Purchasing Card Best Practices:
Program Expansion & Controls
Julie Krause, Vice President
Commercial Cards Sales Manager
M&T Bank
May 12, 2010
Purchasing Cards –
Where is Your Organization?
 Do you have a Purchasing Card program?
–
–
–
–
Is it as successful as you’d like it to be?
Have you re-evaluated your program recently?
Do you have a plan for future growth of your program?
Are you using controls & tools to protect your organization from
fraud/misuse?
 Are you considering implementing a P-Card program?
– Interested in improving your bottom line by reducing costs?
– Interested in improving working capital?
 Are you just here for the great food and credits?
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Why use Purchasing Cards?
Not Important
Source: Aberdeen Group survey of 297 enterprises between March and July 2007.
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Extremely Important
Why Use Purchasing Cards?
Process and Transaction
Cost Savings
 Many different stats are reported, but directionally they all
point to lower processing costs for P-Card.
Average cost of P-Card
process is $22 per
transaction (versus
$89 for traditional PO
process)1
Source:
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P-Card processing
costs 40% - 50%
lower than paperbased checks2
1. RPMG Research, Purchasing Card Benchmarking Report, 2006.
2. Aberdeen Group, Impact of Payment Automation on Bottom Line Savings, 2009
Why Use Purchasing Cards?
Process and Transaction
Cost Savings
Stick with it!
Process savings from P-cards tends to grow over time
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Source: Aberdeen Group “Global Commercial Payment Cards”, April 2007.
Why Use Purchasing Cards?
Enhanced Funds Availability
 P-Cards can improve your working capital
 Payment to Card Issuers is generally due monthly –
opportunity to gain float by managing the timing of
vendor payments
 Many organizations are relying on a strategy of
extending Days Payable Outstanding (DPO) by using
P-Cards to pay vendors with non-negotiated terms
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Why Use Purchasing Cards?
Revenue Sharing Opportunities
 For larger Purchasing Card programs, Issuers may
be willing to “share” in their revenue (Interchange
paid from the Merchants) in the form of a rebate
 Card Issuers want your P-Card program to be a
success as it is mutually beneficial and may work
with you to help you grow your card spend
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Growing Your P-Card Program
Review and Modify First
 Before you make a plan for growth, evaluate your current
program:
 Did you meet your original objectives? If not, why?
 Are the key stake-holders (Purchasing, Accounts Payable, etc.)
on-board with the program or do you need to revisit buy-in?
 Are the appropriate levels of controls in place?
 Benchmark your program against traits of “High Performing”
programs
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Best Practices:
Traits of “High Performing” Programs
Program has specific, measurable goals and objectives
There is executive-level support for the program
Program Administrator has the skills necessary for the position
Policies and procedures are understandable, well-documented &
updated regularly
Training is performed regularly for all individuals involved
“Agreements” are used with Cardholders & Program Administrators
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Best Practices:
Traits of “High Performing” Programs
There is a separation of duties (Program Administrator & Audit)
Program is not under-controlled or over-controlled
A cross-functional team (purchasing, accounting, IT, etc.) is
established to review program
Program is reviewed frequently to uncover areas needing
improvement and opportunities for growth
Issues are resolved before program is expanded
Very limited manual processes
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Best Practices:
Establishing Internal Card Controls
Concern
Employees will misuse Commercial cards
•Purchasing card misuse accounts for a mere 0.025%
of purchasing card spend, which is the equivalent of
$250 for every $1,000,000 of purchasing card spend1
Facts
•Corporate card misuse currently accounts for less
than 0.01% of T&E spend or less than $100 for every
$1,000,000 spent2
•Card programs can be data management tools that
can assist in the detection of misuse
1 RPMG
2 RPMG
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Research Group, 2007 Purchasing Card Benchmark Survey Report
Research Group, 2006 Corporate Travel Card Benchmark Survey Results
Best Practices:
Establishing Internal Card Controls
Prevent and Detect Fraud & Misuse
 Communicate “use” expectations to card holders
 Establish a healthy balance of MCC restrictions
 Establish an internal audit procedure
• Audit representative samples
• Audit transactions within 60-90 days
• Review span of control – who generates audit reports and
who reviews them
• Communicate audit findings to card program participants to
increases awareness of oversight
 Report any suspicious transactions to your issuer urgently
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Lessons Learned:
P-Card Implementation Top Challenges
Source: Aberdeen Group, November 2008
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Growing Your P-Card Program
Conduct a Payables Transaction Review
Step 1: Before you embark on a plan to grow your PCard program, determine your potential
Analyze
your current
vendor
database
Identify
current cardaccepting
vendors
Set realistic
short-term
and longterm vendor
acceptance
targets
Develop a
plan to
solicit
vendor
acceptance
** Many Card Issuers will work with you on this process
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Growing Your P-Card Program
Gather Internal Support
Step 2: Establish a P-Card team including appropriate
stakeholders from across your organization
•Senior Management
•Accounts Payable
•Finance
•Purchasing
•Internal Audit
•Legal
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All are crucial to
the success of
growing a
successful P-Card
program
Growing Your P-Card Program
Set Realistic and Informed Targets
Step 3: Use the data from your vendor analysis and
your own knowledge of your suppliers to set
“electronic conversion” goals
Use the knowledge that your Card Issuer and your own A/P
and Purchasing departments have to categorize suppliers by
their willingness to accept P-Cards from you:
• Do you have negotiation leverage?
• Do you already have very favorable terms?
• Is the supplier looking for you to pay sooner?
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Growing Your P-Card Program
Train Your Staff to Grow Card Spend
Step 4: Anticipate Supplier push-back and proactively
educate your staff on the benefits of card acceptance
 Process Efficiency
Reduce internal processing and transaction costs by eliminating paper-based
processes such as creating invoices and processing checks
 Working Capital Management
Payments are received sooner and more consistent than check payments
 Credit Risk and Loss Reduction
Eliminate possible collection costs, credit risk, and losses related to nonpayment from check acceptance
 Customer Acquisition and Retention
Provide a valued service and potentially gain increased business with existing
customers and a competitive advantage with new customers
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Growing Your P-Card Program
Develop a P-Card Payment Policy
Step 5: Continue to grow your program by building the
acceptance of P-Cards into your payment terms
whenever appropriate

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

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One-off spend needs
RFP’s
New Vendors
Vendor Consolidation
“Preferred” supplier contract terms
Growing Your P-Card Program
Monitor Performance to Goals
Step 6: Track P-Card Spend at regular intervals to
monitor performance to original goals.
 Hold your team and your organization accountable to the
goals they established
 Track and internally report conversion success monthly
 Identify and address any issues
 Communicate successes within the organization
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Growing Your P-Card Program
Looking Forward
 Keep open communications with your Card Issuer
• Stay abreast of new technology developments
• Work jointly to combat card fraud
• Inquire as to how they can help you to grow your program
and to automate your payables
 Benchmark your organization against Best Practices
- always look to refine and improve your processes
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