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The Role of Accounts Payable Automation in Modern Accounting Practices

Vlad Falin

December 20, 2023

5

From receiving goods to clearing payments, it is not a single-click process. Multiple steps in between make the accounts payable process tedious and time-consuming.

You receive goods, match them with purchase orders and invoices, send the invoices for approval, make the payment, and finally, maintain records for bookkeeping. This process alone takes weeks and creates confusion when multiple stakeholders are involved.

Think about purchases above $50,000. There are multiple approvals, and each purchase triggers a unique workflow. Documents are not consolidated, and no one has a clear idea of the payment status. 

Thus, accounts payable become chaotic.

Can You Automate Accounts Payable?

To streamline your accounts payable process, you can use tools to automate it. This will simplify bill payments and give you more visibility and control over money.

While it will take time for stakeholders and employees to embrace automation, you can consolidate your scattered pieces on a centralized platform. If you are looking for suitable AP automation tools for your company, check out our list of the top accounts payable automation software.

This post will delve deeper into how you can automate the accounts payable process and how it will help your business. 

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What is the Accounts Payable Automation Process?

Accounts payable automation uses tools to automate invoice verification, approval workflow, payment processing, and bookkeeping. 

Instead of manually organizing, matching, approving, and clearing invoices, the entire process goes on a digital platform to provide visibility and control at each step. So, earlier, employees would spend hours getting approvals and days clearing payments, but now, an automation tool reduces the invoice processing time. 

Account Payable automation process

The platform captures and extracts the invoice from emails via optical character recognition (OCR). The invoice goes to the platform with all the critical information, such as purchase order and simplifies three-way matching. A trigger-based approval workflow notifies the stakeholders to approve invoices. The admin gets complete visibility of each step and clears the payment without going through a variety of software. 

How to Automate Accounts Payable

Automating accounts payable is as simple as choosing and integrating the right automation software with your existing accounting and procurement software.  

The automation software offers visibility into where the money is going and control over the entire process. You can customize the approval workflows and payment gateways and create an ecosystem that supports your procurement process. You can accommodate manual processes and integrate them with other software without going through a complete flip.

With the right automation software, you bring all the critical stages of accounts payable on a centralized platform. Here are the five key steps you can automate:

1. Invoice Management

Invoice Management

Manual: The vendor sends an invoice to a dedicated email or a physical copy via fax or mail. The employee receives it and moves from one stakeholder to another for approval. The process is delayed for days if any manager is unavailable. Once the approval is complete, all the documents go to the accounting team, who clears the payment. 

Automated: Depending on how the vendor sends the invoice, the automation platform captures the invoice from email or WhatsApp. If you receive a physical invoice, you can upload the invoice, and the system extracts all the vital information via OCR. There's no need to manually enter details or add a general ledger (GL) and taxation code. The system captures, extracts, and consolidates all the invoices.

2. GRN Matching

GRN matching

Manual: The dedicated team receives goods along with the goods receipt note (GRN) and must match it with the invoice and purchase order. This ensures that the specified goods are received as per the purchase order. Manually, this process is prone to errors, leading to discrepancies. It demands accuracy to ensure you receive the correct items in specified quantities. 

Automated: Automated software makes this easy by combining all the relevant documents on a single platform. The dedicated team has the invoice and purchase order side by side, making it easy to compare items, purchase orders, and invoices for three-way matching. As a result, spotting discrepancies becomes more manageable, reducing the chances of errors.

3. Approval Workflow

Approval Workflow

Manual: Once the invoice is received, the employee gets it approved by dedicated managers. Based on the invoice amount, they need more than a single approval. Manually, this means going from one office to another or delving into long threads of email or Slack conversations. It becomes difficult for accounting teams to track approval and clear payments. 

Automated: With automated software, each invoice triggers an approval workflow for relevant stakeholders to approve the payments. The admin can create custom no-code workflows based on different if-then rules. For instance, marketing purchases above $50,000 will have more approvals than expenses of $5,000. Also, all the relevant teams will have visibility into the approval status, making it easier to clear payments on time without confusion.

4. Payment Processing

Payment Processing

Manual: Once the invoice is approved, the accounting team determines the details and pays via checks, cards, or other payment methods. It takes a few days before the payment is cleared, and the teams need to sync all the information across the accounting software for reconciliation.

Automated: With automation, accounting teams and employees enjoy more flexibility. For instance, Pluto offers corporate cards, payment gateway integration, and a digitization platform for bookkeeping.

  • With corporate cards, you can create custom vendor-specific cards with advanced controls to ensure payments are made only for approved vendors.
  • Pluto integrates directly with your payment gateways to facilitate payment within the platform. 
  • If you make payments via checks or other physical modes, Pluto will act as a digital bookkeeping platform. You can enter the payments made on the centralized platform and ensure that all the information is streamlined. 

 

5. Reconciliation

Reconciliation

Manual: Reconciliation is the messiest part of accounts payable. Teams must maintain records, manually enter all the details, and sync them across the accounting platforms and ERPs. It is time-consuming, prone to errors, and tricky in case of purchases where one invoice invites multiple tax and GL codes.   

Automated: Automation consolidates all the information on a single platform without manual data entry. It uses OCR to extract all the critical information with a feature to upload the invoices in bulk. Further, you can split the transactions to add multiple tax and GL codes to address the audit season rush.

How Accounts Payable Automation Simplifies the Procurement Process

Accounts payable automation is not just for the procurement or the accounting department. It also makes it easier for stakeholders to approve the payments and employees to get timely resources.

Procurement Process

Source

Overall, it assists you in bringing together scattered parts of the procurement process. Here are reasons why you must invest in accounts payable automation:

1. Improve Compliance

You get complete visibility and control over your accounts payable. You can create custom workflows to ensure that any purchase that goes against the company policy is rejected. You can also accommodate intricate hierarchies to suit your organization's needs and get timely approvals.

2. Avoid Double Payments

It is usual for teams to end up paying the same invoice twice as no one has visibility into the payment status. It happens when the same invoice is paid twice by different team members or when vendors send the same invoice twice, and both get paid. You can avoid this as the software detects duplicate invoices and gives visibility into the status of invoices. The main dashboard highlights the pending invoices and the ones awaiting approval. It becomes easy to stay on top of all the invoices and avoid errors.

3. Faster Approvals and Matching

Faster Approvals and Matching

You get a trigger-based no-code approval workflow engine where you can create customized workflows to accommodate intricate hierarchies. The software notifies the stakeholders to review and approve the invoices. Since all the information is available on a single dashboard, two-way or three-way matching is a matter of a few minutes. This accelerates the approval process, and payments are disbursed much faster. It improves the vendor relationship without risking over, under, or delayed payments.

4. Better Reconciliation

You get all the relevant documents consolidated on a single platform with the appropriate purchase. Additionally, the software automates the coding and categorization, simplifying the reconciliation process. In case of discrepancies, spotting errors becomes easy. Moreover, with features like locking the approved payments and restricted access for auditing, you can eliminate the chances of fraud or manipulation.

5. Accuracy

You improve the accuracy of your records and GRN matching with all the information streamlined on a single platform. Moreover, as the software relies on OCR, you eliminate the need for manual data entry, reducing the chances of errors. Also, you can integrate the automation software with your accounting platform and ERPs to sync data and ensure consistency across the platforms. 

6. Centralized Dashboard

Centralized Dashboard

You get a centralized dashboard with all the key information available in a unified place, acting as a single source of truth. Additionally, you get insights that can help in data-driven decision-making to facilitate procurement cost savings. Further, you can view all the awaiting payments and approvals on a dedicated dashboard. You no longer need to run from one platform to another for information as the software integrates with your accounting system.

7. Accessibility

The unavailability of a single person can create bottlenecks in the approval process and block the supply chain. With all the information streamlined on a single platform, each stakeholder can access relevant data for decision-making. So, whether the CEO is traveling or the CFO is not at the office, they can access the details from any corner of the world and avoid disruption in the supply chain.

8. Visibility

You get visibility for each step, each document, and each purchase. You can bring the entire procurement automation on a single platform and track the status in real time. Whether an employee raises a request, gets an invoice, or needs to clear payment, you will stay on top of the information without creating any delays or friction.

Automation is Easy With the Right Software

Adopting automation software isn’t easy, especially for critical processes like accounts payable, which also involve external stakeholders. The top three factors to look for in appropriate software are flexibility, visibility, and integration. 

Choose one that integrates with your existing processes and systems and is flexible enough to accommodate complex hierarchies. Instead of focusing solely on the accounting or procurement team, it should cater to all the key stakeholders and make automation easier to adopt. 

At Pluto, we aim to bring a balance among the spenders (employees), the savers (finance teams), and the sourcers (procurement teams). Each stakeholder gets visibility, and decision-makers get flexibility. Pluto integrates with your current system and enables you to automate accounts payable without affecting the supply chain. 

You can also automate your entire procurement process with Pluto and improve your bottom line. Read more in our procurement automation post.

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Spend Management
November 10, 2022

Leen Shami

Understanding Business Expenses

All companies and businesses will incur business expenses, but how can you know what exactly is considered business expenses? And how will the introduction of UAE corporate taxes affect business expenses and income reports?

What are business expenses?

Business expenses are costs a business incurs to run the business properly. In simpler terms, they're expenses made by the business for the business.

With the UAE introducing corporate tax laws in 2023, it's crucial for businesses to be able to track and categorize their business expenses, as some of them may be tax deductible.

While the IRS may divide business expenses into ordinary and necessary business expenses, the UAE takes a different approach.

Ordinary business expenses are anything that is "common and accepted" to a business, whereas necessary expenses are anything that is "helpful and appropriate" to a business but not essential.

The federal tax authority in the UAE does not take a similar approach and only considers business expenses as tax deductible or not. We will discuss this in a later section.

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Examples of business expenses

Business expenses include a wide range of expenses, from insurance to office space, to online subscriptions, such as Zoom, Figma, or Adobe.

Let's break it down; if a design agency bills a client AED 120K per year, that doesn't mean they made a profit of 120K. When a business brings in revenue, it must account for the business expenses made to provide its clients with its services. These services include digital software subscriptions, office rent, employee wage, and/or wifi fees.

Here are some examples of the most common business expenses:

  • Advertising and marketing
  • Business travel (fuel, airfare, taxis, etc.)
  • Employee costs (payroll, salaries, insurance, perks, etc.)
  • Employee equipment (such as laptops, monitors, phones, etc.)
  • Legal fees
  • Office space rent & utilities
  • Software subscriptions

While many more expenses are considered business expenses, these are the ones most businesses will incur.

Types of business expenses

When setting up a budgeting plan, business expenses play a vital role in keeping the businesses' financials in check. When preparing a budgeting plan, finance teams typically begin by looking at the three types of business expenses incurred.

These business expenses include:

3 types of business expense; fixed, variable, and periodic

1. Fixed expenses

Fixed costs are costs that do not change; they happen at known intervals, such as month to month.

With predictable costs, budgeting is more straightforward, as these costs are always expected and never come as a surprise.

Examples of fixed expenses include:

  • Rent
  • Employee payroll/salaries
  • Utility bills
  • Insurance

2. Variable expenses

Variable expenses are business expenses that change from month to month. These costs vary depending on a company's production or sales volume; if production or sales increase, variable expenses increase, and if production or sales decrease, variable expenses decrease as well.

Variable expenses are typically a business's largest expense, as some may be unexpected or unaccounted for.

To calculate the variable cost, multiply the quantity of the output by the variable cost per unit of output.

Total variable cost = Total quantity of output X Variable cost per unit of output

Examples of variable expenses include:

  • Shipping expenses
  • Sales commissions
  • Raw materials (used in production)

3. Periodic expenses

Periodic expenses are business expenses that happen infrequently or, sometimes, semi-regularly.

Typically, periodic expenses happen on a quarterly or yearly basis, such as annual car insurance, but can also come as a surprise, such as a company car repair.

Budgeting can be tricky with periodic expenses, especially when expenses are infrequent.

Examples of periodic expenses include:

  • Maintenance & repairs
  • Merger and acquisitions costs
  • Major equipment purchases

Profit and loss statement report

A profit and loss (P&L) statement, also known as an income statement, is commonly used when businesses record business expenses. Through the P&L, businesses can determine their taxable income. This is especially important for UAE businesses with an annual net income above AED 375,000.

The 3 categories of an income statement include the following:

1. Costs of goods sold (COGS)

Costs of goods sold are the costs associated with the production of goods sold by a company. This typically includes direct costs only, such as materials used and labor costs to create the goods sold. Indirect expenses are not calculated regarding COGS; these include sales and marketing.

For a business to determine gross profit, the costs of goods sold must be deducted from its revenue. They also affect how much profit a company makes on its products.

2. Operating costs

For a business to run, operating costs are unavoidable.

Generally speaking, operating costs relate to a business's daily maintenance and administration. These include costs such as COGS, payroll, rent, and overhead costs. However, non-operating costs, such as interest and investments, are excluded from an income statement.

An income statement reflects operating income after operating costs are deducted from revenue.

3. Depreciation

When accounting for depreciation, there are two types to look at:

a. Depreciation expense

A depreciation expense is a loss in value of fixed assets that companies record through depreciation. During the period you use an asset, its value decreases, and the price you originally paid for it is allocated over time.

An example would be a physical asset that loses value over time, such as a car or vehicle.

b. Accumulated depreciation

Accumulated depreciation refers to the accumulated depreciation charge a specific asset has taken as it wears down or becomes obsolete. Accumulated depreciation is shown on the balance sheet, unlike depreciation expenses reported on the income statement.

Personal and business expenses

Knowing the difference between personal and business expenses incurred is vital, especially with the UAE corporate tax law coming up. Business expenses can be used to lower a business's taxable income; however, personal expenses incurred are not considered deductible expenses.

So, what's the difference between personal and business expenses?

Personal expenses

Personal expenses are purchases made for personal reasons and cannot be used as deductible expenses.

If you make a purchase for the business but add in an item for personal use, it is crucial to have two transactions to avoid mishaps coming your way. Having two receipts will help you record and store the receipt so the business expenses can be used as deductible expenses.

Business expenses

If you're making purchases that benefit the business, such as driving more revenue, they can be considered business expenses. When making business expenses, it's essential to keep a record of the purchase by storing the receipts. By doing so, you can use these business expenses to lower your tax liability by deducting the amount from your income.

Tax deductible expenses

We've reviewed personal expenses, the 3 types of business expenses, and what goes into P&L statements. But which of these are considered tax-deductible expenses? In a nutshell, all the above, other than personal expenses. Let's delve deeper into tax-deductible expenses.

Tax deductible expenses are business expenses that help businesses generate revenue. These expenses are deducted from the company's income before applying any taxes.

Examples of tax-deductible expenses:

  • Administration fees
  • Advertising and marketing
  • Bank charges
  • Insurance
  • Legal fees
  • Maintenance and repair
  • Office expenses
  • Office rent
  • Payroll/salaries
  • Supplies
  • Travel and transportation
  • Utilities

Non-deductible tax expenses

Non-deductible tax expenses cannot be deducted from a company's income.

In the UAE, there are 3 main categories for non-deductible tax expenses:

1. Related party payments from the mainland to a Free Zone Person

The related party payments made to a Free Zone Person that is taxed at 0% on receipt of the income will not be deductible for CT purposes. However, if the payment is attributed to a mainland branch of the Free Zone Person, the related party can claim a deduction.

2. Entertainment expenses

Because these types of expenses often also have a non-business or personal element, businesses can deduct up to 50% of the expense incurred to entertain customers, shareholders, suppliers, and other business partners.

3. Other expenses

No deduction will be allowed for certain specific other expenses, such as 

  • Administrative penalties
  • Recoverable VAT
  • Donations paid to an organization that is not an approved charity or public benefit organization.

How to keep track of business expenses

To maintain your business, it's important to track your business expenses. There are several ways to track business expenses; however, you will need to establish a system to account for costs and accurately manage your business.

Here are 6 steps to keep track of your business expenses:

1. Open a business bank account

A business bank account should be completely separate from your personal checking account and must only be used for business expenses/purposes. This will help you manage your business expenses easily and give you eligibility for business credit cards or, even better, Pluto corporate cards.

2. Select an accounting system

If you haven't chosen an accounting system yet, choosing one that's appropriate for your business is vital. Some businesses opt for spreadsheet software, such as Microsoft Excel; however, to simplify the accounting process, we recommend going for accounting software that will automate the process for you.

3. Choose cash or accrual accounting

Choosing cash or accrual accounting typically depends on the size of your business.

Small businesses can use cash accounting and record transactions when they happen, as volumes are small.

For bigger businesses, accrual accounting is essential, as they have high volumes of transactions. With accrual accounting, only the product sold is recorded, rather than payment received for the product. Similarly, an expense is recorded when a bill is received rather than when an invoice is paid.

4. Store receipts

Storing receipts is essential, as they are proof of business expenses made. You can store receipts by scanning them, taking photos, and keeping digital copies.

5. Regularly manage and record expenses

It's important to track spending and categorize them accordingly. Examine every transaction to compare these business expenses to your revenue.

6. Consider subscribing to an expense software

For some businesses, it is worth looking into expense management software to automate the process of tracking, managing, and recording expenses.

Tracking business expenses with Pluto

If you choose to go for an expense management software, it will help you automate the tracking, managing, and recording of expenses. But Pluto's expense management software offers more than just tracking, managing, and recording your business expenses.

Pluto will keep detailed records of all your expenses, reduce your taxable income, and help you if you are audited or need to reconcile accounts.

With Pluto, you'll be able to do the following:

Store receipts

  • Upload your receipt through Whatsapp or the Pluto app as soon as a business expense is made
  • Store all digital receipts on Pluto's software
Upload receipts using Whatsapp

Record business expenses

  • All transactions are recorded on the software automatically when using Pluto corporate cards
  • Petty cash is automated, meaning expenses are recorded on the spot
  • If an expense is made using an employee's personal card, the expense is recorded automatically as soon as they file for a reimbursement

Track business expenses

  • All business expenses made by employees can be tracked through Pluto's dashboard
  • Daily, weekly, or monthly expense reports are available in real-time
Real-time reporting through Pluto

Accounting integrations

  • Pluto integrates with all major accounting platforms

Auto-categorization

  • All expenses recorded are auto-categorized through Pluto's AI technology
  • Pluto categories are synced to your GL codes

Create tax codes

  • Create and activate tax codes that sync with your accounting platform to mark expenses as tax deductible or not
Create and activate tax codes on Pluto's dashboard

Business expense FAQs

More often than not, business expenses have many different rules. Here are the commonly asked questions about business expenses:

How do I categorize expenses?

Most accounting software already has business categories incorporated in the software, so you can use them and amend them as needed.

Pluto's expense management software allows integrations with significant accounting platforms and automatically syncs to your GL codes and chart of accounts.

Do fuel costs count as business expenses?

If the fuel cost was made for business purposes, such as travel for a client meeting, then yes, it is counted as a business expense and can be considered tax deductible.

However, driving to and from work is rarely considered a business expense.

Can business expenses be carried forward?

The UAE corporate tax law details report still hasn't come out yet. We will update this question once the Federal Tax Authority shares more details in the UAE.

Is personal expenses tax deductible?

No. Personal expenses are not tax deductible.

Is my rent deductible if I am self-employed and my home is my office?

In some cases, yes, it is possible if you are self-employed, but only a certain percentage of your rent will be considered a business expense, for example, 25% of your rent.

5
All
Procurement
December 6, 2023

Vlad Falin

Procurement Automation: Top 4 Procurement Process to Automate in 2024

The standard procurement process is tiresome and confusing. 

You have multiple purchase requests from multiple departments. You wait weeks for approvals, and then a few more, before you can vet and negotiate with vendors. Finally, when the goods are delivered, you must assess their quality and ensure you got what you had ordered. 

All this is done with constant pressure to speed up the process and ensure procurement cost savings. It is not scalable, and it has many loopholes. Eventually, you end up with supply chain bottlenecks, increasing procurement costs. 

Such a chaotic process impacts all three core components of procurement—people, process, and paperwork. Goods are delayed, processes are tiresome, and paperwork is incomplete and scattered.

But, with automation in place, you can centralize the entire supply chain and get more visibility and control. Employees will have a dedicated platform for raising requests, the process will be streamlined, and paperwork will be consolidated on a unified dashboard. 

In this post, we will cover how you can automate your procurement process without impacting your supply chain because any mismanagement directly translates into a broken supply chain. 

See a Demo

What is Automation in Procurement?

Procurement automation is the process of adopting software to digitize and centralize your procurement process. Instead of relying on forms for purchase requests, emails/Slacks for approvals, or accounting software for accounts payable, you move your procurement process onto a single platform that automates all these processes. 

procurement automation with Pluto

You just have to set the policy and workflows, and the software manages the chaotic parts while adhering to company policies. And since these software integrate with your existing accounting software and ERPs, you need not change your procurement process much. You can choose which elements you want to automate and get the flexibility to adapt to your business needs. 

Top 4 Procurement Processes to Automate

1. Purchase Requests

Purchase requests involve employees raising requests for the purchase of goods or services. They specify the goods required, and the procurement team ensures that all stakeholders give their approvals to the requests. The larger the expense, the more stakeholders involved. Plus, this becomes complex for larger firms when there are intricate hierarchies. 

By automating this process, all the requests are consolidated and the approval process is accelerated. For instance, Pluto facilitates trigger-based custom approval workflows to notify stakeholders and get approvals without disruptions. This ensures compliance with procurement policies and complete visibility into spending. 

2. Purchase Orders

Purchase orders involve creating and approving legal documents that outline the details of a purchase, including quantity, price, and delivery terms. However, this process becomes chaotic when vendor lists are scattered across platforms and you don't have proper systems for consolidating all purchase requests and orders.

Automate PO for procurement automation

Automating purchase orders consolidates all the purchase orders in a single platform. It enables multiple functions, such as converting purchase requests into purchase orders as soon as they get approved, maintaining a preferred vendors list, offering punchout systems to create purchase orders faster, etc. As a result, you enhance the accuracy of the purchase order and improve supplier management. 

3. Goods Received Note (GRN) Matching

GRN matching involves verifying that the goods received match the details specified in the purchase order and confirming their acceptance. Any mismanagement at this stage negatively impacts inventory, leaving you with poor quality or unnecessary goods. Moreover, doing this manually takes time and leaves room for errors.

Automate goods received notes in procurement

Automating GRN matching consolidates purchase orders and bills on a single platform for easy two-way and three-way matching. 

For instance, Pluto captures the receipts and matches them to the purchase orders for accuracy, expediting the reconciliation process. You get complete visibility into the products that don’t match the purchase order. As a result, the verification process fastens with minimal discrepancies.

4. Accounts payable

Accounts payable involves managing and paying invoices for goods and services received, ensuring timely and accurate financial transactions. Manually, this process takes weeks before the invoice gets approved. In other cases, teams end up paying the invoice twice, leading to the issue of double payments. In the end, procurement teams lose visibility into where the money is going, making cost optimization difficult. 

Accounts payable automation

Automating accounts payable streamlines invoice processing to reduce errors and enhance overall financial efficiency. For instance, Pluto integrates with your accounting software and payment gateways to automate payments. As soon as the invoices are approved, you get a dedicated dashboard for awaiting payments. With a single click, you make payments while ensuring data consolidation without any delays.

Top 3 Challenges in Procurement Automation 

While procurement automation can enhance your procurement process, here are some challenges that need your attention:

1. Resistance

Employees resist adopting automated processes due to fear of job displacement or reluctance to change established workflows. This happens because they don't understand the real benefits of technology and how it can assist them in their jobs. As a result, the adoption process slows down, hinders efficiency, and leads to a lack of cooperation from key stakeholders.

To overcome this, provide training and education on the benefits of procurement automation. Involve employees in decision-making and showcase successful case studies to alleviate concerns. This will set clear expectations and also help specify the requirements of the software. 

2. Implementation Cost

The upfront costs associated with implementing automation tools and systems for procurement processes are substantial. This includes costs from purchasing software and hardware and the expenses associated with system integration, training, and potential disruptions during implementation. Thus, it becomes difficult to get stakeholders on board and get approval despite long-term benefits.

To overcome this, conduct a thorough cost-benefit analysis and share the results with stakeholders. Discuss the operational efficiency of procurement automation and consider phased implementation to spread costs. Also, explore scalable solutions, so you don't have to keep reassessing and re-investing in the automation solution.

3. Security 

Security concerns about the privacy of sensitive procurement data arise with adopting automated systems, especially due to large amounts of vendor, payment, and employee data. This makes it susceptible to cybersecurity threats, raising concerns regarding data breaches or unauthorized access.

To overcome this, look for certified software ensuring data protection regulations compliance. For instance, Pluto is PCI DSS Level 1 certified, which is bank-grade security. You can also conduct regular audits and encrypt sensitive information for added protection.

Automate Procurement Process With Pluto

You can tackle these procurement automation challenges and others, too, such as flexibility, technical issues, and supply chain complexity, by choosing the right automation partner. A solution that caters to your need to provide visibility, control, flexibility, and ease without disrupting your supply chain. 

Here are some ways that Pluto can support your procurement automation to streamline the 3Ps of a procure to pay software—people, process, and paperwork::

1. Approval Workflows

You get a no-code trigger-based approval workflow engine that helps you set exact approval hierarchies to get approvals without any disruptions. You add if-then rules and set a precise and intricate workflow. 

Thus, when an employee raises a purchase request, instead of chasing stakeholders, this system notifies all of them to review and approve the requests. Also, if queries and any clarification are required, all the conversation takes place in Pluto itself, giving you complete documentation and visibility. 

2. Vendor Management 

You get a unified platform to consolidate all your vendors with integrations to your accounting software and ERPs. You can sync and manage all the vendors for faster purchase order creation. You can add the list of items and simplify the purchase order and GRN matching process.

3. Receipt Management 

You get a dedicated dashboard to manage all your receipts. Pluto captures the invoices from emails and WhatsApp and uses optical character recognition (OCR) technology to extract key information. As a result, GRN matching becomes easy as you have all the vendor, purchase order, and invoice details in one place. Also, with all the details consolidated, you accelerate the reconciliation process by documenting all the key information on a single platform. 

4. Payment Processing

You get direct integrations with your accounting software and payment gateways, making payment processing easy. Since Pluto already supports the approval process and GRN matching, you don’t end up paying for faulty goods. Also, you get all the information on a single platform with its current status and other key information, so you avoid double payments. 

5. Reconciliation

You close books 10X faster with Pluto. With OCR technology, you need not manually add general ledger and tax codes. And since all the accounting software is synced, the information remains consistent throughout the system, making reconciling easier. Also, if any discrepancies arise, you have complete visibility into each AED you spend with Pluto.

Simplify Procurement Automation

Your procurement team doesn’t need multiple procurement automation software for each process. You will end up with multiple platforms, struggling to integrate them, and spending hours trying to work the pieces together instead of getting flexibility. 

Pluto streamlines the process while facilitating integrations with your existing accounting software, ERPs, and payment gateways. You get a layer of automation that sits on top of current processes to meet your needs. Hence, you get a solution that fixes all the loopholes instead of disrupting your current processes. 

We explored the top 6 procurement software solutions for modern businesses on our blog, and recommend checking the options and picking one that offers functionality without disrupting your workflow. 

5
All
Corporate Cards
October 26, 2022

Leen Shami

Corporate Credit Card Policy: What is it & How to Create One

Corporate cards are a great way to manage your spending, control expenses, eliminate petty cash, and, most importantly - give your employees the freedom to focus on their work without any blockages.
But for everything to work smoothly and for everyone to know how to use your corporate cards, you must establish some ground rules.

What is a Corporate Credit Card Policy?

A corporate credit card policy entails the protocols and terms and conditions of use associated with a company credit card issued in an employee's name. A company credit card policy protects businesses and companies from unauthorized payments and inappropriate use by outlining the repercussions and consequences of such actions.

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Why Do You Need a Corporate Credit Card Policy?

In the same way, companies have a travel and expense policy; they have a corporate card policy. A company credit card policy is set in place to ensure all company cards are used for authorized and permitted business purchases.

In a corporate credit card policy, the guidelines, responsibilities of the cardholder, dos and don'ts, and repercussions of misuse are outlined. This ensures that all business finances are regulated.

While it is important to have a corporate credit card policy, Pluto takes the extra step to ensure all transactions and purchases are pre-approved, regulated, and permitted by:

  • Creating Pluto cards that can only be used with specific vendors
  • Setting daily, weekly, or monthly limits on cards
  • Having an approval workflow to make sure the necessary departments are approving all transactions
Credit Card
Creating a corporate card with Pluto

Which Employees are Eligible for a Corporate Credit Card?

It is essential to note which job roles are eligible for a company credit card to protect your business against accusations of favoritism or discrimination.

A company can decide whether all employees, c-suites, or department heads are eligible for corporate credit cards.

Typically, companies only give executives, VP levels, C-suite, and salespeople access to company credit cards. However, there are situations where employees who are not eligible for a company credit card may have to pay for business-related expenses, such as plane tickets. In this case, the employee would ask their manager to pay for such an expense with the corporate credit card, or they will have to pay using their personal credit card or cash and file a reimbursement, which will be reimbursed with the next paycheck.

 With Pluto's expense management platform, a company does not have to worry about corporate credit card eligibility or the hassle of employees filing reimbursements.

Using Pluto's platform, the business will have access to unlimited corporate cards, meaning any employee can be issued corporate cards with spend limits, approval workflows, and category-specific purchases. This results in no overspending and knowing all transactions are pre-approved and authorized due to the card only being accepted at allocated vendors.

Suppose an expense is made using cash or a personal credit card. In that case, the employee can snap a picture of their receipt and have it approved on the spot with Pluto's Whatsapp reimbursement feature, making it easier for finance teams and employees to sort through reimbursement receipts!

Corporate card message
Pluto's Whatsapp Reimbursements

Components of a Corporate Credit Card Policy

When creating a corporate credit card policy, the credit cards intended to be used, the credit card provider's requirements, and the company's needs should be known.
In most cases, corporate credit card policies include the following points as part of their corporate credit card policy:

1. Employee Credit Card Agreement

When issuing a corporate credit card to employees, an employee credit card agreement must be signed to ensure that employees understand the card belongs to the company, regardless of the employee's name on the card.
The agreement will also state that the company credit cards can only be used for business-related expenses, where the company can investigate charges, if necessary.

2. Permitted Types of Expenses 

The types of transactions that can be made should be stated clearly in the company credit card policy: work-related expenses only. These include, but are not limited to:

  • Meetings with clients
  • Work-related travel (e.g., flight ticket, accommodation)
  • Educational material
  • Software subscriptions
  • Legal document expenses
  • Business meals

While tending to the above is a good way to ensure company credit cards are being used for business-related expenses, Pluto offers cards that can only be used for specific vendors, such as fuel cards, to avoid mishaps or fraud.

Corporate card fuel expense
Vendor-specific purchase cards

With these policies and procedures in place, employees should note that if an instance occurs where the company credit card is used for non-authorized transactions, personal expenses, or cash withdrawals, they will be faced with disciplinary action.

The disciplinary action could result in the following:

  • Cancellation of the company credit card
  • Withdrawal of corporate credit cards privileges
  • Recovery of funds from employee's salary
  • Termination of employee contract

3. Exceptions

In some cases, an employee cardholder may incur an expense that is not usually permitted under the company credit card policy. To be able to do so, the company credit card policy should indicate how the cardholders can apply for an exception and get permission for such expenses.
While doing so, the company should also outline specific transactions that can never be made using the company credit card.

4. Spend Limits

The spending limits on a company credit card usually depend on the employee's job and level of seniority. The company credit card policy should clarify the card's limits when receiving a new card.
In general, businesses can choose to have limits established based on transactions per-item or on a cumulative basis. However, not all employees will have the same spending limits.
With Pluto, you can set spending limits on virtual or physical cards before issuing them to ensure that employee spending stays within their budget.

Corporate card new card creation
Set spend limits on Pluto

5. Temporary and Permanent Limit Increase

To get a limit increase on a company credit card, the cardholder must fill out a form stating why they need a limit increase on their card and whether it is a temporary or permanent limit increase. The form will then have to be signed by the employee's manager and sent to the company credit card provider for processing.
Although it is possible, the process of getting a limit increase on a company credit card may take quite some time. Pluto allows managers, administrators, and finance teams to increase limits on virtual or physical company credit cards in seconds.

Corporate card limit
Edit spend limits on Pluto in seconds

6. Approval Requests

A company credit card policy must show how approval requests work when using a corporate credit card. Usually, approvers are responsible for reviewing all transactions regularly. By doing so, the following is warranted:

  • The transaction or expense adheres to the company credit card policy
  • A receipt is attached to the transaction made
  • The description of the transaction follows the details mentioned above

Pluto takes the extra mile to automate approval workflows and receipt reconciliation. With Pluto, all approval requests will be made through the Pluto platform, and receipts will be collected through Whatsapp as soon as a transaction is made.

Corporate card request
Approval workflows on Pluto

7. Cardholder Responsibilities

Including the cardholder's responsibilities in the company credit card policy is an essential part of the document. The purpose is to describe how employees can ensure they use their cards appropriately.

It's important to include that:

  • Cards cannot be used for personal expenses
  • Cards must only be used by the cardholder to help avoid fraud 
  • Cards and PINs must be stored in a safe place
  • Cards must be reported as stolen and lost as soon as possible
  • Document all expenses and send monthly reports

8. Policy Violations

Employees are expected to comply with the corporate card policy. If the cardholder violates the terms stated, disciplinary action will be taken against the employee.

The disciplinary action can include:

  • Face a written warning for violating the corporate credit card policy
  • Pay for the expenses yourself if you've used the card for any inappropriate use
  • Lose the right to have a corporate credit card if you lose a receipt or violate the policy
  • Suspension or termination of employment if you give the company credit card to unauthorized people or abuse the expense limits
  • Loss of company card privileges if expenses are not submitted on time
  • Legal action and termination can be imposed if prohibited purchases are made using the company credit card

How Can a Corporate Card Policy Prevent Fraud?

Globalization and remote work have increased the risks of card fraud and identity theft. A proper corporate credit card policy will minimize these risks and ensure that your corporate funds are safe.

1. Flexible limits

With Pluto, it is effortless to set card limits in real-time, so decreasing the spending limit when needed can be done in a matter of seconds. This ensures that a card is not over-exposed. If the card details were compromised, the perpetrator would not be able to withdraw any big sums.

2. Limited users

You can see all the cardholders from your Pluto dashboard and create additional cards if needed. This prevents sharing card details between the employees, as it is simply not needed anymore. The cards are used by authorized personnel, who are aware of the proper use and policies - further preventing any potential fraud and leaks.

3. Vendor-specific cards

Pluto allows you to create a card for a particular transaction, purpose, or project. This will enable you to allocate a certain amount of money that can be spent on the card, meaning the risks of any authorized charges, re-bills, or other online scams are non-existent.

4. No petty-cash

In a bigger organization, petty cash can be an issue as it is easy to defraud. Even when used properly, it is a pain to keep track of. Petty cash is no longer a problem with Pluto corporate cards, particularly when you can issue as many corporate p cards as you need with Pluto seconds (specifically 9 seconds).

The Value of a Corporate Credit Card Policy

Company card policies control employee spending, ensure compliance, and minimize fraud risk. It's even easier to maximize your results by integrating it with Pluto's expense management software.

By integrating with Pluto, you can:

  • Issue unlimited corporate cards
  • Digitize receipt reconciliation
  • Reimburse in seconds
  • Review all transactions in real-time
  • Approve expenses in an instant
  • Minimize the risk of employee fraud

Key Takeaways

A corporate card policy will help you to establish ground rules that will keep things running smoothly but, at the same time, will not limit your employees in their day-to-day work.

Ensure everyone who will have the card is aware of the rules. The great thing about using Pluto is that you can make your corporate card policy very simple, as Pluto has all the tools to manage your spending and keep everything under control.