What do prepaid expense cards and company credit cards have in common? Absolutely nothing. Okay, we’re exaggerating to you a little bit. After all, both cards offer ways for team members to spend money on work expenses without having to first foot the bill and then request a reimbursement later.
But the similarities between these two cards ends there.
In this blog, we’ll break down the differences between prepaid expense cards and company credit cards.
Here’s what you need to know.
What are company credit cards?
Company credit cards essentially work in the exact same way as a personal credit card. They allow team members with purchasing power to buy goods and services on behalf of their organization using company funds.
These cards are typically used by small business owners and entrepreneurs who will add a select few users to the company credit card to make purchases.
However, issuing company credit cards to team members can be a little nightmarish. Because the account holder is basically extending their line of credit to multiple team members, there’s no clear or proactive way for them to retain control over spend, manage transactions, or monitor purchases. And at the end of the month, the account holder is personally liable for the bill.
Prepaid expense cards, however, are a little different, and they solve for a lot of these concerns.
What are prepaid expense cards?
As the name suggests, prepaid expense cards are cards with preloaded amounts. This means cardholders can’t spend more than what’s loaded onto the little piece of plastic in their pockets.
Used in many bigger businesses where there are multiple people purchasing at any given time, these card programs remove the liability from the account holder and place it on the business. This corporate liability means that team members file expense reports so the company can reconcile charges with the card statement each month. It also means team members don’t have to pay the bill upfront.
In many ways, prepaid expense cards work in exactly the same way as a company credit card. Team members log onto a vendor’s website, find what they’re looking for, and enter their card details to finalize the purchase. No fancy fluff, no complex process.
Unlike company credit cards, prepaid spending cards can only be used after the finance team has reviewed the requested purchase. They also have to approve it and load money onto the card to enable the cardholder to make the transaction.
This turns purchasing from a reactive and uncontrollable beast into a proactive, well-managed, and transparent angel, one that streamlines the reconciliation process for finance teams and shines a light on all company spending.
Unlike company credit cards, prepaid expense cards aren’t connected to your organization’s primary bank account. This means team members don’t have their hands directly in company pockets. That means less risk and more control over expense management.
With Procurify, purchasing and finance managers can login to their domain and set up spending limits, track transactions (in real-time, no less), and allocate assigned budgets to specific accounts based on requests made by team members.
No rogue spend, no complicated month-end process.
Why should your organization use prepaid spending cards?
In today’s remote-first workplace, spending cards democratize the purchasing process.
Traditionally, the purchasing process follows one of two paths:
- Team members submit a request for purchase to the finance department, and once approved, those in control of business spending (typically the purchasing team) purchases resources on behalf of these team members.
- Some high-level executives hold a company credit card, and only they have the ability to purchase what they need, when they need it.
Today, these two scenarios don’t cut it. They make for a slow, laborious, and bureaucratic purchasing process that fails to offer trust and autonomy. After all, executives aren’t the ones purchasing digital ads, on-the-ground marketing teams are. What’s more, purchasing managers shouldn’t have to engage in a back and forth with team members about what desk chair they want for their home office.
Instead, team members responsible for these types of spend are allocated their budget and extended the trust to purchase the resources they need when they need them. And this makes everyone in the organization accountable for business spending.
Spend culture is everyone’s business
HR teams aren’t solely responsible for diversity and inclusion. Executives are solely responsible for decision making. By the same token, finance teams aren’t solely responsible for purchasing.
If an organization is to maintain a successful and healthy spend culture, it requires the participation of all team members.
For finance and purchasing teams, that means finding new and innovative ways to make it easy for everyone to purchase what they need, when they need it. With prepaid spending cards, this can be done in a controlled, centralized, and transparent way and without risk of rogue spending or fraud.
With Procurify spending cards, you can:
- Set fixed or flexible spending limits that can be for each individual card.
- Use our mobile app to make on-the-go purchase requests and approvals control regardless of location.
- Automate your approval workflows so managers don’t have to engage in length discussions about each and every request.
- Deploy virtual cards so team members can begin purchasing right away.
- Integrate with your favorite accounting software and reduce the burden of manual data entry.
As the old adage goes, it takes money to make money. The difference is about how you choose to manage it.
To find out more about how Procurify’s spending cards have helped our customers, check out this customer story:
Editor's note Original author: Sean Kolenko Original publish date: 10 May 2016 We've since updated and republished this blog post with new content.