Cash Flow

Automating Payment Processes to Regain Control over Employee Expenses

Automating Payment Processes to Regain Control over Employee Expenses

It’s often called “cash splash,” and it refers to the all-too-common loss of control over expense payments. As part of the efficiency-mindedness resulting from the 2008-9 financial crisis, companies are clamping down on this cash splash by finding ways to regain control over operational expenses.

With the economic downturn prompting renewed focus on cost efficiency, companies are reevaluating every line of their income statement at an elemental level. A particularly sticky wicket: employee expenses such as purchasing and travel and entertainment (T&E).

For most companies, T&E is among their largest controllable spend categories, along with salaries and data processing. It can be challenging for an organization to manage these expenses, for a number of reasons: It’s the largest expense for which buying is not done through a single point of purchase or department by a purchasing professional; T&E buying decisions are usually spread across the enterprise. Services are not consumed within the walls of the company. And T&E pricing is highly variable and volatile, because it’s so dependent on uncontrollable, external forces.

Visibility begets control

Controlling T&E, purchasing and other employee expenses begins with better visibility into transactions and their data. The most successful organizations tend to aggregate and analyze expense data from three core sources: employees’ self-reported data in expense reports; booking data from internal or external travel agencies; and data from a corporate card program.

The final piece of that puzzle may well be the most crucial, because of the multiple significant benefits that a well-oiled corporate card program can bring to a company.

Chief among the bottom-line benefits of corporate cards is process cost savings. A travel card program, for example, can significantly streamline and automate the expense reporting process. The administrative cost of processing a manual travel expense report is around $28; automating that process reduces the cost to about $6 — nearly an 80% savings.

More card-carrying benefits

While process cost saving is the most prominent benefit of corporate travel and purchasing cards, it is certainly not the only one. Consider these additional advantages:

  • Supplier discounts. Travel and purchasing cards can be used to leverage supplier discounts, to the tune of 2.20% to 2.25%. Apply that number to all employee purchases, airfare, lodging and auto rental transactions, and the total dollar savings can be significant. Using employee spend data, you can also strengthen your negotiations with vendors, develop preferred suppliers and manage to contracts.
  • Card rebates. Financial providers of commercial cards are fighting for corporate business, and are offering cash rebates to employees, the company, or both.
  • Employee convenience. A corporate card allows employees to separate their business expenses from personal expenses, freeing them from having to use their personal credit card to buy a desk chair or plane ticket. It also allows employees to get reimbursed faster, because transactions are entered into the system in a streamlined fashion.
  • Combating enterprise risk. A card provides additional financial control and security over other payment types, such as check or Automated Clearing House (ACH). Companies can tap the data visibility offered by the card network to dispute transactions with vendors, facilitate audits, and protect against fraud.

Best practices in a card program

With the above benefits so apparent, it is no surprise that so many companies are looking to institute a new corporate card program or enhance an existing one. In so doing, they are adhering to eight best practices for a successful program.

1. Make visibility a priority

The first step is one of mindset. It’s essential for management to understand how employee T&E fits in and contributes to the business, and recognize the importance of seeing all the expensing that occurs throughout the organization.

2. Establish and enforce policy guidelines

Institute and enforce a policy directing employees to use the company-issued card for all business expenses. Determine the organization’s most appropriate employees for a corporate card by taking a hard look at who’s buying what, and how often. For example, employees who travel on business more than twice a year are excellent candidates for a T&E card.

3. Focus on technology

Optimize your solution by insisting on using the most up-to-date card program technologies. Your system should be able to perform multiple functions with a single sign-on, such as daily card and out-of-pocket transactions, easy creation/submission of expense reports, and simple back-end management review and reporting.

4. Establish upfront card controls

Establishing controls lets you refine your card program to the company’s priorities. You could, for example, indicate the types of suppliers that can use the card. You could block cash access to the card, preventing employees from using it at an ATM machine. Set limits on transaction size or monthly dollar amounts. Establish different credit lines per employee. Setting these kinds of controls up front not only lets you customize your program, but also enjoy valuable peace of mind.

5. Analyze how T&E services are being purchased in the organization

The true value of your purchase transaction data is the ability to analyze and control expenses. Commit to amassing this information to see what people are buying and how goods and services are being used. Then use that intelligence to adapt your card policies to more efficiently and effectively buy on behalf of the organization.

6. Conduct management reviews

Thanks to card program technology, cardholders can go online and review a transaction, then route it to their manager for review and approval. This can be achieved through multiple approval stops before it’s approved and uploaded into the General Ledger.

7. Adapt, refine, repeat

A successful card program is not a “set it and forget it” proposition. It must be carefully managed and periodically reviewed and refined to maximize potential control and cost-saving benefits. Be prepared to take a hands-on approach.

8. Partner with a leader

Nobody understands how to design, implement and benefit from a corporate card program better than a provider of such programs to organizations nationwide. Partner with a leader who can help you understand where the opportunities and traps lie, what your competitors are doing, and how to extend your program to additional spend categories such as insurance, rent, utilities, etc.

If the process cost savings of corporate T&E cards are impressive, they are even more so for purchasing cards. Purchasing cards allow organizations to push responsibility for routine purchases down to the cardholder level, improving cycle time and lowering transaction costs by replacing cumbersome manual review and approval processes.

Historically, an employee would submit a purchase order that goes through approvals, then the purchase would be sourced by procurement, then the purchase would be made and the product sent — a resource and cycle time-intensive process. With a purchasing card, companies restrict purchases to a certain dollar amount — $2500, for example — and put buying decisions directly into the hands of the cardholder. Cardholders can purchase what they need to get their job done more quickly, while taking low-dollar, high-volume transactions out of the procurement pipeline. Automating the requisition-to-check process in this manner can yield savings of up to $75 per transaction.

This content does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.


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