Since companies began using digital innovations to facilitate their work, the number and quality of new financial instruments have been increasing. One such tool is a purchasing card, which makes payments faster and safer. It improves control over business purchases with the help of special software, mobile applications and thoughtful policies.
This article reveals the core aspects of procurement cards, including their benefits. You can also learn what to consider when choosing a purchasing card program and the best practices for its implementation.
Key takeaways
- The purchasing cards are designed to minimise the burden on the accounts payable (AP) department by reducing paper checks and purchase order usage.
- Procurement cards provide more robust control over spending and improve companies’ cash flow.
- Before implementing a purchasing card program, any business must consider its needs, abilities, and requirements and create a comprehensive program policy for smooth management.
Purchasing card usage gives your company more oversight over business-related payments than credit cards. Convenience, security, and control are what characterise this type of card. Read further to discover its potential for your business.
What are purchasing cards?
Purchasing cards, also known as procurement cards or P-cards, are corporate cards with flexible limits and aimed to make corporate procurement much more effortless. The company gives access to particular employees to use these cards. Those staff members can use purchasing cards to buy goods and services needed for the business, including but not limited to:
- Office supplies such as stationery, PC and other office equipment;
- Cleaning services;
- Advertising and marketing expenses;
- Transportation cost, including fuel and spare parts;
- Learning and auxiliary materials for workshops and trainings;
- Costs on meetings, events, gifts, and hospitality;
- Legal and consulting services;
- Shipping and packaging expenses.
A purchasing card can be a credit or debit card. The company can cooperate with banks or other organisations. Financial institutions provide services such as issuing payments to payees and invoicing customers at the end of the month.
How does a purchasing card work?
The business negotiates with a card provider to issue purchasing cards with certain limits. Then, a credit card program administrator will be assigned. This person establishes control and policies for using corporate P-cards according to the purchasing card program. The predetermined employees receive from the company procurement cards, signing the terms of use. They can make business-related purchases only within their program’s policies and up to a specific limit. The company, rather than its employees, repays the cards’ monthly balance by the end of the month.
A purchasing card has the same characteristics as a usual plastic card, i.e., card number, expiry date, and security means like CVC code. These cards are accepted in stores and online. Usually, staff members use P-cards to pay for a few but high-volume purchases. They can automate their payments to small vendors using procurement cards.
A purchasing card program and its benefits
Businesses use purchasing card programs to finance ad hoc or regular expenses, and they are in total control of payments. Administrators receive the necessary reports to analyse spending patterns. The collected data assists in adjusting program policies.
Businesses can find a purchasing program beneficial for several reasons:
- Convenientpaymentmethod: Employees don’t need cash for corporate purchases. They can use a P-card instead, making the purchasing process easier.
- Fasterpurchases: Rather than overloading the account receivables team with purchase orders, your staff members can pay bills to suppliers independently. Card payments happen quicker than usual.
- Spendingcontrol:Your company can oversee spending by individual cardholders, who have the right to utilise p-cards. More control means that the purchasing process becomes more manageable.
- Potential revenue from rebates: Banks that provide purchasing card program services offer rebates to those businesses that use their procurement card service. Companies can use such rebates to compensate for small expenses such as subscriptions or digital tools and operational costs like utilities.
- Improved relationships with vendors:Faster supplier payments using purchasing cards result in stronger partnerships. Suppliers can provide extra bonuses for early payments and other perks.
- Enhanced payables security: Features that safeguard financial transactions from fraud using procurement cards include spending limits, PIN codes, transaction monitoring, two-factor authentication, and other security methods.
What to consider when choosing a purchasing card
When seeking the relevant P-card solution, you will find out that many financial organisations come up with different features and benefits for businesses. Consider the following functionalities of purchasing card programs:
Spending limits
Banks and other financial institutions’ features should contain easy-to-comprehend capability to control employees’ spending. Choose the option that enables oversight using a web platform and mobile app, where you can set up daily, weekly, or monthly budgets, billing cycles, and transaction limitations for any procurement card with a few clicks.
Bonus system
Seek an organisation with a flexible and transparent system of perks for continuous purchasing card program usage. Compare different variants to choose the most relevant provider for your needs.
Security measures
In addition to the usual data protection methods against fraud, banks offer liability insurance in case an employee misuses a purchasing card. They can also provide two-factor authentication for enhanced protection from fraud and suggest more monitoring practices and extra security measures. Keep in mind your budget and the security of transactions.
Integration withbusinessprocesses
Your account payables team will likely benefit from seamlessly integrating P-card data with existing business processes. Cohesive work with enterprise resource planning (ERP) systems is critical for business success for large corporations. Investigate if a solution has all the necessary APIs to connect with your accounting and planning software.
Organisation ofpaymentapproval system
Payment oversight capabilities are also essential. Pay attention to features such as receipt imaging flexibility, user interface, expense tracking, access control, and reporting. Analytics, monitoring, and approval processes should be intuitive and customisable.
Procurement cards vs corporate credit cards
At first glance, corporate and P-cards work similarly. Most employees use them to spend on business purchases. However, there are some differences.
A corporate credit card refers to a specific company, not a person. Usually, only top executives can use such credit cards to pay for flights, accommodation, and events. A bank or other issuing organisation sets rigid spending limits that are hardly changeable. The company requires employees to report business-related transactions on corporate cards at the end of the month. In some cases, the firm and personnel take joint liability, meaning each party is responsible for its share in the accrued amount of a credit card.
Purchasing cards provide more options for business payments than company credit cards. A P-card has the following specifics:
- Purchasing cards are available for a specific number of employees or teams;
- You can flexibly control each employee’s funds limit. The company can establish a purchasing card program policy and manage spending for teams or each employee. Finance teams or dedicated managers can easily change those limits.
- A P-card can be issued as a virtual or a physical card. Virtual cards are a secure method of making payments online because you can select unique card details for each transaction. So, you don’t need to share sensitive data on every website.
- Employees can submit requests for funding before the purchase. Managers receive such requests and approve or deny them. This is another layer of sound control of staff members’ spending.
- Companies may set restrictions on payment to specific vendors.
- Each employee has an account in the software where they can observe their spending limits.
- Staff members can download receipts to the program for diligent accounting.
- ERP system enables regular reporting with analytics on each employee’s spending.
Best Practices When Using P-cards
When you decide to use procurement cards in your business practice, you can follow the best ways to make their usage more efficient without misuse of individual cards. Here are these strategies:
- Establish a comprehensive expense policy
Setting well-defined and well-thought-out rules helps you avoid issues during card utilisation, such as fraud and misuse. Provide training to your employees who will get access to those types of cards to communicate those policies to them appropriately.
- Setspending limits
A good practice is defining each employee’s budget, type of transaction, and vendor. Some companies can restrict the usage of P-cards to specific vendors. In your policy, mention how you determine spending limits.
- Regular balance check
Analyse your employees’ spending patterns each week and adjust limits if necessary. Identifying issues beforehand prevents severe problems with any payment in the future.
- Name eachpurchasing card
Assign each P-card to a specific employee. Mention the employee’s name and surname for each card. This makes the usage of procurement cards more manageable and secure. Naming cards also help analyse each employee’s spending, making it more precise. It is also helpful for expense tracking and accounting for those payments.
- ManageP-cardusage
Restrict the use of purchasing cards during holidays and weekends and when the purchase is made. You can turn off those cards when their amounts are spent to the fullest. Your business must also exclude specific cards when a particular employee or employees leave your company.
How Wallester can help
Purchasing cards is an efficient way of streamlining corporate procurement. It’s a system that requires a diligent approach and appropriate software. You can find everything here at Wallester. Our business expense tracking and reporting platform and corporate cards are available in physical and virtual formats.
Wallester’s corporate cards work in a similar way as purchasing cards. You can set individual limits for each employee. They, in turn, can spend money in-store and online, buying office stationery, subscriptions, fuel, etc. Staff members can upload invoices using the mobile app, while Wallester’s business tracking solution will do all the work for you. Our platform assists you in managing and analysing your purchases.
Leverage instant card issuance and worldwide payments with Visa. There are no commissions for transactions in euros and beneficial exchange rates at your service.
Apply to us to learn more about our corporate cards, which can work as purchasing cards for you.
