How Commercial Cards have become essential business tools

Commercial Cards can play a vital role in helping businesses bounce back stronger from the pandemic, according to James Sykes, head of Commercial Cards at Lloyds Bank.

“There’s been quite a dramatic change over the past nine months, with businesses focusing on becoming more effective, reducing costs, and creating value,” he says.

This has made them more open to analysing whether the existing systems they have in place, such as their payment procedures, can be improved.

“It can be eye-opening for finance directors when we explain the potential benefits of using cards as many don’t realise how much they’ve changed and what they can offer,” he adds.

Commercial Cards have certainly come a long way. No longer are they just pieces of plastic used for low-value transactions, such as the stationery. Today they are essential business tools.

“Commercial Cards are effectively 16-digit numbers that make payments frictionless and can help a company improve its relationships with suppliers,” he says.

This can include making a company’s transactions more efficient, accelerating the overall accounts process, and giving a boost to working capital arrangements. However, every business is different.

Bespoke approach

For this reason, it’s important to speak with senior managers to understand what they need, according to Andrew Pearl, director – relationship management & client services – Commercial Cards at Lloyds Bank.

“Solutions are tailored to the individual customer,” he explains. “We’ll ask them what issues they’re facing or where the noise is in their business – and then see how we can help.”

Key to this is understanding how the relationships with different suppliers work. How often are they paid? How manual is the process? Are there regular problems? What could improve the process?

“Once they start to recognise the potential value of making transactions via cards, they see almost endless opportunities to use them within their businesses,” Pearl adds.

In many cases, this can result in problems being solved that the business didn’t even realise it was facing. In others, it simply provides a better way of working. Ultimately, these discussions with businesses will examine the existing payment methods they use. What do these processes involve? Do they get value out of making the payment that way? Are there benefits to this approach or is it simply the way it’s always been done?

“Our job is talking to customers and asking what challenges still exist in their business around procure to pay,” says Pearl. “It’s all about having that conversation with potential clients.”

A win-win for businesses and suppliers

A common issue of contention for companies and their suppliers’ centres around cash flow management, according to Sykes.

“Companies may be tempted to pay bills in 60 days, rather than 30, but this isn’t great for relationships with suppliers,” he says, noting that Commercial Cards offer a practical alternative solution.

“The business can make the transaction with us, their supplier gets paid on time, and they get to keep their money for longer,” he adds. “It’s a win-win.”

Businesses can also use this approach when suppliers ask to be paid earlier – especially if they are able to negotiate a discount in exchange.

Another major challenge for many businesses is dealing with thousands of invoices. This is a particular issue for those whose employees are still working remotely in the wake of the pandemic.

“We’ve had customers dealing with 36,000 invoices for a relatively small supplier spend value,” says Sykes. “If you can replace them with one monthly electronic document, then this is a major benefit.”

Not only does this save money but it also frees up employees to be more effective. “They can actually focus on something more strategic and valuable for their department,” he adds.

Streamlining processes

Commercial Cards can also streamline a company’s Accounts Payable function and provide useful information that would otherwise take a long time to track down through other channels.

“Automating the process helps avoid having to match up purchase orders, invoices and other bits of paper,” says Sykes. “You can also ensure a card number is only ever used with specific suppliers.”

Then there are the cost and time-saving benefits when a business needs to pay a supplier urgently without going through a drawn-out process of putting them on their systems.

“This process can take weeks or months, whereas with a card you can make the payment immediately,” says Sykes. “This is what most of us do in our personal lives, with the likes of Amazon.”

Looking to the future, Pearl believes the world is moving into a world where the supplier doesn’t really get involved with accepting a payment – it’s just dropped directly into their bank account. “It’s definitely one of the areas where development will continue,” he says.

Whatever happens, Sykes is adamant that Commercial Cards will have an increasingly important role to play in the businesses of tomorrow – it’s just a matter of exploring what they can provide.

“I’d urge businesses to engage their card suppliers for a discussion as these products can provide value that they may not know existed, but which can transform how they operate,” he adds.

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