Citi’s Commercial Card Blueprint March report questioned corporates in Europe, the Middle East and Africa on their use of cards, from spending habits to the procurement process.
|Steve Robson, Citi|
"Previously, the travel or procurement teams would have led the selection process, but what we are seeing now is the greater need for a credit line and substantial flows across commercial cards.”
The report notes treasurers are attracted to the product, citing greater expense management and the ability to monitor cash-flow levels to manage working capital.
Robson believes the treasurer's more visible role within firms accounts for their growing influence in the credit card selection process.
“Treasurers are taking the benefits of the cards on the cash management side, both with B2B card solutions and the more traditional travel and entertainment cards," he says. "It is falling under the remit of the more senior members of the team and the areas the treasurers manage.”
The trend towards treasury involvement is not yet universal.
Enrico Camerinelli, senior analyst at Aite Group, says in his experience the process of choosing a card provider still seems to mainly go through HR teams, without the involvement of the treasurer.
Companies that do not give their treasurers a say could be cutting them off from overseeing all details of their own cash-flow forecasting. Significant spending could pass through the cards, and understanding this spending could have benefits for the overall financing of the business.
Citi's Robson says: “There are major spends going through these programmes and it makes sense for the treasurer to have an overview of the payment flow.”
|Kevin Phalen, BAML|
“They facilitate payments where immediate settlement is needed like in the travel and entertainment space, while they continue to play an increasing role in lower-value payments, typically under $10,000, where clients are looking to streamline their procure to pay processes," he says.
"Lastly, cards continue to be an important part of the working capital solutions that treasurers need for their organizations.”
Robson notes that for some companies card payments can account for up to 3% of their overall spend, which could be a substantial figure for large corporates. As a result, treasurers are becoming interested in seeing how these numbers fit into working capital flows.
For companies with mainly paper-based payments, moving towards cards can help reduce costs.
Robson says: “The high price of completing paper-based transactions across the procure-to-pay cycle can be reduced by completing the process on the card. For example, one corporate was seeing processing costs running as high as $88, and switching to cards reduced this to $12.”
Phalen agrees there are numerous associated cost benefits to using cards, adding: “First, given the data and the efficient means of payment, there tends to be significant operational cost savings by eliminating costly purchase order processes.
"Second, the solutions provide the ability to pay suppliers faster while potentially extending the corporate clients payment terms, in other words a great working capital solution. Lastly, they also provide great visibility into supplier payments, which can then be leveraged for supplier negotiations.”
Of those surveyed in the Citi report, 39% stated they have a single provider for their global cards programme. However, 90% stated they wanted to move to having a single cards provider. Robson says this can further help with costs, even for the largest MNCs.
“The implementation of Shell’s corporate cards programme pulled together 40 separate programmes they had previously been using around the world," he says. "The consolidation and centralization enables more areas to utilize electronic payment functions and move away from the older, paper-based solutions.”
The benefits of including the cards does not work for every company.
Camerinelli says: “Certainly they help keep spending under control, but the costs of managing these cards are not always worth the solution.”
He says the purchasing cards are still primarily used for the purchase of indirect goods, and to monitor general spending by employees.
Regardless of the size of the spending, payments through cards give treasurers access to the associated data.
“Treasurers will look at the data to assess both what is being spent and where,” says Robson. "Through analysis of such big data, they can determine whether the company is getting value for money from their supply chain.
“The interest from the treasurer is in what can be gained from the big data. What is being spent and where? Are the spend values rising or falling? These big data points all flow easily through the cards process, and can be collated and analysed.”
More granular detail can enable the treasurer to draw up detailed plans.
“The data is simple to pull together to assess against the pre-determined metrics, and enables treasurers to create their own targets. Once this is collated, it can be used to help manage working capital flows.”
If this is a possible usage for the cards data, it is not yet being widely done.
Camerinelli says: “I don’t see that big leverage of data from the treasurers’ perspective. It’s more procurement and HR wanting to track costs and spending behaviours.”
Phalen concludes: “I would say the data that corporate cards create continue to be a central part of the treasurers spending process. Treasurers want to see all of their payment types: ACH, wires, cheques and cards. The data-rich capabilities of the card payments are critically important to the treasurer.”