Control Cash Flow

Controlling Employee Purchases to Cut Costs

Automating Payment Processes to Regain Control over Employee Expenses

While products or services with a competitive edge spark small business successes, cost control may be the essential element that sustains growth. According to SunTrust Research of 397 businesses1, a third of businesses list controlling costs as one of their top priorities. Growing businesses often need funds to invest in additional growth opportunities, whether for product or service development, sales and marketing to develop new markets or equipment for a new facility. Since dips in the economy or company setbacks can strike hard at smaller, less well-capitalized companies, tight control over expenses can tip the scale in a positive direction.

While many businesses want to keep close control over all spending, employee expenses such as purchasing, and travel and entertainment (T&E) are a natural place to start. For most companies, T&E is among the largest controllable-spend categories, second on the list of places to look for cost savings after overhead, according to SunTrust Research1. T&E purchases are often subject to decisions made by employees outside of the office where it is not easy to monitor each purchase.

Control Your Business's T&E Costs

Managing T&E, purchasing and other employee expenses begins with better visibility into transactions. However, data is often spread across multiple sources including employees’ self-reported data in expense reports, booking data from internal or external travel agencies, and data from business credit card programs. Consolidating spending information for reporting and timely management is a challenging task.

Additionally, T&E programs that reimburse employees need to process expense reports, and that processing is costly. Paystream Advisors’ research estimates that processing a single expense report costs $26.63 in administrative costs.2

Finally, many T&E programs reimburse employees as soon as expenses are incurred. Often, employees who have charged expenses on their personal credit cards are reimbursed before they get their credit card bill. Yet, for those looking for cash to put toward company growth, transferring the 30-day grace period offered by credit cards to employees while missing the opportunity to put those funds to work for the business is not a winning strategy.

Business Credit Card Programs To The Rescue

According to SunTrust Research, controlling employee spending with authorization, approvals and limits is the top action pursued by businesses looking to find more cash1, and business credit card programs are one of the best means to accomplish just that. Consider the program advantages of business card programs:

  • Visibility over purchases. Business credit cards consolidate spending data for analysis, reporting and management by cardholder/employee, spend category, supplier, etc.
  • Supplier discounts. Travel and purchasing cards can be used to negotiate supplier discounts including employee purchases, airfare, lodging and auto rental transactions. Using employee spend data, you can strengthen your negotiations with vendors, develop preferred suppliers and manage to contracts.
  • Employee convenience. A business credit card allows employees to separate business expenses from personal expenses, freeing them from having to use personal credit cards to buy a desk chair or a plane ticket.
  • Combating company risk. A card provides additional financial control and security versus other payment types, such as checks or Automated Clearing House (ACH) payments. 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, it’s no surprise that so many companies are looking to institute a new business card program or enhance an existing one. In doing so, adhering to best practices for implementing a successful program includes:

Make visibility a priority

Leaders need to understand the importance of T&E management to the business and recognize that seeing all the expensing is the first step toward managing costs.

Establish and enforce policy guidelines

Create a policy directing employees to use their company-issued card for all business expenses. Determine the most appropriate employees for a business credit 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 credit card.

Focus on technology

Use the most up-to-date card program technologies with the best fraud protection features. Your system should be able to perform multiple functions with a single sign-on, such as daily card and out-of-pocket transactions, easy submission of expense reports and simple back-end management review.

Establish upfront card controls

Strong controls let 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. Set limits on transaction size or monthly dollar amounts. Establish different limits per employee. Setting controls up front not only lets you customize your program, but also enjoy peace of mind.

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. Collect this information to see what people are buying and how services are being used. Then use that intelligence to adapt your card policies to more efficiently buy on behalf of the organization.

Conduct management reviews

Have cardholders review their transactions. You can review and approve transactions as well. Then you can upload approved transactions into small business financial system for inclusion in your general ledger.

Evaluate purchasing card as you grow

Purchasing cards provide an even higher level of expense management than business credit cards. Purchasing cards can be used with suppliers to simplify review and approval processes and improve payment cycle times while lowering transaction costs. Purchasing cards allow employees the freedom to make real-time purchases to buy what they may need to work efficiently.

Better employee purchasing control can mean more profits. Learn about ways to address your most pressing business challenges with our Small Business Best Practices Guides.

1 2017 SunTrust nationwide survey of 397 small business owners.

2 2016 Travel and Expense Management Report, Survey of 200 small businesses, Paystream Advisors, Inc., 2016.

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