems, making expense accounting easy. At the very least, it should allow you to download CSV statements for easy imports into your accounts package. Going a step further, Soldo integrates seamlessly with systems like Xero, automatically sending transaction data and letting you reconcile spending in just a couple of clicks. Either way, for power users, the days of data entry are done!

Chapter 5

Business Credit Cards: A Buyer’s Guide

When thinking about business expense cards, you should always consider the following:

• Look for a card with no annual fee, or be certain the perks on offer will compensate for the expense.
• Be prepared to negotiate, and renegotiate. Credit card APRs aren’t set in stone, and can rise without warning. If you have a good credit rating, it’s worth seeing if you can talk down the APR. Set a note in your diary to renegotiate fees and costs after 12 months, or after the end of your introductory offer period.
• The best traditional business credit card for your company is the one that offers the best combination of APR, fees and rewards based on your specific usage. This is too nuanced a calculation for price comparison sites, which will often base recommendations on costs alone. The best modern card for your company is likely one that changes the way you work, rather than a marginal benefit on the fees you pay.
• Be aware that if your business is relatively new you might get turned down for a business credit card.
• Remember that credit cards won’t solve all, or even most, of the spending needs of your business. Day-to-day spending shouldn’t happen on credit. Some people (including the best behaved as well as the worst delinquents) are not ideally suited to a credit environment. And you may find yourself constantly bumping up against a credit limit that is defined by your personal reach and not the needs of the business. A credit line is rarely aligned to the actual circumstances of a small business’ operations.
• If all this sounds like a lot of work, consider prepaid expense cards instead. You are not asking for credit, so your credit rating will have no bearing on your application. Nor will your credit rating be affected by using the cards. Fees tend to be low, transparent and fixed (no credit means no APR), so there are no nasty surprises when your statement arrives.

Expense card buyer’s checklist

Before you decide on the right expense cards for your business, ask yourself the following:

1. What do you need your cards for?

Business credit cards can be useful – if you need credit. If you regularly find you don’t have enough working capital to pay suppliers, for example, having a revolving credit limit can ease cash flow. 

On the other hand, if you simply need cards to allow employees to spend company cash, prepaid expense cards may be a better option. They offer more control, greater cultural benefits for your business, and no risk of spiralling debt.

       2.   Can you pay off your credit card debt in full every month?

If you’re certain that your credit card spending will be paid off every month (or before any interest free period ends), spending on a credit card can be a useful way of improving your credit rating and building up rewards like air miles. 

Miss a payment, however, and credit cards can become very costly. Aim to pay the balance in full to avoid interest charges altogether.

        3.  Do you – or your staff – travel widely for work?

Or do you spend enough on office supplies or other necessities to justify chasing rewards like cash back or air miles? 

Many small businesses will not rack up enough in expense spending to justify the cost (in annual fees, high APR etc.) of credit card reward schemes.

       4. Do you have multiple expense spenders?

You can trust one or two leaders in your business to spend company money wisely. But as your business grows, multiple employees need to spend on the organisation’s behalf. Issuing multiple company credit cards makes it significantly more difficult to control spending manually.

With prepaid cards, no employee (including senior talent who might find it harder to stay frugal!) can spend more than the sum loaded on a card, which is company money rather than debt. Modern prepaid cards also offer ways to control spending and detailed real-time oversight.

 5.   Do you want a card that does more than manage cashflow?

Modern expense solutions should do a whole lot more than managing cash flow. They should empower employees to spend without fear, reduce time on administration and offer valuable business insight. They should be a strategic tool rather than just a convenient source of cash flow. 

In contrast to the old world of business credit cards, new solutions like Soldo let you…

1. Know exactly what your cards will cost.
2. Empower more staff with controlled access to company money.
3. Target expense spending more effectively and even identify ways to reduce it.
4. Reduce time spent on tracking, managing and reconciling expense spending, for you and your team.
5. Gain complete real-time visibility on expense spending.

Soldo is a powerful expense management solution that combines prepaid company credit cards for small business with a smart, intuitive app and admin tools.

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