How to Implement a Company Card Program

How to Implement a Company Card Program
Contents

Sooner or later, a startup reaches a point at which it can no longer rely on employees sharing one corporate card or reimbursing team members for business purchases they’ve made out of pocket. 

If either of those scenarios sounds familiar, you may be experiencing problems that are slowing down your finance team and complicating expense management. Personal and business expenses may be getting mixed up. Employees could be fed up with using their own funds for company purchases. If you have a petty cash system in place, providing funds to employees in advance might have become a hassle. Or, the admin work of processing expense reports for reimbursement may have become too time-consuming. 

If you’re exploring whether a company card program is right for your startup, you’ve come to the right place. This guide will explain the ins and outs of how company cards work, and how to make them work for your company.

Types of company cards

There are three main types of company cards: charge cards, small business credit cards, and corporate credit cards. You’ll find that popular credit card issuers like Visa, Discover, Capital One, and American Express offer a number of options within each of these categories. Here’s an overview of how these company cards work and how they differ.

How company charge cards work

Company charge cards work like debit cards. Unlike a credit card, you don’t have access to a line of credit. Instead, you accumulate a balance and then have to pay that balance off at the end of the billing cycle. Charge cards carry less risk than credit cards, but they also tend to lack cashback and rewards programs that credit cards are known for.

How small business credit cards work

There are two types of credit cards for businesses: small business credit cards and corporate credit cards. Most startups that don’t want charge cards start with small business credit cards because they don’t have the high spending minimums that corporate credit cards require.

Small business credit cards work in pretty much the same way that personal credit cards do. These cards give cardholders access to a revolving line of credit — up to a predetermined credit limit — based on the guarantor’s credit standing.

If the outstanding balance is not paid in full on the monthly due date, the bank charges interest on the amount owed. As of June 2021, the average interest rate for a business credit card is 17.57%. That means that if your card has an unpaid balance of $1,000, your business owes $1,175.70 on that amount after the due date passes.

Because small business credit cards require a guarantor, late payments can affect the guarantor’s credit score. 

How corporate credit cards work

Corporate credit cards work like small business credit cards, but have more requirements and are better for larger companies that want to issue cards to many employees. 

Typically, a business needs to generate at least $4 million in revenue each year to qualify for a corporate card. Because of the high business cash flow, there’s no guarantor required, but the company’s financial standing is taken into consideration. 

How to choose a company card

When choosing a card to issue to employees, consider your business’ needs and circumstances. Research the card’s interest rates, rewards and perks, fees and penalties, and credit score requirements.

Interest rates 

Consider your spending needs and discipline in paying credit cards off within the interest-free grace period. If you think you’ll carry an owed balance each month, look for a card with a lower interest rate. In this case, it may be better to remove the risk of being charged interest on overdue amounts with a charge card instead of a credit card.

Rewards and perks

Select the perks that will benefit your business the most. 

For example, if your staff is on the road or in the skies often, look for a card with travel rewards, like bonus miles, access to airport lounges, or cashback for car rentals. 

If you make a majority of your purchases at one store, for office supplies, for example, consider getting their store card for discounts. 

Cashback is a valuable perk too, and company cards often offer high cashback rates for spending at gas stations. Make sure to review and understand caps on cashback, miles, and discounts to maximize your rewards. 

The best credit card offers sign-up bonuses of several hundred dollars in statement credits. However, if your company has few expenses, the spending minimums you’ll need to reach to take advantage of these bonuses may be unattainable. Read the fine print to fully understand the minimum spend to unlock these sign-up bonuses.

Some cards also offer 0% intro APR periods, usually for the first year and a half after card account opening. Understand when this introductory period ends, and see if the subsequent rates work with your startup’s financial goals.

Fees and penalties

Credit cards can offer perks and rewards because they make money through fees and penalties. Look out for these key fees when selecting a card:

  • Annual fee
  • Late fee
  • Over-limit fee
  • Balance transfer fee
  • Cash advance fee
  • Foreign transaction fees

Credit score 

If your business doesn’t have an established track record, banks may require a personal guarantee. Some cards require a personal guarantee regardless of business credit history, so if you’re not comfortable with this, look for a card that doesn’t ask for one.

How to work with company cardholders and budget managers

Company card programs can become complicated due to the number of parties involved. Typically, it’s a startup’s finance lead who decides what card program the company will implement, who will get access to cards, and how they can use them. 

Then you have budget managers, who decide how their department’s or team’s budget will be spent. And there are, of course, the cardholders, who make purchases on behalf of the company. 

Follow these best practices for managing expectations and spending among these stakeholders:

  • Have a clear and easily understood spend policy that explains types of purchases allowed, conditions when spending is allowed (e.g. meals during business trips or cabs home when working past 8 p.m.), maximum transaction amounts, approved vendors, and more.
  • You’ll also need to create and distribute a company card policy that explains things like who can be a cardholder, what they can use the card for, and how the purchase approval process works.
  • Work with budget managers to set an overall budget for the team or department, and allow them to allocate funds to teammates accordingly.
  • Keep cardholders accountable by assigning one user per card. When a card is shared by multiple people, it’s easy to lose track of who made which out-of-policy purchase.
  • Set spending limits on each card.
  • Monitor spending and conduct regular expense report audits to check whether employees are adhering to policy.
  • Allow cardholders a level of autonomy so you don’t create a bottleneck in productivity with senior manager approvals. 

How Lola.com helps startups with company cards

Spend management platform Lola.com is becoming an increasingly popular alternative to traditional company card programs. Lola.com offers corporate cards with the flexibility of a credit card, the lack of interest fees like a charge card, and visibility like you’ve never seen before. Here’s the scoop:

  • Virtual employee cards for all. You can issue each employee their own virtual corporate card, that they can begin using instantly, right from the Lola.com dashboard.
  • Unprecedented control. Set granular spending controls that make it impossible for employees to spend outside of policy or go over budget. Select which vendors they can and cannot make purchases from.
  • Link cards to budgets. Easily create budgets and assign budget limits to individual cardholders.
  • Real-time visibility. Track spending against your budgets in real-time — not weeks after the books have closed.
  • Goodbye expense reports. When every employee has a card, they no longer need to ask for reimbursements, which eliminates the need for expense reports. Easily and digitally upload receipts to transactions. 
  • No fees. Enough said.
  • No interest charges. Lola.com connects to your bank account and does a “sweep” on a monthly basis, so you always pay the amount you owe and are never in debt. 
  • Don’t need a personal guarantee. That gives finance managers and business owners peace of mind, knowing that employee spending won’t impact their credit score.

The bottom line: A company card program can help your startup grow

Relying on employees to use their personal funds to front business expenses creates time-consuming administrative work and bottlenecks. Implementing a company card program empowers employees to do what they need to do, without stunting progress. A corporate card program like Lola.com’s can set you up for greater growth by giving you unprecedented control over and visibility into company spending.


About the Author: Ana Cvetkovic
Ana Cvetkovic is a freelance writer for Lola.com. She is also the CEO of BLOOM Digital Marketing, a creative marketing agency that specializes in creating demand generation content for SaaS companies in the hospitality and travel industries.