Many companies prefer using credit cards to manage expenses despite the variety of alternative payment solutions in the market. According to the RBA, there are arounds 1,756,000 credit cards issued for commercial purposes in Australia.1
Prepaid cards have largely been overlooked by businesses because of a lack of viable products in the market. Many people associate prepaid cards with gift cards, public transit cards or a product designed for children and youth. However, payments technology has come a long way. Prepaid cards have evolved from being a replacement of traveller’s cheque to new, innovative use cases.
What is a business prepaid card?
Business prepaid cards, which is the topic of today, have been designed specifically for business owners and employees. They are primarily used by employees, contractors or sole traders for the payment of general business and travel expenses. Some companies also use prepaid cards for contractor/gig payment and salary packaging.
Business prepaid cards work much like credit cards, but remove a lot of the pain points that come with accessing a line of credit.
Advantages of business prepaid cards
- Control business spending – the beauty of prepaid means that you can only spend what you have pre-loaded. This means that you don’t need to worry about your employees overspending or going over the budget. With Vasco Pay, administrators get access to an online portal which displays real-time transactions across all company cards.
- Reporting is relatively straightforward – on top of viewing company transactions, you can also export transaction history and plug it into your accounting software. This makes your reconciliation process easier and more hassle-free.
- Distribute cards quickly – prepaid cards do not require credit checks and are therefore easier to apply. You will still need to verify your company and directors, but this is usually a faster turnaround than applying for credit cards.
- Empower more employees – with credit cards, you are generally limited to giving them to the CFO, the Procurement Team or select managers. Unfortunately, this adds an extra layer of red tape for your employees who need to access company funds for expenses. Hospitality, retail, transportation are some of the sectors where employees frequently incur expenses as part of their job. By giving employees prepaid cards, you are taking away unnecessary approvals and reimbursement claims, and instead empowering them to work more efficiently.
So when should you use prepaid or credit cards?
Both business credit cards and prepaid cards will help you keep your business expenses separate and make tax time easier. Most prepaid cards, such as Vasco Pay, can be used in the same way as a credit card – in-store, online, via PayWave and to withdraw cash from an ATM, wherever Visa is accepted.
The choice comes down to whether you want to give your employees access to credit or only funds that you have pre-loaded. Perhaps the answer is not one or the other, but a hybrid approach. Even if you have a business credit card, you can offer certain employees prepaid cards to spend in a supervised way or for a specific spend category, such as petty cash.
With the new financial year approaching, it’s a great time to start a new way of managing expenses with business prepaid cards. Learn more about how our Business Visa Prepaid Cards on our SME page and give it a go today.