Purchasing Cards

Who wouldn’t want to optimize cash flow, improve purchasing convenience, control travel and entertainment expenses, reduce back office tasks and time, minimize fraud, and benefit from revenue sharing or other rewards?

If that sounds like you — consider the benefits of a purchasing card program.

Although many companies still maintain checks as a primary method of payment, those that move a higher percentage of their payments to a card program can improve their financial and competitive position without adding to the back office burden.^[1]

What is Your Payment Mix?

The typical mix of payment methods is skewed toward high-cost checks. Checks are more costly to process than other payment methods. Are they too big a share of your company’s disbursements?

A card program can help you:

• Gain greater control over spending
• Increase visibility into supplier relationships
• Improve your bottom line — through float and revenue sharing
• Automate manual processes like transaction allocation and reconciliation

Making Your Card Program a Success

Once you decide to implement a card program, how can you get the most out of it? Successful card programs make use of these four practices.

Support your program with policies like these:

• Require employees to use the card for all of their company travel and entertainment expenses.
• Do not allow the use of personal cards.
• Set a purchase threshold requiring use of cards (e.g., any transaction under $2,500 must be on the card).
• Specify vendors or categories of spend where the card should be used.
• Work with senior management to reinforce the benefits of your program and encourage them to help drive the desired employee behaviors. 

Review your vendor management strategy:

• Be sure that you are making card payments 100% of the time to all vendors that accept card payments.
• Where possible, include language in your vendor contracts requiring the acceptance of card payments.
• Use the robust reporting capabilities of major card programs to gain insight into your spend with vendor for increased leverage in negotiations.
• Promote the benefits of card acceptance — faster payment, safer and more efficient than paper — when communicating with vendors.

Pay invoices using your commercial card:

• Get in the habit of reviewing all invoices to determine if vendors accept card payments.
• Many vendors typically accept payments by card or allow you to pay online with a card. For example:
  • Telecomm vendors
  • Waste management providers
  • Document storage companies
  • Janitorial companies

Establish appropriate control and evaluation:

• Set card transaction and monthly spend limits that are in line with employee spending authority to ensure full card utilization.
• Unblock any MCC restrictions that could prevent employees from making the business purchases required to perform their roles.
• Review all controls every six months to ensure that they continue to meet your objectives.
• Actively measure card usage and the total benefit to your organization from your card program.

By following these simple steps, you can position your organization to get the maximum benefit from your card program.