How Do Corporate Expense Cards Work?

How Do Corporate Expense Cards Work?

Corporate expense cards are credit, debit, or prepaid cards used for work expenses. They are issued by a company to individual team members, and differ from standard credit cards in that the costs are paid for by the company, not the employee.

How do corporate expense cards work?

Corporate expense cards are designed to offer flexibility and agility, while maintaining control over employees’ spending with ease.

They can be issued to every member of the organization, and on the backend, each card is linked to a central spend management system where budgets are assigned and adjusted, transactions are reviewed and either approved or rejected.

They can either be physical or virtual cards.

The card provides each employee access to the amount of company funds that management has determined they need. On the other hand, the expense management suite offers the spend management team a control panel where they can oversee card usage to ensure it’s in compliance with the company’s expense policy.

Corporate expense cards leverage several features that distinguish them from conventional credit, debit, or prepaid cards and ultimately, enable them to offer more benefits to companies.

These include:

  • Individual cardholding. Cards are issued to every team member who’s responsible for every charge made on their card.
  • Custom limits. Each card is assigned a limit that can be based on the cardholder’s job description, tenure, or a combination of relevant factors.
  • Granular controls. Expense management personnel can issue, increase, or decrease, or freeze balances (on physical and virtual cards alike), review expenses, and either approve or reject them in real-time. Central control helps ensure employees are compliant with your organization’s expense policy.
  • Easy data processing. Receipts can be captured and uploaded to your system with ease.

The corporate expense card gives employees the freedom they need to make business expenses quickly, without the need for lengthy approval procedures at every instance.

More importantly, corporate expense cards are connected to a powerful central control system where all the expense management data flows. From this central system, your core spend management team can control each cardholder’s access to funds, review transactions, and reconcile financial data with ease.

Why are corporate expense cards your best option?

Simply put — because every other option is inferior and creates work for finance.

Whether you’re currently operating a zero employee card model, sharing cards among team members, or running primarily with individual prepaid or debit cards, these options have their limitations. They are either limited in the amount of control they offer your core expense management team, or restrict employees so much that a lot of time is wasted processing expense reports and reimbursements month-on-month.

Below, we compare corporate expense cards with the most significant alternatives, and examine the key benefits your business can derive from switching to a card management system that’s built primarily on intelligent, expense cards.

Corporate expense cards vs no employee cards

Despite the strides in spend management tech, many small businesses still haven’t adopted any solution for managing expenses from company bank accounts. Instead, employees are expected to make purchases from their personal funds & then manually file for reimbursement at the month’s end.

Here’s a scenario that would typically show up in workplaces where there’s a zero employee card policy:

An employee is looking to make a purchase, say sign up for a SaaS tool or order a product sample. Of course, there’s no company card to charge so they just charge their credit card. At the end of the month, they file a detailed expense report and submits it to Accounts for reconciliation and reimbursement.

This process might seem quite simple on the surface—until we dig a little deeper. Since there are no employee cards, team members spend from their personal credit cards and forward expense reports at the month’s end. This creates lots of work for Accounts leafing through receipts and expense reports in order to manually confirm each reimbursement. Invariably, this creates room for fraud and manual irregularities.

And then, there’s the fact that using their personal credit cards pushes employees' credit limits precariously close to the limit month-on-month, with the hope that Accounts will reconcile on time so they can avoid damaging their credit score.

In contrast, a corporate expense card offers small business employees access to the company’s funds so they can make purchases without having to spend their own funds and stress out over swinging their credit every month

Similar to the scenario discussed above, many organizations run a shared card model where a few key staff (CEO, CFOs, team leads, managers) are issued cards (prepaid, debit, or credit) and the rest of the organization is left to depend on them.

Looking to sign up for a paid trial of that new marketing SaaS app you discussed with your marketing manager? You’ll just have to borrow her card for yourself.

Again, this might seem quite simple, until you realize seven other team members are doing just that. Again, as we explored earlier, a shared card model creates a nightmarish pile of admin work needed to track down business expenses, review them manually, and pin each expense to a member of the team.

A corporate expense card easily alleviates all these administrative headaches. Without the need to spend personal funds, the reimbursement process is eliminated. Team members are issued individual cards that they control rather than having to spend under someone else’s name. With every team member assigned a specific card, security is enhanced since it’s easy to track business expenses to whoever made them, without the need to manually discover who spent what from a sea of receipts and expense reports.

Corporate expense cards vs corporate credit cards

Corporate credit cards are linked to a line of credit, without any other specific limitation on the amount employees can spend, aside from the card limit. Without well-defined spending limits, there are ample opportunities to rack up huge debts—even if they’re for legitimate business expenses—which spiral into nasty interest charges if they’re not paid off.

Likewise, company credit cards frequently lack any expense management feature, making it necessary to track and manually reconcile spending.

Corporate credit cards focus too much on perks rather than offering budgeting and expense management tools that work for everyone involved in the process. While business credit cards are limited in the level of visibility and control they give to your core spend management team, a corporate expense card enables you to assign a budget to staff from your company funds, track their usage, and expand or contract their limits at any point.

Corporate expense cards vs prepaid cards

Compared with the zero card model and corporate credit cards, prepaid cards are a step in the right direction.

  • They’re designed for individual control, i.e. each employee owns one.
  • Unlike company credit cards that employees can use to run up debt with little oversight, prepaid cards are loaded up with a specific amount of cash that the cardholder cannot exceed.

But overall, prepaid cards still lack several expense management features and cannot be said to be a robust expense solution.

For one, each and every prepaid card has to be manually loaded up with cash and topped up yet again at the end of each month. Secondly, a significant number of vendors typically prefer credit or debit cards over prepaid cards, or don’t accept them at all.

Most importantly, prepaid cards function very much like credit cards and are not connected to a single source of truth where you can keep track of employee spending, review, approve, and query expenses. This creates a jumbled up mess of expense reports and manual verification of transactions time and again.

In contrast, corporate expense cards are tied to a company account and linked with a custom budget tailored to the needs of each employee. Spend limits refresh at the month’s end, and can likewise be adjusted easily on each corporate expense card, unlike prepaid cards that must manually be topped up periodically.

Once a prepaid card is compromised, it’s hard to recover the funds from it, while on the other hand, expense cards can be programmed to provide fraud alerts when certain transaction types are attempted.

Corporate expense cards are more versatile, easier to control, and ultimately, offer more agility to the end users than prepaid cards.

The main advantage of corporate expense cards over just about every other option for your organization is the control and flexibility they offer:

  • Corporate expense cards are tied to a unified control platform where they can be managed down to the little details. Budgets can be defined based on an employee’s seniority and job description, adjusted whenever necessary, or programmed to function according to specific rules.
  • Corporate expense cards offer more flexibility as individual team members can make business expenses without much manual oversight.
  • Corporate expense cards offer more agility since everyone on the team can do their expensing work with minimal oversight, as long as it fits into already defined rules.

Lola offers a comprehensive spend management platform, complete with software enabled corporate cards that remove the work from assigning and managing budget, tracking business expenses, and eliminating fraud.

By leveraging the flexibility and control Lola offers, you’ll be able to empower employees with the freedom they need to do their best work, while still keeping a finger on the pulse of your spend.


About the Author: Churchill Leonard
Churchill creates long-form content for dynamic SaaS businesses looking to drive growth via organic search. Content hacker @PubLoft, a content agency for the top 1% of SaaS startups. Loves research-heavy YT videos, and eats an unfair share of the world’s supply of yoghurt.