The growing popularity of commercial Cards Vs. Business cards

Commercial cards and Business cards are often mistaken for each other. These two cards may sound the same but are different in more ways than one.  Let’s learn about their differences in this article.

Corporates have many expenses apart from settling supplier invoices, and employee salary i.e., for travel, entertainment & employee engagement. Commercial cards provide a quick and easy way to make B2B payments for corporate travel and lodging. These cards offer a comprehensive expense management program that enables the company to manage cash flows, as well as save money while providing benefits to the employees.

The following are the major benefits of Commercial cards.

• Optimizing working capital facility:

Commercial Card programs help to create more value for businesses and their suppliers. One of the advantages of commercial card programs is the ability to optimize working capital by extending the business’ days payable outstanding (DPO), which is the average number of days that a company takes to pay its bills and invoices to the supplier.  Similar to payment systems of normal credit cards, the payment made to the supplier through a commercial credit card acts as a form of short-term lending to the business and helps maximize the available float during the billing cycle. When a business extends its DPO, it’s not at the expense of the supplier and doesn’t impact the business’ DPO ratio.

• For travel and entertainment-related expenses:

Corporates provide commercial Cards to their employees to manage their Travel and Entertainment-related expenses when they’re on the move. Commercial cards for businesses have credit card numbers and may be used to make payments or to purchase products. Companies can give cards to their employees so that they can avoid reimbursement processes and having to approve every small purchase that is needed.

• Centralizing all charges made by employees:

Commercial Credit cards offer efficiency and convenience to firms to keep track of their spending by centralizing all charges made by employees. The employees can take the cards and use them to buy the items that their companies need. Corporates can assign limits, manage issuance & billing, etc. These cards can also be issued to employees for specific purposes. For example, an employee who has a commercial Petrol card that is branded to be used at a specific chain of Petrol Bunks (Petrol Station) can buy petrol at one of those stations but cannot use the card at other places. The payment information from checks or in-house transactions is usually insufficient for straight-through processing and, therefore, requires manual input. Commercial cards offer robust and comprehensive remittance data, which can be useful for both reconciliation and accounting. The data can also be easily integrated into enterprise resource planning (ERP) systems and accounting platforms, which helps improve efficiency and supports greater automation. This may be a drain on in-house resources and increases the likelihood of making errors.

Difference between commercial cards and business cards;

• Commercial cards are designed for large companies with large annual revenues. Business cards are suited to mid-sized businesses.
• The Business must pay the balance in full each billing period of the commercial card. Business cards normally have the option to carry a balance and pay off their bill over time.
• Primarily, commercial cards are issued to large businesses with many employees. Corporate cards generally have higher spending limits and may offer more perks than business cards due to their volume.
• Commercial cards generally have higher spending limits and may offer more perks than business cards due to their volume.
• All transactions on the Commercial Cards are part of the company’s credit history and there is no hard credit inquiry in the approval process. But in the case of small business owners personal credit score will play an important role in credit limit approval.

One more benefit of card payment is that the traditional method of payment process involves a lot of paper—for example, purchase orders, invoices, shipping notices and check payments—making it costly and inefficient. And oftentimes, it can take up longer time to manually process and pay for each purchase by cheque. Delay in payment for any reason can trigger ripple effects throughout supply chains. If one firm fails to pay its supplier on time, the next may be delayed in paying its own, and so on. While paying with a card for goods and services, businesses are digitizing their procurement processes. Not only does this reduce labour- and time-intensive work, like a situation of global pandemic lock-down, electronic payment processes provide a new level of business resiliency by allowing businesses to keep payments flowing.

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