The options in business payment solutions are constantly growing. Over the past 10 years, the advent of the Internet and mobile banking has brought about a profound transformation in the way we pay. As a result, older and more established payment options are coming under pressure. Traditional cash is now seen as far from ideal. Yet organizations still use cash amongst a wide range of different business payment methods to reimburse employees’ business expenses.
There are many payments made within an organization. For all these expenses, the employee needs a payment solution.
For certain expenses, often only one type of payment method is accepted. A hotel booking, for example, can only be made with a credit card. While the florist might only accept a debit card. It is therefore important to offer various flexible payment methods within your organization.
Keeping track of and processing expenses is still a cumbersome task for finance teams. It takes a lot of time and effort to manage these transactions and declarations. Particularly when different payment methods are used, it can be difficult to complete the month-end closing on time.
As you will have noticed, many new payment solutions have been introduced over the past decade. However, many companies have not yet made the switch to these new payment options.
Often, such a switch is added to an already long to-do list of long-term projects, much to the chagrin of finance teams and employees everywhere. While these new payment solutions make it much easier and, above all, safer to conduct business transactions. High time to take a closer look at all payment options and their benefits.
Traditional cash, petty cash
Many organizations still work with cash. Cash is then on-site and often used, for example, to buy birthday presents. When cash circulates in a company, a cash book is used. The cash book records all cash expenses.
Many organizations would like to switch to a cashless business environment, as working with cash and cash books can cause a lot of headaches.
Processing cash business payments can be an administrative nightmare. In addition to being time-consuming, it also requires a complex set-up. How does the cashier keep track of the various cash registers? Where does he or she get the money to replenish them? Have you thought about how to transport the money safely? And, how do you check that the full amount has been put in the cash register?
When organizations work with cash, there is often an established daily routine:
❯ Each day, there is a fixed sum in the cash register to start with;
❯ The employee receives money from customers but may also incur expenses him- or herself. This requires two separate and securely stored tills or cash registers;
❯ At the end of the day the employee counts the cash, balances the cash book and hands over the cash to the manager;
❯ Then, as the last step, the manager or cashier deposits the money in the bank or requests a cash top-up.
It is imperative that all cash transactions are properly accounted for in the cash book. And that all receipts are included. As an administrator, you often have to chase after employees to submit their receipts. So working with cash seems like an easy and quick solution, but there are (too) many snags and catches. And these can cause major inefficiencies in administrative processes.
However, within an organization, there will always be the occasional need for a cash payment. No matter how much a company strives for digital-only transactions, it cannot always escape cash. For example, when a shop unexpectedly does not take banks cards or when buying at a local market.
Advantages: easy to use, almost always accepted in physical stores, no additional costs
Disadvantages: open to fraud, complex administration, risk during distribution
The regular payment card (also called “debit card”)
Practically everyone has one in their wallet. Many organizations still work with cash. Cash is then on-site and often used, for example, to buy birthday presents. When cash circulates in a company, a cash book is used. The cash book records all cash expenses.
Many organizations would like to switch to a cashless business environment, as working with cash and cash books can cause a lot of headaches.
Processing cash business payments can be an administrative nightmare. In addition to being time-consuming, it also requires a complex set-up. How does the cashier keep track of the various cash registers? Where does he or she get the money to replenish them? Have you thought about how to transport the money safely? And, how do you check that the full amount has been put in the cash register?
When organizations work with cash, there is often an established daily routine:
❯ Each day, there is a fixed sum in the cash register to start with;
❯ The employee receives money from customers but may also incur expenses him- or herself. This requires two separate and securely stored tills or cash registers;
❯ At the end of the day the employee counts the cash, balances the cash book and hands over the cash to the manager;
❯ Then, as the last step, the manager or cashier deposits the money in the bank or requests a cash top-up.
It is imperative that all cash transactions are properly accounted for in the cash book. And that all receipts are included. As an administrator, you often have to chase after employees to submit their receipts. So working with cash seems like an easy and quick solution, but there are (too) many snags and catches. And these can cause major inefficiencies in administrative processes.
However, within an organization, there will always be the occasional need for a cash payment. No matter how much a company strives for digital-only transactions, it cannot always escape cash. For example, when a shop unexpectedly does not take banks cards or when buying at a local market.
Advantages: easy to use, almost always accepted in physical stores, no additional costs
Disadvantages: open to fraud, complex administration, risk during distribution
❯ A debit card
With a standard debit card, issued by your corporate bank, you can withdraw cash from an ATM or make electronic payments. The amount is then instantly withdrawn from your business account.
If you do not want debit cards to be linked to the main business account, you must request an additional account. Especially when there are several locations with different cardholders to deal with, this can quickly become quite complex. Managing such a setup requires a lot of work. The bank may also lose interest in the case of low turnovers on the sub-accounts.
Withdrawing money from an ATM is not always free. For example, your bank may charge you extra when withdrawing money from an ATM belonging to another bank. To save money, make sure your employees always use ATM’s from affiliated banks. Electronic payments with a bank card (via iDeal or giropay, for example) within the Eurozone are free.
The amount of money you can withdraw at cash machines or spend at a payment terminal is usually limited per day or per week. These limits can be changed, but only by the account holder.
This somewhat limits your freedom. For example, when you unexpectedly have to incur a large expense. In which case the amount of money in the account may be sufficient, but the daily payment limit is not. This will need to be changed in the system. Often, that will be done with help of Customer Services at your bank but is not processed immediately. This means that you cannot complete the payment on that same day.
In some cases, you can overdraft on your debit card. To do so, you will need permission from the bank. In that case, the money you are short is borrowed from the bank. Of course, this is not free and from a business point of view therefore not desirable.
Advantages: contactless, easy withdrawal at a cash machine, online payments with iDeal
Disadvantages: interest on overdrafts, daily payment and withdrawal limits, not very flexible in case of multiple locations
❯ A prepaid Maestro card
A prepaid debit card is in many ways similar to a standard debit card but also has some characteristics of a credit card.
You add a certain amount of money onto the card in advance, the ‘credit’. You can then use it to pay in a shop or to withdraw cash at a bank machine. When the balance has been used up, payment with the card is no longer possible. This always involves the organization’s funds.
The money on a prepaid card is transferred from your business account. This affects your liquid assets but helps you avoid the costs of credit. Overdrafts are not possible. And by regularly topping up the cards, you can spread out the cash transfers.
A prepaid Maestro card has some of the same benefits and drawbacks as a regular debit or credit card. However, only with a prepaid Maestro, can you, as finance manager, decide how much money is spent per card. This gives you more control over budgets. And the cards will not be linked to your main business account. So employees are prevented from accessing company funds.
Advantages: all the benefits of a normal debit card, not linked to a business account, no overdraft charges
Disadvantages: one-off set-up of the top-ups (based on spending pattern), not accepted by all online platforms
A corporate credit card
Credit cards are a popular and ‘classic’ payment choice within the corporate payment solutions segment. Within Europe, payment can almost always be done without extra fees. However, for cash withdrawals often additional costs are charged.
Corporate credit cards are often used for payments abroad because they are accepted worldwide. They are therefore very convenient for business trips. In addition, they are handy for online payments.
❯ Standard credit card
If you have a business account, you can also apply for a corporate credit card. This card can be used for all business-related expenses, such as business trips, petrol, office supplies or other online purchases.
With a regular credit card from a bank, you in fact borrow money to pay with. There are different types of credit cards with regard to how the money is then repaid:
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- A ‘classic’ credit card where you pay back the borrowed money immediately or in instalments. You pay interest from the moment you borrow.
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- A charge card where you are obligated to repay the borrowed amount within 30 days. During that time no interest will be charged. After this period, the interest rates become relatively high.
All American Express cards are charge cards. But this is often also the case for Visa and Mastercard cards. The amount will not be debited from your account immediately. At the beginning or end of the month, you will receive a bill of all amounts paid in the previous month. Visa and Mastercard often give you the option to repay the amount due in instalments.
When paying off the balance on credit card bills in full each month, your organization often won’t incur extra charges. However, if you do postpone payment, a bank-dependent interest rate will be charged. A credit agreement must therefore be signed.
Although credit cards are used by many companies as a corporate payment solution, there are also many disadvantages. The application for a credit card involves a lot of paperwork. It’s not as easy as it seems.
Once you have completed the paperwork, the issued card will have a fixed limit. The amount depends on the card in question but often exceeds €1,000. From a business point of view, it does not feel comfortable to have employees travelling with so much “money”. Unfortunately, the limit cannot easily be adjusted according to company needs.
There is also a daily charge card. This can be called a ‘hybrid’ of a prepaid and a regular credit card. A credit balance is put on an account from which all payments are immediately withdrawn (debit) until the balance is zero. Thereafter, payment is advanced by the bank (credit). At the end of the month, the account is drawn up and any outstanding amounts are immediately debited from the linked bank account (usually a giro account).
Advantages: worldwide contactless payment, extensive insurance coverage for purchases
Disadvantages: Fixed limit, not flexible, lots of paperwork on the application
❯ A prepaid credit card
With a regular credit card from a bank, you borrow money to pay with. With a prepaid credit card, the set-up is slightly different.
A prepaid card is a debit card where the money is held in a secure third party account.
For this type of prepaid card, you can therefore only spend money that you have advanced yourself. However, transferring money onto the card via a normal bank, would, until recently, often take 2 or 3 working days to process.
Banks are increasingly introducing new instant payment protocols. This was first rolled out for domestic payments, but then also for payments within Europe. This is useful when you regularly have unforeseen expenses. You are able to simply increase the limit on these cards in real-time.
In Europe, when discussing prepaid credit cards, we actually mean prepaid debit cards, where a sum of money is transferred into a separate account and only that amount can be used for payments. Once you or your company have gone through the due diligence process that comes with the initial card application, it becomes easier to obtain additional cards. This will allow you to allocate prepaid cards to new employees in a shorter time frame. Because prepaid cards work with e-money, transactions can be tracked online in real-time. This makes them perfect for corporate payment solutions such as SimpledCard.
Advantages: flexible budget, easy allocation to staff, real-time insight
Disadvantages: not universally accepted online
❯ The secured credit card
With a secured credit card, you make an advance deposit into your account at a credit institution. This deposit serves as collateral for the card issuer when you fall behind with your payments.
This type of credit card is mostly used in English-speaking countries. It enables people with a bad credit history to improve their credit score. Otherwise, they might not ever be in the position to obtain a credit card.
So the bank offers credit and the customer is obligated to pay off the monthly expenses in a timely fashion. In principle, the deposit remains unaffected. At the same time, the limit of your credit will be equal to your deposit.
Advantages: useful for people with a bad credit score
Disadvantages: deposit required, credit limitations
We are happy to help you find the right online payment method for your organization.
Online payment services
The majority of business-related purchases are online. Hence, it is necessary to have a suitable payment solution in place to pay online.
Although the first payment option that comes to mind is the ‘standard’ credit card, there is a growing array of specific payment options for online purchases. How do these differ from a credit card? And how do use them for business purposes?
❯ iDEAL
Payment with iDEAL is a direct online transfer from your bank account to the bank account of a business. The interface opens the web-environment of your own bank and all required data are automatically provided.
After authorization, you are immediately notified whether the payment has successfully gone through. It is safe and fast. With this, customers who do not own a credit card, can still easily purchase online.
Although iDEAL is primarily a payment method for private consumers, it is also regularly used by companies. For example, when ordering birthday gifts for colleagues or buying office supplies online. Some online shops only accept iDEAL payments.
Companies often prefer this type of payment. Mainly, because the money transfer is completed immediately. The transaction is concluded within seconds, speeding up the purchase order. There is no administrative hassle caused by declined card payments.
All this makes iDEAL an attractive payment option for companies. However, unlike with credit card payments, iDEAL does not offer purchase protection. If you do not receive your purchased items, it is up to you to claim your money back from the supplier.
Over 10 major banks in the Netherlands have an iDEAL license.
Advantages: fast payment option, offered by many Dutch webshops
Disadvantages: not compatible with all bank accounts, do not offer purchase protection
❯ PayPal
PayPal is a popular payment method worldwide. In the Netherlands, it is one of the most used payment options, with 1.7 million users. It comes in third place, just behind iDeal and the (corporate) credit card.
PayPal is also widely used on auction sites such as eBay and Marktplaats. Unlike iDEAL, PayPal, like many credit cards, offers purchase protection. If the purchased product is not received, PayPal will make sure you get your money back.
This payment option is also primarily used by private consumers. You link several bank accounts or credit cards to it. This is called an ‘e-wallet’. One important benefit is security. When using such an ‘e-wallet’, information about the bank account or credit card, used for the purchase, is not disclosed to the seller.
PayPal does store data on its servers but promises to keep it secure from hackers. That is a different setup to the so-called device-based digital wallets, such as Apple Pay and Samsung Pay. These payment options only store your card details on your phone or computer.
PayPal also offers a business solution in many countries. This b2b payment option enables direct debits to also be processed through the system.
Essentially, there are no costs involved. You can create a free account and complete an infinite number of transactions. Only in case of an exchange rate will webshops pay a fee for using Paypal.
Advantages: universally accepted, no extra costs for the buyer, purchase protection
Disadvantages: additional account required, less overview for the finance team
❯ Bitcoins
The media are filled with sensational stories about bitcoin, and the trading and speculation that goes with it. This relatively new digital currency is state-of-the-art technology. The basis of the bitcoin is a ledger that uses an encryption scheme, carried out by many computers in thousands of steps, organizing distribution and rendering it immutable (the so-called blockchain).
You could compare a bitcoin to an email that is protected with a password. Each bitcoin has a password that is only available to the owner until he transfers money.
The bitcoin is not issued by a central bank, country or organization as is the case with regular currencies. Users pay with bitcoins via software. In practice, not many shops accept bitcoins as a payment option. For example, on Amazon, you cannot pay directly with bitcoins.
Advantages: safe and anonymous, no intermediaries or bank needed
Disadvantages: low merchant acceptance, employees not able to access network
Buying on account
For businesses, it is convenient to pay large bills at the end of the payment period. By then it will be evident whether or not the service has been delivered according to specifications, while meanwhile the company still has access to the money, which benefits cash flow.
However, when buying from new suppliers, they will usually want to first run a credit check. They want to make sure that you can actually pay for the purchase you are planning to make.
In addition, you don’t just include any organization in your preferred supplier base. Each new profile takes time to set up and will have to be verified. This does make for a speedy process. Which, in turn, negatively impacts the delivery time.
By law, a webshop must offer customers the option of buying on credit. However, many merchants are not keen on taking on this liability themselves. More and more, this payment option is offered by payment service companies such as AfterPay and Klarna. With just a few clicks, they have made it remarkably easy to pay post-purchase. A credit check is no longer needed.
B2B webshops have now also started using these types of post-purchase payment options. Considering such payments often involve relatively large sums of money, it has become a decidedly relevant payment method in the business sector.
With regard to B2B purchase decisions, these often involve more than one person within a company as payment must be approved by someone authorized to do so. With recurring purchases, but also with one-off invoices, post-purchase payment is a good alternative.
❯ Payment by invoice
Many organizations still prefer to pay by invoice. In this process, all received invoices are first centrally compiled. After validation by the persons responsible, payments are set up and held for authorization. After authorization, payments are then made via transfer by someone from the finance department.
This is done by multiple people within the organization to make sure that the account is accurate. And, more importantly, to prevent fraud.
The invoice process can be done manually, but this significantly increases the risk of errors. This problem is solved by using a digital payment request. This is why you see these more and more often. A digital payment link is created and sent along with the invoice. This can also be done with, for example, a QR code.
Advantages: trusted by finance teams
Disadvantages: risk of errors, manual work
❯ AfterPay
One of the best-known providers of post-purchase payments in the Netherlands is AfterPay. They bear all the credit risk of the payment and also manage to invoice.
When choosing this payment method in a webshop, you are able to receive and view the purchase (in the office) before having to pay for the products. And, you only pay for the product you decide to keep. This saves the finance department a lot of hassle because they won’t have any refunds to process.
Purchases at b2b webshops generally involve large and expensive orders. AfterPay does not charge any fees or interest. However, webshops are free to charge extra transaction fees for payments via AfterPay. Overall, this type of payment can be a convenient option for businesses.
Advantages: transaction process is safe, you only pay for the products you keep
Disadvantages: additional account required
A direct debit
Many businesses use direct debits as a payment method. This involves a one-off or sometimes periodic direct debit payment. A ‘contract’ is drawn up in advance, under which you give the merchant permission to debit automatically an agreed-upon amount from your bank account. This is called a ‘direct debit mandate’. This can be done directly through a business account or through a third party such as Buckaroo.
In the past, a direct debit mandate had to be given in writing, signed by the account holder. Nowadays, this is no longer necessary. What happens is that an e-mail is sent in which you digitally place your signature within a secure environment.
Advantages: security through direct debit mandate
Disadvantages: payments continuing inadvertently
How to integrate the right payment method into your workflow?
With so many options and providers, it can be difficult to choose which payment method best suits your business operations and employees. You want to make it as easy as possible for the operational teams within your company, without losing oversight. In addition, you need to be sure that payments are safe and secure.
Your preference may also depend on the actual payment behaviour of your employees. And also on how payments are processed and managed within the company.
A good set-up payment process and strategy for your company’s expenditures can be of great benefit to your organization. While unfortunately often treated as an afterthought, prioritizing such a strategy can give your organization the control it needs. To help you choose the right method, ask yourself these questions:
❯ What is the frequency of expenditures: do they occur regularly or mostly as a one-off?
❯ How many employees would I like to have access to the business payment methods?
How do I allocate them and can I easily add on new employees?
❯ Which payment methods are a good match with the established spending pattern (online vs. physical purchases, domestic vs. purchases abroad, cash withdrawals allowed or not)?
❯ Which payment option has the best cost/benefit ratio?
❯ How do I include payments for business expenses in our workflow? How do I ensure a smooth integration into the accounting system?
❯ What degree of control do I want as a finance manager? Maximizing budgets, quick insight into transactions, direct feedback with purchase receipts, four-eyes principle, etc?
❯ Does the provider provide support in case of payment issues? How are incidents of fraud identified and dealt with?
Implementation of your payment method strategy
Once you have answered the questions above, you can start implementing the business payment process in your company. This is done in three steps:
- Choosing and “purchasing” one of the payment solutions;
- Managing integration with the accounting system and workflow;
- Overseeing adoption within team and organization.
After rolling out the new payment method within the organization, it is important to monitor how it is used. Listen to employees and ask for feedback from the operational teams. This feedback will provide you with better insight allowing you to then tweak and optimise the processes where and if necessary.
Finally, make sure you stay on top of new developments relating to business payment solutions. What new payment methods are being developed and how do they fit with your business operations? That way, you will able to respond quickly to changing payment requirements within your company.
At SimpledCard we have many experts to help you choose and implement the right payment solution. If you have any questions about which payment solution is best for your organization, please feel free to contact us for a ‘no obligation’ consultation. Together we will look at your company’s needs and help you develop an action plan.
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