Benchmarking on P-Card usage

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    • #298861

      1 – What categories can PCards be used for (e.g., legal professional fees, phone charges, promotional costs, staff training and conferences, etc.)

      2 – What are the thresholds?

      3 – What are the restrictions?

      4 – What are the advantages for use?

      5 – What are best practices?

    • #298868

      1. What categories can PCards be used for (e.g., legal professional fees, phone charges, promotional costs, staff training and conferences, etc.)

      Because they can generate rebates to the buying organization into the 2% range are easier to transact than typical PO and/or invoice payments a good credit card (Purchasing Cards [pCards], Ghost Cards, and Virtual Cards [vCards] are essential tools in today’s procurement toolbox. pCards are an excellent tool for a broad range of procurement spend categories including “retail-like” transactions ranging from travel, fleet, fuel, energy/utilities, telecom, trade events, entertainment, staff training all the way over to single-instance vCard payments for inventory purchases and replenishments, direct material purchases, indirect services, technology subscriptions, professional services [legal, accounting, engineering, design, etc.] and more.

      2. What are the thresholds?

      Good pCard programs have cardholder profiles with limits set by title/role in a tiered matrix. These identify allowed purchase types/categories for each person. With Level 2 or 3 suppliers, by MCC code, expenditures appropriate to an individual employee’s role can be allowed. Thus a salesperson with a fleet car who also travels by air could be allowed to make appropriate card payments. A company’s truck driver though, could have a card that allows fuel purchases at a gas station’s pumps but not allow Twinkies and Beef Jerky purchases inside the station’s mini mart. The departmental card held by the Facilities Director could have max number of transactions per day, per week, and per month with dollar limits ‘per transaction’, etc. Typically around 10 to 15 cardholder profiles appear in a pCard matrix.

      Thresholds for vCard payments are a thing of the past. Virtual Card payments are being used by large companies to pay very significant individual supplier billings in the hundreds of thousands to millions of dollars. pCards are securely used for many transactions within each company’s own procedural guidelines. I myself have helped multiple clients move $40 to $150 Million in annual suppliers to rebate-producing vCard methologies.

      3. What are the restrictions?

      Depends on your objectives for the card program(s). Restrictions can be tailored via policy and procedure for your company to achieve your desired outcomes.

      4. What are the advantages for use? According to many studies, it costs the average company between $100 and $300 of staff time and expense to process a single traditional payment transaction. In addition, ACH direct payments also cost money to process (usually between $0.25 and $0.32/each in bank fees) while check payments are even more costly (between $1.50 and $2.50/each for secure check stock, print ink, envelope, postage, etc.). Treasury banks are masters at hiding payment processing fees all over your firm’s bank statement. For example, the fees associated with ACH payments are buried in a payment ‘batch’ fee each day that includes XX number of payments per batch. Then you get dinged the ACH fee itself. Then you get dinged another per-transaction fee for the bank to issue an email notification to the supplier that a deposit has been processed.

      pCard and vCard settlements actually return a rebate to the buying organization. That’s right, you are paid a rebate by the card issue on every dollar paid to a supplier or merchant. Savings in – – costs/fees out. For one of my clients, a simple 10 day review documented a range of probable rebate “matches” to their supplier portfolio between $2.8 and $3.0 Million annually. The program was implemented (including moving the firm away from BofA and AMEX card programs previously in place) and the client is now receiving an average of $267 Thousand a month ($3.2 Million annually) in payments from the program. Other advantages include warranty protections from the card provider, fraud protection, etc.

      Next to check payments, today’s ACH payments are the most fraud-prone of any payment methodology. Fraud results from illicit actions by supplier, external third parties, and/or internal company employees [33% of the time that white collar crime occurs it involves payables operations]. Virtual card payments greatly reduce the opportunity for fraud from any of these three groups – working alone or together.

      5. What are best practices?

      Many ‘best practices’ apply which should be carefully tailored for the buying organization. Most important is to choose the right pCard and vCard issuer from many choices in the marketplace. There are dramatic differences between card programs (i.e. Visa, MasterCard, AMEX, Discover) which cause huge variations in scope and timing of rebate payments. Moreover, the card issuers behind Visa and MasterCard vary widely too.

    • #298870

      1.What categories can PCards be used for (e.g., legal professional fees, phone charges, promotional costs, staff training and conferences, etc.)

      There are no system limitations on categories however we only allow the use for emergency needs or other items that can not be invoiced such as office expenses such as catering where the supplier requires payment at time of service.

      2.What are the thresholds?

      We require manager approvals at the same level as we do for T&E expenses.

      3.What are the restrictions?

      Anything that can be invoiced we review and help the user move to invoice. Card limits are managed so that only the required credit is available per card. If we need to temporarily bump a limit we set a time to drop it back down.

      4.What are the advantages for use?

      Allows for tracking of office expenses outside of an individual T&E card and provides us with a way to change the accounting on charges at the line item level regardless of who holds the card itself.

      5.What are best practices?

      We are working on adding approvals in the AMEX system to reduce the potential for misuse and make sure that line managers are aware of charges early.

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