P-Cards, purchasing cards or procurement cards, call them whatever you like – have a compelling concept. They have modernized B2B payments, reduced paperwork, provided more control over spending and much more.
TravelPerk reports that seven in 10 U.S. companies use corporate purchasing cards to pay for goods and services. This is true because P-cards streamline the process of procuring goods and save the organization time and money. Equally, organizations hand these purchasing cards to their employees only for smaller and routine purchases.
Although P-Cards are a systematized solution, they might not be a one-size-fits-all formula for all corporate purchasing.
Why is that?
Several employees use procurement cards but mainly rely on checks and automated clearing house due to partner preferences. Indeed, payment methods depend on the supplier’s preference at length. As a result, procurement cards exhibit limitations by not meeting the supplier’s specific needs.
Disadvantages of Purchasing Cards
Though purchasing cards provide many benefits, they carry elemental risks. When procurement controls, reviews, and approvals are bypassed, unintended items may be purchased, resulting in lost funds, reputational risk, and other organizational problems.
That is, many organizations face challenges of increased fraud and abuse when using P-cards. For instance, a purchase made using a purchasing card was later claimed for reimbursement via the expense reporting channel. Due to the separate nature of these channels, traditional review processes often fail to identify such duplicate expenses.
An employee can also incur PO leakage while using a purchasing card because they may buy an item from a convenient vendor, instead of the preferred vendor. A PO leakage can result in significant losses, running into millions of dollars over time.
Additionally, sharing procurement cards acts as a deterrent. Not only does it reduce visibility and control over spending, but this concept is not always practical too. In fact, transactions do not appear on a statement until several days after they have occurred— allowing the possibility of misuse. Likewise, discovering an out-of-policy spending may be time-consuming, leading to irreversible damage!
The reconciliation of P-cards incurs high administrative costs as well. Most procurement card systems do not categorize spending or integrate with accounting systems. As a result, corporate purchasing cards only provide a partial picture of expenditures. Therefore, procurement cards do not demonstrate how much has been spent versus how much had been budgeted, thus obscuring meaningful spend analysis.
Supplier Participation in P-Card Program
Concerning persuading suppliers with regards to payment preferences — can be an uphill task for companies with limited resources, especially if the company is not equipped with the right systems. So, the result can be friction-laden leading to errors, higher fees and operating costs along with delayed payments.
As mentioned earlier, B2B companies have their own preferences on how they want to pay and be paid. Therefore, a poorly executed P-Card adoption plan only leads to numerous challenges:
- The lack of a supplier-enablement plan creates roadblocks for supplier adoption and the use of purchasing card solutions.
- The absence of instructions for using the card results in unnecessary complexities. Sometimes, employees may figure out the usage but, in some situations, there may be shadowy purchases leading to increased business spending.
- There is a loss of important data as the expense management and accounting systems are not being integrated by the finance department.
Solution
Creating operational efficiencies and speeding up payments require a lot of work. Ultimately, the goal is to identify a process that handles 100% of disbursements, process supplier’s invoice, distribute payments through all forms, and reconcile payment within accounting systems.
That being the case, Gainfront’s procurement solution can effectively address the challenges associated with P-cards by providing various benefits:
Our procurement solution offers centralized control over purchasing activities, allowing organizations to set up predefined spending limits, specific vendor lists, and approval workflows. This helps prevent unauthorized or excessive spending, reducing the risk of misuse or fraud often associated with P-cards.
We help organizations gain real-time visibility into spending patterns and trends enabling better tracking and analysis of purchases made using purchasing cards —allowing for more accurate budgeting and forecasting.
Gainfront streamlines the procurement process, including requisitions, approvals, and order placements thus minimizing manual errors and paperwork, and enhance overall efficiency.
Additionally, we enable a comprehensive audit trail by capturing detailed information about each transaction, including date, time, vendor, item description, and associated approvals. This can aid in internal audits and compliance reviews, ensuring transparency and accountability.
Altogether, our procurement solution addresses P-card challenges and helps organizations overcome the limitations and risks associated with procurement cards, enabling more efficient and controlled procurement operations.
Rahul Asthana has a PhD in Operations Management from the Anderson School at UCLA. He has 25 years of experience in supply chain management, starting his career in IBM working in supply chain operations. He then moved into product management and product marketing of supply chain software while at SAP and Oracle. He manages product strategy and product management at Gainfront. In terms of hobbies outside of work, he really enjoys tennis. Follow Rahul Asthana on Linkedin!
