Some extra planning early on can help founders avoid problems down the road
In the early days of a startup’s life, founders often make quick decisions without understanding the long-term impact. Corporate cards are a classic example: Too often, founders fill out an application online, a week or so later their card arrives via mail and they’re off and spending.
Fast forward a couple of years, and there are now 50 people using cards, no procedures in place to manage spending, and (oh, by the way) all the charges are still being backed by the founder’s personal credit. It’s usually not until a startup gets a CFO or controller that someone realizes there’s a problem.
For a fast-growing company, the corporate card program is never going to be the highest priority. But being stuck with the wrong one can mean a lot of extra time and headaches for the finance team, not to mention extra risk for the founder. There’s no reason to be stuck with cards that don’t work for your company, especially since getting one that you won’t have to transition out of later is just a matter of making a thoughtful decision early on.How do you get into the right card program as early as possible? Here are a few steps you can take when you’re first applying for a card that can help make sure you won’t need to transition card programs later:
- Establish a true corporate credit facility. Often when early stage companies apply for a business credit card, they don’t take the extra time to make sure that their available credit is based on the company’s finances. No one offers a corporate card without some security in case the borrower doesn’t pay off charges. When a card isn’t based on a company’s credit, it’s usually tied to a founder’s personal credit — meaning the founder is liable for all the charges made.
- Find a corporate card program that scales with you. In the beginning, all you need a card for is making a few charges and maybe earning rewards points. However, as your company grows and more people start using cards, staying on top of everything gets even more complicated. Month-end reconciliation — matching transactions on the corporate card statement to the ones in the financial systems — can take a lot of time if your card program doesn’t have internal controls and reporting capabilities.
- Don’t just focus on rewards. Sure, points are nice. But what really matters when selecting a corporate card program is whether the issuer is in a position to help you manage the card and share best practices. Some areas where expertise can help a new company get its footing include how to:
- Manage travel and expense spend and vendor payments;
- Put internal controls in place and capture useful data that will help you make better decisions later on;
- Manage spend across card holders and department
- Manage to recurring purchases;
- Turn AP into a revenue-generating opportunity; and
- Maximize cash-back rewards.
It’s not easy to set up a scalable card program when you’re a startup. That’s why choosing a card provider that will take the time to help you is the critical first step. Silicon Valley Bank (SVB) offers guidance and support to clients as part of the corporate card program, with areas such as:
- Managing T&E and marketing spend
- Handling vendor payments
- Implementing key internal spend controls and procedures
- Capturing useful data to help with month-end reconciliation
SVB Corporate Card programs are designed, not just for your startup, but for the mature, successful company your startup could eventually become.
Learn more about SVB's Corporate Card Program designed for new and growing businesses.
The views expressed in this column are solely those of the author and do not reflect the views of SVB Financial Group, or Silicon Valley Bank, or any of its affiliates. Peter Miller and Teampay are independent third parties and are not affiliated with SVB Financial Group. All credit products and loans are subject to underwriting, credit, and collateral approval. All information contained herein is for informational and reference purposes only and no guarantee is expressed or implied. Rates, terms, programs and underwriting policies subject to change without notice. This is not a commitment to lend. Certain terms, conditions, exclusions, and limitations apply, including a limit on cash advance capabilities.