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How SMBs Can Stay Smart About Cash Flow With Modern Expense Management

4 Mins read

Small businesses have been through the ringer over the past few years, facing a range of challenges, from trying to remain afloat during a global pandemic to navigating through rising inflation. While many financial technology tools promise to cater to the SMB market, evaluating the various options can be daunting and many business owners don’t know where to begin. Expense management, often overlooked, is one area in particular where small business owners can easily capture meaningful value from new technology options.

As a complex and largely internal-facing system, expense management is frequently last on their list of upgrades. We’ve all worked with businesses that rely on outdated spreadsheets, antiquated receipt tracking systems or the institutional knowledge and memory of a small group of employees. While it’s easy to understand why busy owners choose to opt for an out-of-sight, out-of-mind approach instead of modernizing expense management capabilities, doing nothing can have dire consequences. According to a US Bank study, 29% of small businesses that failed cited cash flow problems as a factor in their failure.

In a higher interest rate environment in 2023, money is most valuable when it’s at rest. Most company credit cards have operated the same way for decades: an employee uses their card for a work-related purchase, and at the end of the month they gather receipts and submit an expense report to the accounting team. Then, the employer needs to review all reports that were submitted, ensure they’re accurate and chase down any missing receipts and finally reconcile them to their bank statements. This process is inefficient and often incomplete. According to the Global Business Travel Association (GBTA), nearly one out of every five expense reports contain some sort of error or omission, resulting in valuable time wasted fixing mistakes and verifying the accuracy of the submitted reports.

Beyond the myriad of inefficiencies and mistakes, there are risks to the employer when all employees are sharing one corporate card. Accounting teams typically find that sharing cards lead to unexpected costs, overspending, and unauthorized expenses. It’s also more likely that employees will hit card limits when they share card numbers, potentially leading to cards being declined in sensitive situations, like taking a client to dinner or standing at a hotel check-in fumbling for an alternate way to pay. Not only are these situations embarrassing in the moment, but they have the potential to leave lasting negative impressions of your brand.

Fortunately, the modern fintech tools and digital banking capabilities that we all enjoy for easily paying our friends, depositing checks on our phones, and tracking our money are also making it possible for small businesses to avoid costly expense report mistakes and reach greater operational efficiency.

With modern credit and spend management solutions, small business accounting teams can control use of their physical corporate cards, setting specific guidelines for when an employee can use the card, and for what types of purchases, all in an online dashboard. A major benefit of this capability is automating transactions and reporting: once an employee uses their card and snaps a picture of the receipt, purchases can be processed and automatically entered into the general ledger, eliminating the need for expense reports or reimbursements. Accounting teams have real-time visibility into purchases without waiting until the end of the month to reconcile expenses. This sort of transparency helps small businesses better manage expenses and stay ahead of their financial situation, before cash flow becomes a concern.

We live in a digital world, and that’s why virtual cards are a great solution for small businesses. They offer the same level of granular controls as physical cards, but with far more flexibility. Businesses can issue virtual cards on demand, allowing employees to access their cards via digital wallets, and grant access to certain employees with specific limits. For example, you can set spend controls such as no purchases after a certain time, or limit transactions to only pre-approved spending for specific dollar amounts or even a single vendor. Virtual cards also provide enhanced security. Because the primary account information is shielded, it will not be visible even if a card number is shared. This helps protect sensitive data and provides greater transparency and accountability for the business.

A modern expense management solution like Torpago allows companies to tailor both physical and virtual cards to each user and department and set spending rules and expense policies as needed with its online platform. Torpago also automates purchase records by enabling employers to digitally capture receipts on their phone. There are no expense reports to fill out (or chase down) – saving valuable time and energy – and reconciliation happens automatically.

Deako Lighting, the inventor of the world’s first plug-n-play light switch, uses Torpago’s software for a variety of spend management functions. These range from enforcing employee card policies, to setting card-level restrictions based on the time of day, dollar amount, and merchants, to automating receipt uploads and expense reports. Deako’s admin and finance teams have real-time visibility into spending across every department and can efficiently close the books at the end of the month, allowing them to make more-informed financial decisions.

With these enhanced features, small businesses can ease the financial burden on their employees, reduce time spent on paperwork and expense reports, and have greater visibility into company spending, freeing up time and money to be spent helping their businesses thrive.

Todd Pollak is Marqeta’s Chief Revenue Officer, responsible for leading the company’s go to market teams, overseeing the company’s revenue strategy, how it positions itself in the industry, serves prospects and supports customers. Before Marqeta, Pollak spent four years at Ancestry as Chief Commercial Officer, overseeing the company’s marketing, product strategy and commercialization teams. Before Ancestry, he spent 13 years at Google serving as managing director in the financial and retail sectors. He holds a Bachelor of Arts in English and History from the University of Michigan, and lives in San Francisco with his wife, dog and two daughters.

Expense management stock image by Pickadook/Shutterstock

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