According to the latest ADP National Franchise Report, franchise businesses added 48,600 jobs in December. The majority of the growth came from the restaurant business, which added two thirds of franchise sector jobs. With more employees come more expenses to manage. With a strong need to control expenses and limit risk, many franchisees are uncomfortable handing over a business credit card to their employees. However, companies with staff on the road have a solution: business prepaid cards and expense management software. They provide the perfect mix of corporate card convenience with an online, real-time control and reporting system allowing employees to spend while leaving control in the right hands.
Unlike standard corporate credit cards, a prepaid expense card ensures employees never have direct access to the business credit line. Employers no longer need to worry about exceeding credit limits or getting hit with late fees, over-limit fees or interest charges. Franchisees across a wide variety of industries are implementing prepaid cards to streamline their business expenses.
Why should you consider business prepaid cards as an option for your franchise?
Limit employee spending: A business prepaid card and expense management platform can help business owners limit individual employee expenses by dollar amount and merchant category (fuel, dining, retail, etc.). For example, a franchisee in a home or commercial services industry such as HVAC repair, plumbing or lawn care would prefer to limit her drivers’ expenses to fuel and maintenance. Company administrators can limit purchases to fuel and adjust how much money is on the card at any time. When unexpected expenses arise, employees must request funds prior to spending.
Enable Spend, Maintain Control: Franchisees with remote employees can enable them to make small ticket everyday transactions, as well as large emergency purchases without tying up a company credit line. For example, multi-unit restaurant franchisees can provide store managers with a “petty cash” balance for routine supplies, but if an emergency occurs, the CFO or franchise owner can instantly add cash to the manager’s card for the one-time purchase of a business critical item (e.g., a refrigerator). With business credit card programs, individual card lines would likely be insufficient to handle emergency situations, potentially leaving the store without a critical resource for what could be an extended period of time.
Multi-Solutions for Multi-Unit Franchises: Multi-unit franchisees have unique purchasing needs. For example, maintenance staffs travel between locations and often need to buy supplies or equipment, while new store construction requires a mix of spending by employees and subcontractors. Many such franchisees also have training and new store staff members who require travel and overnight accommodations. A prepaid expense card program provides flexibility to increase spending limits for both the company and at the card level during special events, as well as for everyday employee spending.
Limit Risk: With standard credit card programs, employees have direct access to the company’s business card line of credit. In a business prepaid card program, employees can only access funds that the manager has placed on the card. Moreover, the manager can change how much is available – online and instantly.
Cut the Red Tape: Standard business credit card lines are limited by what a bank is willing to lend, and don’t necessarily change when your franchise’s needs change. With a business prepaid card service, companies take control of the spend availability by funding their repository account with an adequate amount of money – eliminating the bank's approval. As your franchise expands or contracts, you decide how much money is available for expenses and never risk that employees will be turned down because of a bank-assigned limit. Prepaid cards also protect businesses from credit card firms that have been known to cut credit lines with little or no advance notice, causing embarrassment and operational issues for staff and companies.
Cut Down on Fees: Franchise owners are progressively rethinking how to thrive in today’s economy with limited credit histories and mobile work forces. Since business prepaid cards eliminate the burden of interest charges, over-limit fees and late fees, companies can more efficiently manage their spending and allocate funds appropriately.
No Credit Check Required: Business prepaid card providers never order a credit report – not on you or your business. Standard business credit card companies usually require a personal co-signer for the debt and order credit reports on that person and the company. There’s no reason to do so with a business prepaid card, after all, it’s your money. Why would the provider need to know your credit history?
No Personal Liability: There is no personal liability with a business prepaid card program because funds were provided to cover spend ahead of the purchase. With standard business card programs, the franchise owner or authorizing officer is held responsible for the company’s debt if the business is unable to pay.
In today’s business climate, the challenge to constantly and consistently “do more with less” is alive and well. All franchisees face critical financial challenges, including employee spending control, funds disbursement problems for remote employees purchasing travel and job-related materials and card abuse, as well as the misuse of corporate funds. By streamlining employee spending, progressive franchisees can eliminate the traditional financial burdens of credit management, and allocate their time, attention and resources to operations that truly impact the bottom line.
Mike Noles serves as PEX's Chief Strategy Officer. He has twenty years of experience with business credit cards, fuel cards, and fleet cards – serving Advanta, JPMorgan Chase, and Fleetcor – all of which grew profitatably under his growth strategy and stewardship.