Scaling an SME Corporate Card Program

At some point, small and midsize enterprises reach a level of revenue and spend that compels them to implement a corporate card program for the first time or expand their existing card programs. So when is the right time for an SME to scale its corporate card program? And what should companies keep in mind?

Informatica, which has almost 80 offices around the world, spends $8 million a year on United States-booked air volume. Its global T&E totals $30 million. And it's expanding its Bank of America program from less than 100 cards, mostly issued in the United States, to as many as 1,200 cards globally, about 700 in the United States, according to global travel manager Rick Wakida.

The data integration and software company uses a one-card program in which an employee puts travel, purchasing and meetings on one card. "If you think about a small company, people are traveling and buying goods and services, so it's logical that it tends to be a one card-type of solution [rather than] a bespoke travel card or bespoke purchasing card solution," said Kevin Phalen, Bank of America head of global card and comprehensive payables for global transaction services.

Liability Shifts

Because small companies' liability rides on the creditworthiness of the business owner, according to Phalen, small businesses tend toward individual liability cards, as opposed to corporate liability ones. "But as the company starts to grow and they bring in more team members, the [new team members] don't want to have a personal impact on their credit based on the company purchasing and travel card," he said. "Once the company starts approaching the $1 million line [for spend], we see a shift … from individual liability to corporate liability" for one cards.

Informatica, meanwhile, already had a corporate liability policy. As it grew, the company actually considered switching to individual liability but decided against it. "If you have individual liability, you may have people who may not qualify, and then the company ends up guaranteeing it anyway," Wakida said. Corporate liability "is administratively easier, and we want to minimize the impact to the employee."

Rewards Vs. Rebates

As companies grow and expand their card programs, Phalen said the focus moves from rewards for individuals to rebates for their companies. The shift tends to happen when companies reach between $3 million and $5 million in travel and purchasing spend.

Informatica's new card program also will boost the rebates the company gets from its card provider. The leap from less than 100 cards to more than 1,100 will move a significant amount of company spend into the card program. And Informatica's upcoming switch from an individual-pay model to corporate pay means the card balances will be paid much faster. "Speed of pay and total spend are the two main factors in calculating rebate," Wakida said.

A corporate-pay configuration, however, also raises the question of how an employee will repay the company if the employee charges a personal expense to his or her company card. Right now, Informatica's policy is for the cardholder to pay the card issuer. "The best practice is for the company to make the payment and the employee pays the company back," Wakida said. Eventually, his program will make the switch, but the existing policy will stay in place for now in order to expedite the rollout of the new card program.

In addition, Informatica will give employees the option to sign up for a rewards program to increase program adoption, though employees will be responsible for the annual fee. "It's basically to appease employees, get the buy-in and reduce resistance to changing to a form of payment," Wakida said.

Globalization

The biggest challenge Wakida foresees in revamping Informatica's card program is issuing cards outside the United States. The process will require separate applications and documentation from each country. Adding to the complication, if an issuing bank doesn't issue cards in a particular country, it has to partner with a local bank, an additional relationship to manage. "If we're looking at 16 countries, that's 16 different agreements and documentation [sets] that include border resolutions and a bunch of other stuff," Wakida said.

Informatica eventually decided to implement the new card program in phases, starting with the United States. "Once we get to 16 countries, maybe we'll do another phase of smaller countries," he said. In some countries, Informatica first will have to move its locations over to Concur Expense to align with the broader company's expense system. Then the card program and expense system can integrate completely. In still other countries, like India, Informatica has to start from scratch by introducing a card policy.