The pandemic accelerated the already sizable trend toward a more remote workforce, and it appears that remote work’s ubiquity is not ending anytime soon. A staggering 97% of all U.S. office employees have worked from home at some point during the pandemic, according to a global study that also predicted the number of Americans working remotely to reach 36.2 million by 2025, nearly double its pre-pandemic level.
The shift to remote work has complicated some operations for finance teams, especially in employee spending. Most finance professionals say their companies have permitted employees to expense new items during the pandemic. Nearly one-third report that more employees are submitting expenses now than they did before the pandemic began. A recent survey indicates that companies are losing more than $80,000 every year — some more than $200,000 — on purchases made outside of company policy.
Company executives face intense pressure to keep costs down organizationally, yet vendors and employees are looking to get reimbursed more quickly in an increasingly digital world. Virtual cards are gaining popularity as a way to control corporate spend while giving corporate leadership and shareholders more visibility into where wasteful expenditures can eat into company profits. The cards offer employees a convenient and frictionless payment tool for work-related expenses while empowering managers to monitor and ensure compliance with company policy.
The following Deep Dive explores some of the challenges that the move to remote work poses for corporate finance teams. It also examines how virtual cards can improve fiscal efficiency and accountability while making it easier for employees and vendors to do business.
Expense Control Challenges in a Changing Work Environment
Parts of corporate travel, in-person interaction and entertainment are slowly returning to normal, but remote working arrangements are likely here for the long haul. A report found that 62% of hiring managers expect their workforces to remain off-site, and 59% agreed that companies risk falling behind if they do not adopt a flexible workforce model.
Finance team members who once obtained desks, computers and all the supplies needed to do their jobs at the office are now furnishing and supplying their own workspaces at home. Thirty-one percent of finance professional respondents said in a July 2021 report that employees are submitting more expenses now than before the pandemic, and 90% reported that their companies have allowed employees to expense new items in response to the health crisis. Nearly one-third of finance professionals also said they are finding more errors in their expense reports. Seventy-eight percent of respondents maintained that many employees are not cognizant of company spend policy, and 65% said that even senior executives willfully ignore it.
The impact of these expenses is profound. That same study found that firms lose approximately $84,980 annually on purchases made out of policy and that larger companies lose more than $113,250 per year. Thirteen percent of firms are footing the bill for more than $200,000 per year in out-of-policy spending. In addition, companies pay an estimated $32,210 per month in expenses charged to their employees’ personal credit cards, complicating expense verification and increasing the pressure for quick reimbursement.
How Virtual Cards Can Help Companies Watch the Bottom Line
Virtual cards offer many advantages over traditional credit and debit cards for corporate spending. Their most obvious benefit is their touchlessness, a commonly preferred feature as much of the world continues to do business with minimal contact. Teams can submit requests and approvals either online or via a smartphone app to accommodate remote workers.
Virtual cards are also more secure than their plastic predecessors. A virtual card allows the user to generate a one-time card number that links to a corporate account. It eliminates the need for an employee to carry a physical card that can be lost, and it is essentially impossible for bad actors to steal a virtual card number that changes with each use.
Finally, virtual cards can help organizations closely monitor and maintain clear records on employee expenses to control overspending. Companies can set spending limits, select which merchants to pay and set expiration dates automatically. Virtual cards can also help companies give their employees the flexibility to buy what they need without dealing with expense reports and receipts.
These solutions can also make the monthly closeout and general cash flow accounting much simpler and more efficient for financial teams. Firms that automate their expenses and collections enjoy faster turnaround times than those using manual methods, making it easier to maintain a steady cash flow. A recent PYMNTS report found that firms using automated methods to manage collections take 17 days to follow up, while those using manual methods take 19 days.
Virtual cards can equip companies with the maneuverability they need to respond to a business climate that is rapidly changing. With the right tools, executives can have more visibility into monthly budgets, especially regarding expenses. Virtual credit cards supported by a strong software platform offer a view of financial transactions in real time, allowing managers to adjust budgets and spending policies with each new card issued.
As with traditional cards, companies can also earn cash back, which can help add to the bottom line over time. Virtual cards have the power to generate substantial cost savings, placing managers back in charge of their expenses even as the work environment evolves.