- By Naveen Bindal
Credit and Finance for MSMEs: A corporate credit card by definition is a credit card issued to an organization, to take care of their business-related expenses, such as supplier payments, travel booking, meals, rental cars – all of these, without using their personal credit cards or their own funds. Traditionally, SMEs and startups were the most underserved among the enterprise ecosystem with respect to being issued corporate cards. The silver lining here, however, is that there are now a few fintech companies who are filling up this white space and launching innovative products that are specially designed for SMEs and startups. Following are some of the key benefits that SMEs and startups are deriving from corporate cards:
Creating a favourable working capital environment: Corporate credit cards are a great tool for SMEs and startups to enhance their working capital requirements. Having the flexibility to pay to the bank at a later date can not only expedite the payment of suppliers but also help in getting early payment discounts, and any money saved is money earned. For SMEs and startups, who are traditionally very tight with their working capital, any extension in their DPO (Days Payable Outstanding) is always welcome.
Ease in Expense Managing and Monitoring: Corporate cards make it easier for employers to manage their business expenses. Earlier, employees used to pay for all their business-related travel and stay expenses out of their own pockets or by using their personal credit cards, and then reimburse the same. The entire process was very lengthy, manual, error-prone and time-consuming and involved managing multiple receipts, paperwork and issues in reconciliation. This also hampered the employee’s productivity.
With corporate cards designed especially for SMEs and startups; all of such expenses are now managed very easily by the corporates. Using the card to make payments for the said expenses, with the monthly statements helping an easy reconciliation and tracking of all expenses, it is a win-win situation for the employees as well as the SME/Startup
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Complete Control and Setting Limits: The centralised finance team /founder of the startup or SME would not want to share financial or bank account details with the employees for different business payments. Instead, now they can issue corporate cards with pre-set overall and per-transaction limits. These limits can also define where a card can be used, limiting daily/weekly/monthly purchases to specific merchants among the others. Such a mechanism, not only helps in keeping a control on the entire financial situation but also reduces any risk of fraud and mishandling of funds.
Dashboard Reports and Complete Visibility: Corporate credit cards also provide a dashboard report with various filters to help organizations get complete visibility all their financial transactions. Various filters help in generating customized reports (vendor based, spend vertical based, location-based etc) which aid in the much needed centralized and streamlined process of cash management and credit allocation for future financial planning. It also frees the finance team of manually generating all such reports and data.
Easy Payment Option for other Business Expenses: Select corporate cards can be used by SMEs and startups to pay for their business expenses including fuel expenses, utility bills like rent, electricity, GST tax, digital marketing expenses, cloud storage bills among the others.
Corporate credit card, if used correctly, can be an important tool, especially for SMEs and startups. While convenience and security are major points of consideration for any set-up, it is the fact that these help small organisations in their working capital requirement that makes it most beneficial for them. With renewed interest in this financial instrument, it will be interesting to see what the future holds for everyone in the ecosystem.
(Naveen Bindal is the Co-founder at EnKash. Views expressed are the author’s own.)