Accounts Payable
November 6, 2019

Overhaul your AP for the credit card economy

Written by
Yohann Kunders

Business purchasing has shifted to credit cards in the SaaS world, creating downstream problems in AP operations—from collecting receipts for every recurring payment to manually reconciling transactions. 

Here’s how forward-thinking finance teams at Gusto, Netlify, Front, and Affinity have transformed their operations to make sure that AP doesn’t get in the way of growth.

Problem #1: Corporate cards are uncontrollable  

Corporate credit cards are the go-to payment method for fast-growing startups. The problem is that they are convenient for employees to use but difficult for finance teams to manage.

Our anonymized customer data suggests that the average 100-200 person startup has an average of 123 app subscriptions. Most of these charges are too small to pay via ACH, but difficult to track with credit card statements. Especially if cards are shared among many employees. 


Subscription benchmarks for startups with 150 employees


The downside to card spend is that finance teams don’t learn about purchases until reviewing the statement at the end of the month, making financial analysis and accurate budgeting that much harder. 

“There’s always a gap,” says Sean Flynn, Controller at Gusto, “between what I think Marketing’s expenses will cost and what they ended up costing. Once you hand out a corporate card, it’s incredibly difficult to figure out who’s using them and why.”

The solution is to use a platform that balances the ease-of-use of a credit card with the control of pre-approvals.

How Gusto controls spend with virtual cards and pre-approvals 

Sean implemented Airbase approvals and virtual cards to help Gusto’s Marketing team stick to its budget. “With Airbase,” he tells us, “there aren’t any marketing expenses that I don’t know about now.” 

Today if an employee needs to spend on an online subscription, they log into Airbase and raise an expense request. Airbase routes the expense request to approvers within the company and generates a virtual card number for the employee once the request is approved. 

“With Airbase, I can get in front of expenses instead of ticking the box on money that’s already gone out.”

Problem #2: Keeping up with transaction volume is too much manual work

Finance teams end up underwater as companies scale and transaction volume rises. David Coffman, Controller at Doximity, explains that growing transaction volumes put his team in a state of ‘constant close.’ 

His team spent so much time reconciling expenses each month that they didn’t have time to invest in higher-value work. “The minute we finished with one month’s bookkeeping,” David says, “it was time to start on the next.” 

How Doximity automates manual accounting tasks

Pre-approvals and automation significantly cut down the amount of time David and his team spent on expense accounting. 

Today, Doximity uses Airbase to automatically code expenses into the GL as soon as an expense request is approved. So the accounting happens upfront, and in real-time. “With the automatic sync,” David tells us, “my team can actually check up on vendor spend in the middle of the month.”

“Today, Airbase is always closing. And that means a lot less work for me and my team. Now we can focus on the more important aspects of the close.” 

Problem #3: Expense reports slow employees down 

Expense reports can add days to the month-end close by forcing finance teams to follow up on receipts and corrections rather than working on more important tasks such as revenue recognition. Expense reports also negatively impact the employee experience.  

  1. Unreported expenses: Rigid expense policies can get in the way of a legitimate purchase. The Hackett group reports that “rogue spend” or spend that doesn’t comply with the company’s credit card policy can account for 5%–10% of a company’s AP budget, and is impossible to control.

  2. Mistakes are difficult to correct: The GBTA reports that one in every four expense reports contains a mistake. Mistakes mean mutually frustrating reminders—emails, follow-ups, and in some cases, escalating to management—that no one enjoys.

  3. Reimbursement delays: If employees are using their personal cards to pay for company expenses, they’re loaning money to the company. When disputes or mistakes delay reimbursements, waiting for those payments to come through can be tough on employees.

Netlify cuts down expense reports by 80% with Airbase pre-approvals

Amer Ali, Head of Strategic Finance at Netlify, integrated Airbase virtual cards with the company’s travel management app, TripActions, to simplify how employees purchased flights and hotels. 

Using Airbase virtual cards on TripActions, eliminated the need for expense reports. And the finance team can track each department’s T&E spend right within the Airbase platform. 

Amer describes how the T&E process has changed at Netlify: “This would otherwise be 20 people using 20 personal cards and creating expense reports for us to sort through. Now Airbase consolidates all that information.”

Conclusion

The credit card economy comes with serious problems for fast-growing companies. Building out an efficient spend process is difficult when employees share company payment cards, and the burden on the finance team only gets worse as transaction volumes increase.

The finance teams at Gusto, Netlify, and Doximity are solving these problems by automating manual parts of the reconciliation process, and implementing virtual cards and pre-approval policies to get control over spend.