Business travel managers and procurement professionals are
under increased pressure to control costs, manage total spend and deliver
detailed data that serve as the basis for informed buying decisions. Corporate
travel and purchasing cards provide insight into, and increased control over,
where and how corporate dollars are being spent. They also can provide benefits
to the cardholder and the corporation. But how do you know which card program
benefits are best for your organization?
Navigating The
Benefits Landscape
Card benefits usually come in two forms: rebates, which provide
cash back to the organization based on annual purchase volume, and rewards,
which provide earned benefits to the cardholder that can be redeemed for
merchandise, travel or other goods and services. T&E card programs often
offer a choice, whereas purchasing cards generally are tied to rebates.
The Growing
Popularity Of Rebates
Rebate programs' popularity is increasing as organizations
hone in on extracting the maximum value from their card programs. With a rebate
program, the card issuer pays back to your organization a negotiated portion of
the volume of purchases made with the corporate cards. Rebates typically are
paid annually and generally are made available to organizations that meet an
established card volume threshold.
Rebates are ideal for situations in which corporate card use
can be mandated. If your company can develop and enforce a policy that all
employees participate in the card program, you'll capture more spend and
maximize your rebate. Additionally, you will see a host of other benefits
associated with corporate card use, including reducing the potential for error
in expense reporting, increasing spend visibility and controlling the types of
vendors at which the card can be used.
The rebate (typically expressed in basis points) is based on
a number of factors, two of the most important being the expected annual
purchase volume on the cards and the speed of payment to the card issuer. The
more your organization spends, and the faster the card issuer is paid, the
greater the rebate is likely to be.
One note about rebates: Since speed of payment to the card
issuer is a major factor affecting the rebate, companies who choose to shift
payment responsibility from the corporation to the individual cardholder may
find that the speed of payment is difficult to monitor and control. Late
employee payments will negatively affect the rebate. Corporate card programs
that are centrally paid by the company result in consistency in the timing of
payments and minimize the impact of late payments.
Rewards Have Their
Place, Too
In many cases, however, an organization cannot, or chooses
not to, establish a policy that requires employees to use corporate cards.
These organizations are acutely aware that there are significant benefits,
including spend controls and enhanced visibility, which can be attained only
when corporate cards are used. In these cases, corporations often will utilize
rewards programs to encourage the use of corporate cards by its employees.
Rewards programs also may be used to raise a card program's
visibility. Among companies using Diners Club's corporate cards in North
America, more than 60 percent use its Club Rewards program. In addition to
providing an incentive for employees to participate in the corporate card
program, rewards are an excellent way to ensure that the corporate card is used
for as many business purchases as possible.
Rewards programs, however, carry a cost. In addition to
annual fees that are commonly charged to participating cardholders, the cost of
rewards can reduce or even eliminate your ability to collect a rebate. There is
no right answer when it comes to selecting rewards or rebate, but it's
important to know which option delivers the most value to your organization.
One-Stop Shopping
When you're looking for companies to participate in your
corporate card RFP, make it easy on yourself.
If you have separate T&E and p-card programs in place
from different providers, consider consolidating them under one roof. A
single-source corporate card provider can offer more than just administrative
convenience. Combining usage and purchase volume into a single program will
help your company maximize its benefits. Your organization will become a more
attractive prospect to card issuers as well, increasing your negotiating power.
When consolidating with a single issuer, it's vital that you consider card
acceptance across a broad range of industries and geographies. Ensure that the
card brand you choose is widely accepted by your key vendors, and in the
markets your employees travel to.
Card issuers often have other spend management solutions
available as add-ons to corporate card programs. You can maximize spending
control by limiting card usage to specified vendor categories, or even with a
specific vendor.
Maximize Data To
Minimize Costs
Be sure to select a card provider that can furnish both
summary and detail data via robust online reporting tools. Some issuers provide
the option of detailed dashboard tools as a complement to the card program.
Many can also supply rich data on such things as detailed hotel charges, which
can be uploaded into your organization's system.
Best practices include the ability to capture details such
as ancillary airline fees and hotel folio data. Although airlines are still
working to supply detail about bag fees, seat upgrades and meals, many hotel
chains already furnish such data, including descriptions of pay TV, mini-bar,
room service and other expenses.
Visibility into the details of your corporate spend not only
helps you identify ways to economize, it provides a powerful negotiating tool
with preferred suppliers. For instance, one company discovered that it annually
was spending more than $50,000 on mini-bar fees for corporate travelers during
hotel stays. Drilling down into the details, the travel manager was able to see
that most of the money was being spent on bottled water. The travel manager
negotiated with the company's preferred hotel chains to deliver a free bottle
of water to each guest for each night of their stay, with no increase in the
room rate. The company saved substantial money and kept its frequent travelers
happy at the same time.
The Bottom Line
Virtually all organizations are seeking to drive more
efficiencies to their travel programs. The controls and visibility uniquely
offered by corporate card usage represent a significant tool that travel
managers can utilize to deliver and measure these efficiencies.
Regardless of whether your organization chooses to mandate a
corporate card program and obtain rebates or encourage the usage of corporate
cards by allowing employees to participate in a rewards program, the benefits
of card usage will be the same.
Whichever type of program you're considering, your card
issuer will be able to provide valuable guidance and best practices. You'll
want to take advantage of new technologies and cost-saving opportunities as
they become available, so a regular assessment of your corporate card program's
results and ongoing objectives is the best way to ensure that you really are
getting the most out of your corporate card program.
This report
originally appeared in the Jan. 23, 2012, edition of Business Travel News.