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Five Reasons Why SMEs Should Use a Corporate Credit Card 2020
Digital payments have become a way of life for many Singaporeans. It is a common sight to see people use credit cards, debit cards or NETS payment for everyday purchases. The proliferation of digital wallets and mobile payment options such as PayNow and Apple Pay has also made it easier for everyone, and this is not just for young adults, even elderlies have no problem learning how to use them.
Even our Government is encouraging hawkers to GoDigital and implement digital payments like PayNow.
However, the same has not been observed for Small and Medium-sized Enterprises (SMEs). Many SMEs are still relying mainly on using cheques and cash as their primary mode of payment. The main reason for this could be because they are not fully aware of the advantages of using a corporate credit or debit card. Moving forward, as our economy embarks on the journey to becoming cashless, SMEs also have to start embracing digital payments so as not to be left behind.
What is a Corporate Credit Card?
As its name implies, it is a credit card for registered companies, usually issued to higher management levels such as Directors, Managers or Executives. Corporate credit cards are usually used for business related expenses such as travel, entertainment and dining.
Unfortunately, not many companies are aware of the advantages of using a Corporate Credit Card.
According to Visa, in Singapore, there is an approximate 20% of consumer card transactions that exhibit similar spending patterns to those of SMEs. This means that a lot of SMEs are using their personal cards for business expenses, and this could be because they do not have a corporate credit card, or that they want to earn rewards using their personal credit cards.
5 Advantages of Using a Corporate Credit Card
Many business owners are not aware of the perks of using a Corporate Credit Card. In fact, not only does Corporate Credit Card provide convenience and card rewards, it also helps in business planning as a budgeting tool, expense management tool, as well as a source of short-term working capital.
- Optimising Working Capital
Do you know that a Corporate Credit Card provides flexibility for cash flow as it can be used as a form of working capital? When making payments with Corporate Credit Cards, SMEs can “Buy now, Pay later” by taking advantage of the credit term, which is usually 55 days. This means that SMEs can optimise working capital and have more cash flow for the time being, and only pay the outstanding at a later day, which is interest-free as long as it is paid within the credit term.
If you need a longer term loan and a higher amount, then a Temporary Bridging Loan Programme will be more suitable.
- Business Planning and Budgeting
Knowing when payments are due and having control over cash flow are part of business planning and budgeting. Cash flow issues have always been the top five problems that SMEs face. By taking advantage of the 55 days interest-free credit term, this helps to improve cash flow positions, and SMEs can have better control over budgeting.
Using Corporate Credit Cards instead of issuing cheques for payment, this will also help to save on the fees incurred for cheque issuance, especially when many banks have actually raised cheque fees.
- Corporate Credit Cards can be used to pay Suppliers, Salaries and Rental
Many SME owners are unaware that Corporate Credit Cards can actually be used for business-to-business (B2B) transactions. For instance, Business Payment Solution Providers (BPSPs) by Visa supports the acceptance of Corporate Credit Card payments through B2B supplier acceptance.
BPSPs, such CardUp and WireCard, help to bridge the gap by allowing SMEs to pay using a Corporate Credit Card, where the funds are paid directly to the other party’s bank account. More common uses of BPSPs are for paying suppliers, but can also be used for paying employees’ salaries, and even rental payment. A small fee may be charged, depending on the card provider.
- Earning Rewards such as Cashback and Points
One of the main reasons that SME owners are using their personal cards to pay for business expenses is to benefit from earning card rewards such as cashback and points. However, this is mainly because SME owners are unaware that Corporate Credit Cards are able to provide similar benefits and maybe even more.
The next time you sign up for a Corporate Credit Card, do remember to find out more about the perks (since you probably will be using the card, might as well fully utilise it). Some cards even have tie-ups with certain business providers such as Google, Microsoft, and accounting softwares that your company can tap on and benefit from, and at the same time save costs.
- Saving Time on Reimbursement Process
Many companies still stick to the traditional way of reimbursing expenses based on physical receipts submitted by their employees at the end of the month. However this can be time consuming for both the business owner and the employees, especially when there are many receipts, and some could even be faded already. This also creates a big cash flow problem for employees if they are only allowed to settle the reimbursement at the end of every month.
One reason why SME owners stick to the traditional way is so that employees do not misuse and take advantage of the company if they have to incur the costs first and then report the expenses to the company.
Corporate Credit Cards can help to mitigate this issue. Transactions records are readily available and accessible for SME owners to manage how, when and where the card is used. SME owners should also educate their employees and have clear guidelines on when they should use the card, as well as the rules and regulations, liability, and credit limit of using the card.
Of course, the list of advantages of using a Corporate Credit Card do not stop here. When used correctly, it will be a great way for SMEs to mitigate excess spending, track expenses and also eliminate possible fraud.
A Corporate Credit Card has its advantages, but similar to personal cards, it is important to know the terms and conditions, as well as the late fees and additional charges involved should you be late on the payment.
As Singapore pivots towards a digital-first and cashless economy, SMEs have to adapt accordingly and take on the right mindset to embrace digital payment solutions in order to be relevant, and to grow and thrive.
Stay tuned and watch this space, as we will be launching our own SME Corporate Credit/Debit Cards with cashback and merchant perks in the next quarter!
What are some perks you would like to have in a corporate card?
Or are there any particular merchant you would like us to tie up with?
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