E-commerce, e-mail and cell phones have removed a tremendous amount of paper from our monetary system and daily lives, but we still handle more paper than we need to. One financial tool that can reduce paperwork is the purchasing card.
Companies have historically handled different types of expenditures by using corporate credit card vendors and paper-based processes. Different categories of expenses, including office supplies, training expenses, business travel, client entertainment and vehicle maintenance are paid with different credit cards, creating more work than is necessary.
A purchasing card consolidates multiple corporate cards into a single card used to purchase most goods and services. The card’s system assigns an identifier to each transaction, much like a bar coding system at the grocery store. The identifier provides a detailed description of who made what purchase and where and when it was made. Each employee’s card is programmed to control expenses through pre-established limits, customized for each cardholder.
Purchasing card solutions have several benefits. Employees who carried multiple credit cards can now use a single card for any business purpose. Employees no longer have to decide when to use which card, eliminating confusion and decreasing reliance on other forms of payment, which often are more expensive to process.
Secondly, a purchasing card program can result in increased savings by centralizing the administration and support of the program. One monthly invoice can be processed for all your employees’ expenditures, and you will get more and faster information with online reporting features.
A purchasing card program allows for the centralization of data, making it easy to obtain information. More accurate data enables managers to more precisely develop complete spending pictures, which improves their ability to negotiate and secure better pricing from vendors.
Many users of a purchasing card program utilize online expense reporting and card reconciliation, which streamlines processes, improves policy compliance and reduces expense report delinquency rates. Online reporting saves time in business planning and expense budgeting, financial analysis and preparation, and review of routine management reports. It also allows integration of transaction data into existing accounting systems, monitoring of company spending at cardholder or management levels, management of suppliers and generation of standard reports.
To fully take advantage of the information reporting features, you’ll need a software system to categorize expenses and chart them against budgets, the general ledger, accounts payable operations and other computer systems. The system can then divide data into individual transactions and direct each transaction to the correct employee and approver, flagging questionable expenses.
Even if you don’t utilize online information reporting systems, the purchasing card program can reduce the amount of paper by issuing a single, consolidated report for all employees, as opposed to reports for each individual employee.
You may want to consider a purchasing card program if your company:
* Uses multiple credit cards.
* Wants to increase control of corporate expenses while retaining cardholder flexibility.
* Wants to minimize exposure to check fraud.
* Wants more and faster information regarding your corporate expenses.
* Seeks to simplify the reconciliation process.
Carefully weigh the benefits and potential issues related to the implementation of a purchasing card program to determine the right solution for your unique needs. Ryan Burgess is vice president and manager of corporate treasury management and public funds for Fifth Third Bank. Reach him at Fifth Third Bank, (614) 341-2583 or [email protected].
