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- November 16, 2017
- Ethan Laub and Maggie Joy
- Finance & AP
Corporate card programs have many benefits for both employees and companies. Employees don’t have to pay out of pocket for travel and other expenses, and wait for reimbursement. The company gets more control and visibility into what is being spent, and can benefit financially from rebates from the corporate card provider.
As long as companies aren’t racking up late fees on their corporate card bills, they have an incentive to maximize corporate card adoption, the percentage of applicable spend that is being charged to a corporate card. That’s why earlier this year we added two new card-related benchmarks to our expense management tool: “Average card expense age,” and “Percent of spend on corporate cards.”
“Average card expense age” is straightforward—it measures how well you’re doing at getting those card charges rounded up and paid within 30 days, before you get hit with delinquency charges that could eat into your rebates and raise program costs.
“Percent of spend on corporate cards" is more nuanced, because there are a lot of variables that go into card programs. It’s a rare company that is aiming for 100 percent corporate card adoption. Most companies are aiming to balance employee satisfaction with risk and control. So, while it’s enlightening to benchmark your company against peer companies, the operative phrase when considering this benchmark is “applicable spending” which tells you how well you’re doing with your particular program. In order to do that, you need clarity about the goals of your program, and what it is you’re trying to achieve.
Culture question: Who should pay?
The first thing to think about is, do you want your employees to have to pay out of pocket for their expenses and get reimbursed, or do you want them to use a corporate card?
This is going to depend on what kind of company you are, and what your culture is like. For example, in a small consulting firm where you have highly paid employees who travel frequently, the rewards they get by charging business expenses on their personal cards may be seen as a perk. In that case, a company may decide not to roll out a corporate card program, or to offer it but make it optional.
On the other hand, maybe your employees find card rewards programs less valuable than maintaining their bank balance. Asking them to float the company a few thousand dollars for a business trip could cause hardships and result in employee dissatisfaction, especially if your reimbursement process is slow.
Probably the best way to figure this out is to reach out to employees and ask them, maybe through online surveys or focus groups. Whatever you decide—corporate cards, pay out of pocket and get reimbursed, or a mix of the two, there's an expanding array of solutions available to companies to consider.
Low risk, high adoption
In considering your options, you need to think about the risk profile of your company. If you do want to have a corporate card program, how much freedom, and payment power, do you want to put in your employees’ hands?
If you have a high degree of trust in your employees and strong internal controls in place, you may feel comfortable putting “walking plastic” in their hands. By that I mean giving people individual corporate cards to use for their expense items according to their best judgement. If your main goal is to maximize corporate card adoption, that is the best option.
Companies may even forego part, or even all, of their rebate to get the visibility and control that comes with high card adoption, while still keeping employees happy. Most corporate card providers have products that let companies choose to keep the rebate, or accept a reduced rebate in return for giving reward points to their employees.
Walking plastic--with controls
Let’s say you want high card adoption, but you want a bit more control than just issuing plastic to be used for anything and everything. If that is your choice, corporate card providers offer some sophisticated control options. For example, you can block people from spending beyond a limit you set.
It's even possible with some card programs to set controls around merchant categories. You may be able to set rules such as, "You can only use this corporate card on T&E items such as flights, hotels, car rental, and meals, while blacklisting other categories.
With a program like this, your goal may be to have high corporate card adoption, but only for spending in those areas.
The central bill card
On the other hand, maybe you have lower trust or less tolerance for risk, but you at least want the company to cover the biggest ticket items such as flights and hotels so as to have a high degree of visibility and control over them, and to prevent imposing financial hardship on employees.
In that case, what are known as ghost cards or central bill cards could be a good option. With those products, a card resides with the company’s travel agency. Multiple employees can charge flights and hotels against it so they don’t have to pay out of pocket, but they don’t have direct access to a card number, and they don't have the open-ended spending privileges offered by an individual corporate card.
With virtual cards, a fast-emerging variation of the central bill card, each booking that is made against that card is issued a unique ID, to tie that booking back to the charge as it appears on your card statements, making reconciliation and reporting easier. This is all built right into the booking flow, so it doesn’t pose any hurdle for employees booking travel. But, employees can't use it for meals or taxi rides or other incidentals. So, if all you do is roll out central bill cards or ghost cards, you're going to limit your corporate card adoption rate to only certain expense categories and you should benchmark it accordingly.
Many companies choose to issue individual plastic cards to some employees, maybe top executives and their most frequent travelers. For less frequent travelers, the policy may be to have them book through the travel agency, charging the big ticket items to the central bill card, and pay out of pocket and submit an expense report for the rest.
A hybrid approach like this makes sense when you've got a small percentage of people who travel frequently, and thousands of employees who might do an occasional trip for a training or conference. Does it really make sense to issue them a piece of plastic for that? That's a lot of exposure to risk.
There are probably even more program options available and creative hybrid combinations than those I’ve discussed here. To benchmark your program appropriately, you need to first evaluate your employee base and decide on the right goals. Then you should be able to estimate the right percentage of corporate card adoption in your company.
For example, you might say, "Our top travelers, which are these folks, they should be doing 100 percent of their T&E spending on corporate cards. The rest of our employees should be charging 50 percent of their T&E to corporate cards, because that's roughly how much of T&E spending is for flights and hotels--the kinds of things that they might be able to charge to a central bill card.” That’s a simple, high level analysis that you could refine using your company’s own data.
The point is, corporate card adoption is rarely all or nothing. There are many ways to balance the visibility, control and financial rewards of corporate cards with risk mitigation and employee satisfaction. In that last department, one benefit worth mentioning is that when a charge hits a corporate card, it automatically creates a fully populated expense line in Coupa, so the employee has to do very little work, if any, to submit that expense report. It makes your employee's lives easier, and that in turn contributes to driving adoption of your corporate card program.
Ethan Laub is director of product management, Coupa expenses. He joined Coupa in 2015 when Coupa acquired TripScanner, an open booking technology company that he founded. Prior to that, he was a director of account management for American Express Global Business Travel.
Maggie Mae Joy is a Product Manager for Coupa Expenses. Prior to that she was a Senior Implementation Manager, leading over thirty successful Coupa implementations. Maggie is an avid traveler, having visited over twenty countries in the last ten years.