What specific savings can a business expect to realize?
According to the 2007 RPMG study, the average cost to process a payment transaction using a traditional purchase order method is $88.55. Compare that to the average cost to process a payment transaction using a commercial card ($19.49). You’ll see these savings thanks to the elimination of check processing, postage and other costs associated with check writing. Not to mention the savings you’ll see from the time saved by streamlining approval processes, which can be used for more value-added activities. You can also extend the time you have to settle payments for your purchases; commercial cards can have up to a 30-day cycle and/or a grace period before payment is due.
Of course, costs vary from organization to organization, but the extent to which a company is willing to revamp its purchasing and accounting processes will determine the amount of savings realized.
Which companies are best suited for commercial card programs?
Almost any organization can reap the benefits of a commercial card program. I find that organizations that have several different employees making on-the-spot purchases or those with at least 25 vendors see the most benefit. Also, companies that have employees that travel and entertain can benefit.
When employees make business purchases with commercial cards, you eliminate cash advances, purchase orders and checks. Plus, cardholders experience a significant reduction in procurement cycle time.
What controls do commercial cards offer?
You can control the amount of each purchase, total expenditures and access to supplier categories for each cardholder. Transactions are approved or declined at the point of sale based on these pre-set controls. Commercial cards also are accompanied by reporting and reconciliation applications that provide company administrators and managers of employees the ability to review purchases made within 24 hours of settlement. There are standard reports available to facilitate informal and formal audits of these purchases to ensure policy compliance.
What are the benefits of online administration?
Having real-time administrator access to your commercial card program enables you to make changes to limits and cancel cards immediately. It also makes reconciliation easier by automatically loading all commercial card transaction activity for each cardholder, along with pre-approved cost center and general ledger mapping combinations. Cardholders can also add in out-of-pocket transactions to facilitate their expense management process. Online approval workflows also help in reducing the time it takes to process commercial card payments.
Managers can monitor spending patterns of employees with real-time Internet access to their card balances and transaction information. An administrator can go online to perform a wide range of tasks, including changing cardholder limits, closing card accounts, ordering replacement cards, downloading transaction data, running reports, auditing the program and disputing transactions.
Suzanne Colmenero is a senior business relationship manager at Wells Fargo Bank. Reach her at (713) 319-1551 or [email protected].