Companies are realising the benefits of using corporate procurement cards (P-cards). Companies find different business needs where they use these cards to give ready money to their executives or to process certain types of high volume low value purchases.

The benefits of using P-cards are evident as compared to using accounts payable (AP) process. 

  • Reduced cycle time of purchasing transactions
  • Reduced vendor invoices offloading work on AP desk
  • Improved vendor relationships
  • Improved internal reporting on defined merchant categories for spend analysis
  • Better engagement with business

Business should also consider the disadvantages of P-cards:

  • Potential for undetected credit card fraud and identity theft  
  • Additional burden of re-allocating purchasing costs into books of accounts
  • Another purchasing channel needs additional efforts for reporting, controlling and managing the process
  • Confusion among the users when to use P-cards and AP process

With pre-approved budget on these cards, companies surely need effective control, continuous monitoring and governance around the process. Though every company invents its own ways of controlling and putting the check points on the process, following are guidelines for the management which is going to launch or managing the procurement card program.

  • Finance should issue clear guidelines to the business about when to use these cards and when they should formally make use of accounts payable process. Generally, where there is ERP system in the company, management drag every purchase through the system which may not be the efficient way sometimes and that’s where P-card helps. These guidelines may have a maximum value and general purchase categories
  • Initial card issue should be a quick process, otherwise business response is delayed and benefit realisation is also deferred
  • Credit limit allocation can be associated with a reward scheme upto a certain point in addition to formal approvals when needed
  • Users can be discouraged by reducing the credit limit if they don’t follow guidelines for expenditure
  • Be vigilant of filtering personal expenditure on business cards
  • Card issuing banks generally have monthly cycle and therefore internal process of settling these transactions into books of accounts should match the similar timelines
  • Cash may be trapped in VAT reclaim if associated transactions are processed after the quarterly VAT cycle
  • A dedicated support team is very much needed to handle daily operational issues and business queries on these cards, which can be your purchasing team
  • Password reset, reporting lost cards quickly to the bank, changing communication address on cards etc are some of the scenarios which business need to be clear about
  • Users who are leaving the company, should be handled more carefully

I recently got the opportunity to work on a project where I re-implemented the P-card solution in integration with SAP. In my next blog, I shall discuss my experience on this project

To report this post you need to login first.

Be the first to leave a comment

You must be Logged on to comment or reply to a post.

Leave a Reply