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Part I: The Benefits of a Purchasing Card Program for Your Business

August 19, 2010 Finance

It seems that every day, the business professional is introduced and enticed with a system or tool to help them communicate, sell, track and even operate completely differently. But with technology, it’s not just about doing something different. It’s about using that technology to do something better.

And in the world of B2B communications, one of those technologies is a Purchasing Card Program.

Implemented correctly, Purchasing Card Programs (PCPs) allow companies to build mutually beneficial relationships directly with their vendors when acquiring business related goods and services. It brings automated convenience, security and efficiency to laborious, paper-based accounting and reconciliation processes.

Companies adapt PCPs for a number of reasons:

  • To save on processing and transaction costs. Instead of using a traditional purchase order driven process, businesses benefit from using PCPs as a means to drive paper out of the work-flow process, gaining the ability to deal directly with vendors and automate payments on the back end.
  • To capitalize on rebates and incentives. Businesses gain significant rebate opportunities when using a PCP. The program also allows companies to better leverage with their preferred suppliers in negotiating discounts.
  • To eliminate end-of-month “crunch time.” Real-time Web data visibility and enhanced reporting capabilities allow employees to expedite review, coding, and validation of their purchases. The fully automated accounting process minimizes their need to wait for data that is usually not available until the end of the month. Automated, real-time data visibility also allows companies to more accurately capture and understand indirect spend dollars.
  • To minimize fraud risk and exposure. An entire dimension of a strong PCP is dedicated to fraud prevention. With clear policies and procedures in place, along with the ability to utilize advanced card technology features, a well-managed PCP will help minimize fraud risk and exposure and potential abuse of the card.

According to the recently released  RPMG report, 2010 Purchasing Card Benchmark Survey Results,” the purchasing card program is, domestically, a $161 billion dollar industry.

Also, an important ongoing industry statistic mentioned in the RPMG report shows that PCPs can save businesses an average of $71 per transaction in administrative processing costs. These process savings can often translate to fewer FTE’s and fewer resources that can then be redirected to more value added activities.

Implementing a PCP into your company workflow is no small task. The first steps to take in order to ensure streamlined implementation process with minimal surprises:

  • A well-defined and detailed RFP is crucial. The more discovery and investigation a company can do upfront, the better. Uncovering true Provider capabilities and understanding how those capabilities would translate down to the business level will help fast track implementation efforts.
  • Identify and engage stakeholders. A company must take a collaborative approach in deciding which PCP will implement best with current business systems and business culture.  Seek appropriate input from finance and accounting, IT, human resources, tax/audit and purchasing departments.
  • Determine your company’s hierarchal and reporting needs. Companies may need to examine taking a more granular approach to their reporting process in order to benefit from spend detail available in the PCP system, and therefore, optimize data mining opportunities.

Part II in the Purchasing Card Program blog series will explore the process of determining a company’s structural and hierarchal needs as well as the formation of cross-sectional and business pilot testing groups.

– JoAnn Vernacchia

 

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