BankingCorporate to Bank RelationshipsHow commercial cards can give businesses a competitive edge

How commercial cards can give businesses a competitive edge

James Sykes, Head of Commercial Cards at Lloyds Bank, reveals how commercial cards can provide value to businesses of all shapes and sizes

Commercial cards have changed dramatically over the last few years – but many leaders across treasury, finance and procurements still don’t realise the benefits they can provide to businesses of all sizes, according to James Sykes, Head of Commercial Cards at Lloyds Bank, who believes they can solve problems businesses don’t even realise they are facing.

“One of our biggest challenges is breaking the mindset that commercial cards are just bits of plastic used for low value transactions, such as cups of coffee,” he says.

The reality is that today’s commercial cards make a company’s transactions more efficient, accelerate their accounts process, boost working capital, and improve relationships with suppliers.

“They can even provide extra income streams through rebates that businesses receive from meeting agreed spending thresholds,” says Sykes. “The whole industry has evolved in recent years.”

It’s why he values the opportunity to sit down with clients and discuss the possibilities.

“It’s a real eye opener for them when they realise the value cards can add to their business,” he says.

Overcoming challenges and creating opportunities

For Lloyds Bank, the key is knowing how clients’ businesses operate, the challenges they face on a daily basis, and then coming up with options they may not have considered.

Understanding their relationships with different suppliers is particularly important. How often are they paid? When was the last payment made? What could improve the process?

“We have a really robust way of analysing very detailed supplier data to find out which of our solutions would provide the most value to our clients,” says Sykes.

Of course, this depends on their goals. Are they looking to increase efficiency or improve their working capital? Would they like to solve problems with suppliers or pay bills more quickly?

“Some clients end up having four or five of our products, each providing a different solution,” says Sykes. “When this happens, it shows we are really bringing them value and solving problems.”

Cash flow is a key consideration, given pandemic-related uncertainties, so it obviously makes sense to optimise every part of the transaction process.

“Just because the way they’ve made payments has worked for 20 years doesn’t mean it can’t be improved,” he says. “Organisations are becoming more thoughtful around payment strategies.”

While payments have traditionally happened at the end of the process, businesses are increasingly looking for the most effective ways to complete transactions.

A prime example is the benefit of using a commercial card instead of a direct account transfer, according to Sykes.

“It gives you a credit line so you can keep your money for longer,” he explains. “You can also pay suppliers earlier without having the money immediately leaving your account.  And earlier repayment is important to suppliers from their own cashflow perspective.”

Streamlining processes

Over the past 18 months, commercial cards have been used by companies to purchase equipment for their employees so they could work from home during the Covid-19 lockdowns.

“Colleagues asked for what they needed and received a virtual card with a fixed value that they could use to buy the items,” says Sykes. “They then uploaded the receipt.”

This helped companies avoid the logistical nightmare of trawling through various expenses claims. It also made everything more efficient, particularly for businesses with thousands of employees.

According to Sykes, commercial cards also streamline a company’s Accounts Payable function and help them achieve their targets.  This includes providing access to useful information that would otherwise take a long time to track down through normal channels. For example, transactions made by an employee to cover travel costs can quickly show up on the firm’s expense management system.

“We then work with them to close off transactions efficiently,” says Sykes. “Automating the process helps colleagues avoid having to match up purchase orders, invoices and other bits of paper.”

Another benefit of Commercial Cards is the ease in which specific controls can be put in place. Alongside various transactions and maximum spending limits are virtual cards that can be used only once.

“You can also ensure a card number is only ever used with specific suppliers,” he says. “It’s also possible to require pre-approval over certain amounts.”

In many cases, no-one even knows a Commercial Card is involved. As far as they’re aware, it’s just a payment mechanism using a 16-digit number. This means suppliers can even be paid without the presence of a card. Instead, they will just receive the money owed through systems such as Faster Payments or CHAPS.

“Nothing changes for the supplier as they will still send in their invoices for approval, but the payment just happens,” says Sykes. “They won’t even know a card is involved in the process.”

Sykes has worked in the commercial card industry for many years and believes these products can benefit all companies. His goal, therefore, is to continue getting this message across.

“We’d love the opportunity to speak with businesses to understand how they work,” he adds. “We want to see if we can bring added value to our client and their suppliers and help them solve problems by improving relationships with suppliers.”

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