Rewards or expense management: Which is right for your business?

Many business owners feel like they have an obligation to find the best expense management system for their business, regardless of the cost. Frequently, they don't consider the whole cost, including what rewards they might be leaving on the table.

Many of those same business owners maximize their earnings on personal credit cards, but they choose a different path for their company, where they likely have much greater total expenses.

Are expense management platforms such as Ramp, Rippling and Brex the right choice for your business? The devil is in the details.

What do expense management platforms offer?

Companies such as Ramp offer expense management and credit cards in one place. Rippling and Brex are examples of two platforms that offer some level of "rewards" when you spend money on their credit cards. Rippling is more straightforward, offering up to 1.75% cash back, while Brex offers its own points to businesses. The Brex rewards are more valuable when redeeming toward travel expenses but are otherwise much less lucrative than traditional corporate credit cards that earn rewards.

The added value programs like Ramp, Rippling and Brex tout is control over expenses, spending rules and card issuance. They offer a number of APIs that promise to connect your key systems to their expense management software to streamline bookkeeping and expense management.

How much expense management do you need?

Many businesses set out to decide which expense management platform is correct, but I think that's the wrong question. The best question to start with is: "What sort of expense management is best for your business?"

Many popular accounting platforms can provide automation for importing and reconciling credit card charges. Where you might need a more all-in-one platform, such as Ramp or Rippling, could be if you need to have very stringent or specific spending policies. Many corporate credit cards will allow you to set advance spending controls, but companies such as Rippling build in rules-based logic, such as allowing a higher airline fare if the employee is booking during a peak travel period.

Crunch the numbers

Once you know the ideal level of expense management that makes sense, consider what you're leaving on the table. At a minimum, you should expect to find a 2% cash-back card that fits your business needs. When you compare that to Rippling's advertised 1.75% cash back, that might not seem like a very big gap.

However, you should consider that you can earn points and miles at higher rates. For instance, you can earn 10 miles per dollar spent on hotels and car rentals booked through Capital One Business Travel when making purchases with the Capital One Venture X Business. That's effectively a 10% bonus on select travel expenses, which can be huge if you have a lot of those.

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Strike the right balance

Some businesses absolutely need rigorous expense management, but in many cases, they leave money on the table by going all-in on and foregoing valuable rewards that can be earned from popular business credit cards. A hybrid strategy is usually a better bet.

For example, at my business, we use an accounting system tailored to our restaurants. This system automates a number of repetitive tasks and syncs up invoices and expenses from many of our key vendors. And the platform also makes it easy to sync up our corporate credit cards.

The rewards we earn on those corporate cards go much further than just paying for my next family vacation. They enable us to send employees on dream trips or make sure they don't have to worry about expenses when they need to visit a sick family member.

Bottom line

Take a look at the full picture of benefits before deciding if spending through an expense management platform really makes sense for your business.

They can be helpful if you have a lot of employees who travel and dine on the company's dime. However, it's harder to justify having spending controls in other categories (such as shipping or advertising) when you could be leaving considerable rewards on the table.