When a Purchase Card is Not the Best Tool for the Job

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December 6, 2021

The right tool for the job

If you’re a hammer, the saying goes, then every problem is a nail. That’s why a good handyman has a toolbox. Sometimes you need a hammer, other times, a wrench or a screwdriver. And sometimes you need a specialty tool like a heavy-duty windlass tensioner.

Spend management presents the same problem. Organizations, especially public ones, expend a considerable effort to gain visibility and establish oversight, consisting of system controls and organization policies, to manage their business spending. While a purchase card may be handy, there are many tools in the spend management toolbox, and each one has a role to play in your organization’s spend management strategy. With the right mix of tools, you do not have to compromise oversight at the expense of convenience to empower employees to make purchasing decisions.

The right solution to the problem

Purchase cards are convenient, widely accepted, and offer several forms of controls, like spend limits and Merchant Category Code (MCC) code restrictions, that befit a trusted employee. With a level of trust, diligence in collecting receipts, and some after-the-fact oversight, a purchase card hammers away at most nails. But what if you don’t trust your employees, or your oversight and compliance are stretched to breaking? Perhaps convenience doesn’t trump trust. What can you do?

You reach for another tool

  • Reimbursement. Reimbursement is a great tool for smaller purchases where an employee can “go out of pocket” with any expenses, and the company can determine whether or not they are reimbursable or not. There is no exposure for the company because, in order to be reimbursed, the employee must adhere to policy and submit their expense reports in a timely fashion. But asking an employee to use their own money for company expenses, while common in some companies, often creates friction with the employee who might be penalized by a long turnaround time. Many employees, when forced to submit receipts for reimbursement choose to forgo the entire process.  
  • Integrated e-commerce. Today’s advanced e-commerce solutions offer companies a dizzying array of products with appropriate spend controls and pre-approval options. There are many benefits to e-commerce solutions, from pre-mitigated risk controls to SKU-level data reports for expense reporting. The downside to e-commerce is that by ordering online, you have to wait for delivery. This might be reasonable in many use cases, but not all. 
  • Closed-loop bill payment. While it’s not the most exciting tool, the ability to pay a vendor, especially a service vendor, through a bill payment system checks a lot of boxes for control. The ability to pre-approve a payment delights compliance folks, and the ability to capture an invoice and match it up with simple ACH benefits both the company and the vendor.

Tying it all together

Now, as you map out your spend management strategy and you begin to realize that not every employee needs to be treated the same, nor does every vendor, so where do you go? Companies like ClassWallet bring together all four spending tools in a user-friendly platform that is simple for employees and a dream for administrators. Based on need and risk profiles, users can be provisioned with one or more tools to help achieve their objectives while keeping their accounting and compliance departments firmly in control of the company’s expenses.