Unpopular Opinions About Payments
Employee Expense Reimbursements
With all the various card solutions available, including virtual cards for mobile devices, there should rarely be a need for an employee to pay out of pocket for a business expense. To recap the drawbacks of allowing personal funds of any kind:
There is a lack of visibility into expenses.
It increases the risk of internal fraud.
Reimbursement processes are tedious and costly.
An organization potentially loses out on revenue share (rebate) by not using a commercial card.
In one memorable fraud case from a few years ago, a former VP in the healthcare industry submitted copies of personal checks (and false invoices) he claimed to have paid to a particular printing company. He was compensated more than $300,000 over the years. An investigation revealed none of the checks were ever issued to said vendor and, in fact, the printing company had gone out of business in 2000.
Some organizations are hesitant to pull the plug on expense reimbursements due to internal pressure. Employees want the benefits they can earn with their personal cards, but this equates to using the organization for personal gain. Ultimately, it is the organization’s money.
It’s time to change your policy. To support a change, gather the applicable information.
What are the process costs associated with employee expense reimbursements?
Are there control gaps that open the door to fraud?
What could be gained by moving to a commercial card solution?
See a related blog post about next gen virtual cards.
Surcharges for Card Payments
I’ve heard many organizations declare that, if a supplier plans to tack on a surcharge for card payments, they usually end up paying the supplier another way. They say the only exception is if their rebate for the transaction would be equal to, or more than, the surcharge. I would argue that there is a bigger picture to consider (besides the fact that the card networks have supplier requirements related to surcharges and some states prohibit the practice).
Ceasing to do a card transaction because a supplier intends to add a surcharge also means extra steps and time. The procure-to-pay process might already be in progress, so backing out delays the purchase. You might have to initiate a requisition and/or PO. You might have to set up the supplier in the master vendor file (MVF). It creates more work for accounts payable. If payment will be via check, there are also hard-dollar costs. Is it really worth it? As an example, a 2% surcharge on a $500 transaction is only $10. If a supplier will only be used infrequently and the purchases are low value, accepting a surcharge can be the better decision.
See more on surcharging, including strategies when working with suppliers. I encourage all organizations to be prepared with a plan on how to handle surcharges in different situations. Then train your cardholders accordingly.
No Rebate, No Card?
Similar to the surcharge scenario, I’ve heard organizations say they will not make a card payment if the transaction will not qualify for a rebate. (An issuer might, for example, exclude certain transactions from the revenue share/rebate calculation based on specific criteria, such as large-ticket). My opinion is similar to what I relayed about surcharges. There is more to consider than just a rebate.
Above all, I would never abandon a commercial card payment in favor of a paper check just because it does not qualify for a rebate. By now, we all know the drawbacks of checks. Beyond rebates, every organization should focus on payments that are:
Convenient
Efficient
Low cost—an off-shoot of efficiency
Protective against fraud/fraud losses
Commercial cards of all types meet this list of criteria. The first three bullet points are maximized when an organization designs their card programs and the related processes effectively. However, the fraud protection element is inherent to commercial cards, especially ePayables solutions—virtual cards and straight-through payments. If you need to convince management about the value of ePayables, see five points to stress in your business case.
My opinion here might not be unpopular after all, but I’ll go a step further by admitting that I typically put rebates last in the list of card benefits. While there is no denying the monetary appeal, I do not think they should be the sole basis of payment strategy decisions.
Summary
There you have it—some of my potentially unpopular opinions. You may or may not agree with what I’ve written here, but I think the underlying theme represents a popular opinion, at least among payment professionals. That is, organizations should prioritize the development and execution of a payment strategy that is supported by a data-driven business case. How can you help your organization reach this outcome?
Photo by Markus Winkler on Unsplash.
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About the Author
Blog post author Lynn Larson, CPCP, launched Recharged Education in 2014. With 20 years of commercial card experience, her mission is to make industry education readily accessible to all. Learn more…