B2B Payments

Why Payments Is The Least Painful Part Of Employee Expenses

The way employees make purchases on behalf of their companies is changing as employers demand greater visibility and control over how workers spend a firm’s cash.

FinTech disruption in employee expense management has driven much of this paradigm shift thanks to solutions that can automate employee reimbursements, capture receipt data on mobile phones, or promote spend compliance.

In a recent conversation with PYMNTS, Teampay CEO Andrew Hoag recalled how much the employee purchasing arena has changed in the last decade.

“When I started my career in IT, if I went out and bought a piece of software to do my job, I would have gotten fired,” he said.

What’s changed in the last 10-15 years, he continued, is the culture of employee purchasing.

“Every single person in your company is now part of your purchasing department,” he explained.

But as service providers find opportunity in mitigating friction associated with employee purchases, Hoag noted that the true opportunity lies not in the payment itself. Most expense management pain points, rather, occur before and after the transaction.

Visibility, Compliance and Control

One of the biggest industry shifts in recent years has been the emergence of affordable, easily accessible, cloud-based software solutions, even for smaller companies. Organizations understand that their employees often need these tools to do their jobs most effectively, but Hoag warned that the proliferation of enterprise software has clouded spend visibility.

“In an explosion of cloud services, no one from the finance side of the organization has paid attention to it,” he said, adding that while executives have focused on the complexities of integration and access controls, software spend management hasn’t been high on their priority lists. “Teams often don’t understand they’re paying for overlapping services, duplicate vendors and zombie subscriptions that fall below the radar.”

In an organization with hundreds or thousands of employees, those duplicate software purchases and unused subscriptions compound into an expensive waste of spending.

This scenario is just one area highlighting the importance of spend control, visibility and compliance. Similar demands are growing across all use-cases of employee spend, from workers making a one-off purchase of office supplies or furniture, or workers making purchases while on a business trip. Managers are lacking visibility into whether these purchases are compliant, said Hoag, and they need a centralized platform to aggregate and consolidate transaction data for a broad-level view of how employees are spending company money.

The Payment Isn’t the Problem

Commercial card technology, including virtual cards (v-cards), offers the ability to consolidate that transaction data and promote transparency, said Hoag. The ability for employers to generate v-cards for individual purchases is particularly beneficial as more professionals resist the tradition of footing the bill.

“The employee expectation is shifting into, ‘If I’m buying this for work, then work should pay for it,’” he said, noting that arming employees with corporate cards is also particularly beneficial to the corporate itself, which is no longer burdened with the process of retroactive expense report management and reimbursements.

“If you have situations where employees make purchases on their personal card that should have been on the company books, that can cause problems for the corporate controllers,” he said.

But while cards can ease friction of the actual transaction, Hoag noted the biggest pain point in employee spend isn’t the payment itself.

“The payment is the least painful part of the whole process,” he said. “This ecosystem is moving away from just focusing on the payment, and focusing on the problem we’re ultimately solving for the customer, which is, ‘How do I get the money to the right people, in the right organization, at the right time?’ That’s about more than just arming them with a corporate card or access to a virtual card.”

The true value in card technology is the ability to wield transaction data to analyze employee spend post-transaction, as well as establish and enforce spend controls to prevent unauthorized spending before it even occurs.

“What’s interesting today is the ability to dynamically configure cards with controls that allow you to control a payment in a way that is restricted to the policy,” Hoag said.

Combining card technology with a digital platform upon which managers can consolidate requests and approvals pre-transaction, and payment data post-transaction, means organizations can get to the root of the pain in expense management — which, often, is not the act of making a payment itself.

Enhancing Control and the Employee Experience

With employees today less willing to use personal cash for company purchases, ensuring businesses can promote compliance and spend visibility while arming workers with corporate cards is essential to not only managing company expenses, but also promoting a better employee experience.

According to Hoag, this shift will continue not only as organizations adjust their employee spending habits, but as they modernize their B2B payments strategies overall.

“There is a fundamental shift in how companies make purchases today,” he said. “It’s being driven by bottom-up spending, more employee empowerment, and even by the gig economy where you have workers coming in and out of the enterprise. This bottom-up approach permeates everything a company does, and the opportunity in finance is really exciting.”

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NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020 

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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