Cash vs. Credit Card Spend: Does it Really Impact Corporate Savings?

When it comes to buckling down on budget, there are many ways to find extra savings:

• Consolidate meetings and events
• Reduce spending on departments
• Hold down pay increases
• Reduce excessive service levels, etc.

But with each reduction comes an intangible cost that might be detrimental to your competitive advantage–whether it’s customer satisfaction, employee morale, offering a competitive wage, or limiting the available resources to bring innovation into the market.

Fortunately, there’s a less controversial way to drum up extra savings and it involves gaining better control over "invisible" spend. An article from the Harvard Business Review reports that organizations can almost always find 15% to 20% of spending that hasn’t been managed closely. So, for this post in particular, we’re going to dive deeper into why non-compliant cash spend can create more headaches and cost your organization more money in the long run.

Why your company should limit the use of cash

1. Paying with card is just cheaper

There’s a financial benefit to paying with cards rather than cash. This is because there’s more than processing fees to take into consideration, such as labor and incidental costs. Plus, when employees manually enter expenses, errors can be introduced and non-compliant spend can slip through.

2. Tracking high volumes of cash is difficult

When your employees use cash to pay for corporate expenses, it’s hard to see what’s going out the door. And when you can’t see what’s being spent, then you can’t stop it–meaning there’s a higher risk of non-compliant spend. Here’s why cash can cause so many problems when compared to corporate cards:

• It’s unaccountable and easily abused
• It has less documentation and data
• Tracking high volumes is difficult for finance and AP teams
• Validating manually mapped expenses is more time extensive

3. Fraudulent spend lurks around the corner

Asset misappropriation is one of the most common fraud schemes. For cash on hand, the Association of Certified Fraud Examiners (ACFE) found in its latest 2020 report, that the average loss to fraud in a year is $26,000 and lasts an average of 15 months to uncover; the typical velocity (median loss per month) averages $1,700.

Corporate cards increase opportunities for savings

By leveraging the 80/20 rule, you can encourage more employees to use corporate cards, so your organization can have better controls and visibility around one of the top financial line items–travel and expense. This also makes it easier to flow accurate, reconcilable data into your SAP Concur solution, helping you validate and control spend.

Companies who do just this save in many areas, such as:

• More timely visibility into spend: Card transactions flow daily, while cash receipts can take weeks or even months to show up in an expense report.
• Higher quality of spend data: Having a card feed provides validated spend because the use of digital data automatically gathers, sends, and verifies where expenses are coming from through the use of bank and receipt information.
• Increased corporate rebates: The more you can put on your corporate cards, the more you can use economies of scale to increase your corporate rebate savings, including qualifying for a second rebate which rewards you for the speed at which you pay it off.
• Better opportunity to manage fraud: With more digital tools to automatically run audits–like with Concur Detect–you can check more travel, expense, and invoice reports for signs of fraud.
• Increased employee satisfaction: Employees do not have to pay initially with their own cash and transaction amounts that are less than the corporate card spending threshold might not have to require receipts.

Best practices to change employee spending behavior

To help you get started in this transition, we’ve put together some best practices to help you change employee spending behavior:

1. Set and adhere company standards to ensure that all team members who should have a corporate card have one.
2. Gain an understanding of reasons why corporate card is not being used. Address these reasons based on corporate expectations.
3. Educate employees to encourage use of corporate cards and/or make it more difficult to use cash/personal cards.
4. Consider mandating corporate card use for booking air, car, and hotel spend.

How SAP Concur solutions can help you save more

With a few simple adjustments to your corporate card policies, you can get cash spending under control while also giving your employees the kinds of tools they want to use. Tools that reward them with less busywork and more perks. Tools that keep them safe on the road and focused on their jobs. Tools that, from the beginning, show you what they’re spending, so you can keep more cash inside your organization.

Here are some recommendations on how to leverage SAP Concur solutions to simplify the cash to card process, so you can start saving:

1. Partner with Service Administration to optimize configuration
2. Change receipt requirement to a higher amount for card transactions
3. Collaborate with reporting services to save time customizing reports
4. Invest in audit service/process to ensure policy compliance 

For more information on reducing non-compliant cash spend, download our eBook Small Adjustments, Big Changes for five ways to reduce cash spend within your organization.