As businesses have realized the importance of keeping a strong and big workforce, they’ve also witnessed a surge in demands for setting up strong reimbursement policies. While reimbursements are rightful obligations that businesses must fulfill toward their employees, the process itself can be really time-consuming and exhausting. It was this gap that prompted financial institutions to develop a new product called corporate cards.
A corporate card, although it is functionally the same as a personal credit or debit card, allows employees to make corporate purchases and debit them straight from the business account. As payments are not made out of pocket, there is no need to request reimbursement.
However, the key to setting up an effective reimbursement substitute lies in the continuous monitoring of corporate card transactions.
Tax Compliance:
Filing taxes is a healthy practice that all businesses must follow to stay lawfully operational. Continuous monitoring of expenses made through a corporate card can enable your business to segregate deductible and non-deductible expenses effectively.
Quick and automated segregation of deductible and non-deductible expenses would enhance financial reporting and help you make forecasts for the upcoming financial year. If certain expenses are unreasonable, you can be prompt to take a call and instill restrictions.
Secondly, certain corporate spending may help your business qualify for tax incentives. This, in turn, would help you maintain good financial health, as claiming incentives would serve as an effective cost-hedging strategy.
Better Financial Reporting:
Tracking corporate card spending can simplify justifying corporate expenses, enabling your company’s accountant to draft tax returns easily.
Additionally, certain corporate card expenses may help your business claim cashback. By analyzing the frequency of similar transactions in the past, you can effectively forecast how much rewards you would gain in the financial year.
Lastly, having a good financial report in place also ensures that your business is ready to pitch to investors to acquire funding. Automated financial reporting through software integrated with your corporate cards can prove that all data displayed is untempered and easily verifiable. Financial transparency can thus help your business gain investments at more favorable terms.
Contract Optimization:
Consider a situation where you notice that most of your employees like to take your clients to the same restaurant for a business lunch or meeting. Not only would this be an interesting discovery, but it would also be a great opportunity for you to capitalize on this preference. Forming partnerships with vendors with whom your business interacts frequently can open up cost-saving opportunities. You may form a trade where you exchange service discounts, which will be beneficial for both parties. Alternatively, you can negotiate better prices with some vendors for being one of their loyal customers.
Moreover, tracking corporate card expenses can also help your business understand the categories where your employees are spending the most. Based on the category of expense that appears most frequently in your business transaction records, you can choose to switch to a more suitable corporate credit card that maximizes your rewards for a particular type of expense.
Conversely, you may ban certain vendors from processing your corporate credit card if you consider some categorical expenses to be just a money drain rather than an investment.
Final Thoughts:
It’s quite clear by now why it’s important to monitor corporate card spending if your company uses them. While corporate cards have emerged as effective substitutes for reimbursement, employees are supposed to use them with caution and full awareness. Likewise, business owners should get well accustomed to the relevant tools and features that the card issuer provides before the corporate card reaches the employees.
