In today’s rapidly evolving business landscape, technology has transformed the way organizations handle employee expenses. To effectively manage expenses and facilitate seamless transactions, organizations require a convenient and efficient solution.
This is where purchasing cards, procurement cards, or P-Cards come into play, all referring to the same essential concept.
P-cards allow your teams to access company’s funds in a controlled environment. That is, now, employees have greater spending flexibility, but never over the limit.
P-Cards: What do They Really Mean?
In case you are still wondering what a P-card is, it is a company card that employees use to charge goods and services on behalf of their employers. In addition, employees don’t have to go through traditional approval processes for purchase requests.
Many businesses have turned to using procurement cards to reduce transaction costs for day-to-day items. Regardless of the item’s value, processing a request and its approval costs about $50 to $200, according to the NAPCP (National Association of Purchasing Card Professionals). To clarify, often transactions costs exceed the value of items that companies need.
In addition to shifting to these cards for high-volume transactions, most organizations are even trading these purchasing cards for checks to automate payments to suppliers. In the NAPC report, purchasing cards have shown greater efficiencies, particularly for smaller transactions—saving an average of $63 per transaction!
Why should I use a P-Card?
It is certain that procurement cards offer greater spending flexibility when compared to traditional processes.
To illustrate the traditional process — an office manager wanting to buy a new stapler would have to complete a request form, submit it, wait for processing and approval, receive a purchase order, and finally make the purchase.
Soft costs are high for this process. The time it takes for companies to process these types of requests can cost more than the stapler or other items themselves. Instead, with P-cards, this process along with the transaction costs, can be avoided.
Critical Challenges faced in Expense Management
Implementing P-Cards within an organization effectively addresses two critical challenges commonly faced in expense management: expense categorization and reconciliation. These challenges can create inefficiencies, hinder financial visibility, and add significant administrative burdens.
- Procurement cards streamline expense categorization by automatically recording detailed transaction information. This data includes vendor name, amount, date, and item descriptions. Unlike traditional processes, P-Cards provide clarity, enabling finance teams to accurately categorize expenses.
- Purchasing cards simplify expense reconciliation by offering a centralized and automated system. Real-time recording and electronic capture of P-Card transactions enable finance teams to easily access and reconcile expenses. Detailed transaction data facilitates swift and accurate matching, eliminating manual cross-referencing and reducing errors.
Advantages of Using P-cards
Detailed transaction data enhances insights into spending patterns, while automation and centralized nature of P-cards reduces manual efforts and ensures accurate financial records.
Some advantages of using Purchasing Cards include the following:
- Quicker purchase process.
- Expedited payments to suppliers.
- Decreased number of invoices from suppliers.
- Enhanced control over unauthorized purchases.
- Improved transparency regarding expenditure.
How Do P-card Payments Actually Work?
It’s important to note that procurement cards work just like regular payment cards accepted by merchants. The organization’s name is displayed on the P-card to ensure validity. Meanwhile, corporate purchasing cards, known as P-cards, function similarly.
Corporate purchasing cards provide businesses with the convenience of managing expenses in an organized manner. They have a card number, CVC code, and expiration date. They can be used online or in physical stores.
To understand better here is an example:
Imagine Bob needs a new software for a project at work. Without a purchasing card, he would have to wait for the manager’s approval, which can be a hassle.
But with p-cards, things get simpler. Bob can now simply use his P-card software to request the software he needs. The request pops up on the manager’s screen in seconds and can be quickly approved without even leaving the desk.
And, after the request is approved, Bob gets access to the funds. As a result, he can buy the software or other resources hassle-free. Even more, the payment receipt goes to the finance department, so they can update their accounting without any glitches.
To put it briefly, employees can simply charge small items to their procurement cards instead of filling out requisition forms.
Finally, here is an important question. Are P-cards a payment tool for you?
Clearly, purchasing cards are an excellent addition to any company’s internal processes when compared to traditional expense payment methods. They are specifically designed for businesses and eliminate the risk of misuse commonly associated with traditional corporate credit cards. Subsequently, the P-card payment solution maintains detailed records of employees’ spending for businesses, ensuring a higher level of financial control.