New payment solutions are enabling companies to trim costs while improving efficiencies. Designed as an alternative to checks and petty cash, the commercial card is a payment solution that streamlines the payment process for all types of business expenses. Workplace card solutions are stored value (similar to prepaid) cards that can be used to pay employees or customers on an ongoing or temporary basis.
Companies that utilize such offerings can improve their control and reporting of expenses while taking advantage of the flexibility that the cards provide.
“During uncertain economic times, work-place and commercial card solutions give companies the ultimate in flexibility,” says Paul Lewis, vice president of Treasury Management at Comerica Bank. “You can extend payment terms if you need to, or if you’re cash rich, you can take advantage of discounts by paying early.”
Smart Business spoke with Lewis about some of the advantages of workplace and commercial card solutions.
What is the commercial card?
The commerical card is used by business customers to pay for a variety of goods and services. The most common categories are business travel, maintenance, repair and operation (MRO) expenses, low-value procurement expenses, and vehicle expenses. One way to configure a commercial card offering is that on one card a company can customize the permissions or controls according to its various employees’ job responsibilities. For example, the card could be controlled for just travel expenses, just purchasing expenses, just vehicle expenses or any combination of those categories.
How does this payment solution help streamline business expenses?
The two big features on a commercial card program are the control you can customize it to fit the specific needs of an employee or department and the reporting, as you get a tremendous amount of data on the back end. In addition to managing expenses, customers can use this data to track supplier expense and negotiate better payment terms and better discounts. For example, you can use the data associated with a travel card program to aggregate your company’s expenditures at a specific hotel chain and then try to negotiate better rates based on your volume.
For virtually all transactions, the commercial card allows you to extend payment terms, which can increase cash flow. Based on the settlement you have with your bank, you can enjoy terms up to 30 to 45 days. Also, you can enjoy discounts from your suppliers associated with faster payments because they receive their money within two days after the transaction is approved.
What type of online management and reporting tools are available?
In terms of reporting, there is a product called Smart Data, which allows a company to manage all of its card transactions and associate a transaction down to a specific merchant. It also automates the posting and the reconciliation of those transactions directly into a general ledger system. A program administrator, which is the individual at a company that is responsible for managing the company’s card program, can use an online account maintenance (OLAM) solution. OLAM allows the program administrator to provision cards, approve authorizations and essentially manage all of the transactions that cardholders perform. Card-holders themselves can use an online statement to review pending and posted transactions. All of these are online Web-based tools.
What are some of the challenges associated with payroll exceptions?
Challenges of payroll exceptions include disbursing the first pay to a new hire or the last pay to an employee who is leaving, disbursing pay when a check is lost or was not issued and disbursing pay or per diems between normal payroll cycles.
How can workplace card solutions address these issues?
Using a payroll exception card helps businesses comply with local laws and union issues. For example, with production shoots, which are so prevalent in the entertainment industry here in California, production companies have to follow very specific rules in relation to payroll. Of course, it’s not just the entertainment industry; the rules are in place to protect the rank and file across all sectors. If you are an hourly employee, on your last day, your employer has to provide your compensation before you leave. Sometimes, cutting a check and finding somebody to sign it can be difficult. By replacing the traditional paper process with a workplace card, a company can alleviate a lot of concerns.
What types of companies stand to benefit the most from these card solutions?
Any company that spends money on anything can benefit. Whether a company is paying suppliers, paying employees, paying contractors or paying customers, there is a card solution that meets its needs. Each card solution offers the benefits of ease of use, greater access to data and improved processing efficiencies. There really isn’t a company out there that can’t benefit. We work with entities of all sizes, in all business segments, with all types of expenditure requirements.
PAUL LEWIS is vice president of Treasury Management at Comerica Bank. Reach him at firstname.lastname@example.org.