Businesses have to make many different types of expenditures needed to operate. The purchasing process can be time-consuming and costly for most businesses, and the transaction cost may be the same for all purchases regardless of their amounts. Traditional procurement processes involve requisitions, purchase orders, invoices, and check payments. The process may cost the same amount for a small purchase as for a major purchase, meaning that it may cost more to procure a smaller item than the item is actually worth. One solution that some businesses are choosing is to change their procurement systems to using procurement cards for cost and time savings.
What is a procurement card?
Procurement cards are also known as purchasing cards. These are cards that use the credit and debit card system to pay for the business’s purchases rather than going through the traditional procurement process. The cards are issued to specific employees to make needed purchases or payments, and the employees who receive the cards are expected to adhere to the business’s policy regarding the use of the cards.
What are the benefits of procurement cards?
Procurement cards offer several benefits to businesses. The cards help to reduce the expenses that are associated with requisition forms, purchase orders, invoices and check writing as well as to save time. They simplify the entire process from procurement to payment and make tracking of the purchases much easier. Using the cards helps businesses to make needed purchases in a timelier manner and to eliminate the need for petty cash systems.
Why should a business use these cards?
In addition to saving time and money that your business would otherwise spend on the procure-to-pay process, using purchasing cards can help to reduce losses from fraud and ballooning spending. The cards can allow businesses to prevent fraud by having robust control features. Businesses are able to place restrictions on each individual card so that the employees may only make certain types of purchases within preset spending limits.
Employees who try to purchase something else with their cards will have the transactions declined at the point of sale. Business owners will be able to see the attempts so that they can turn off the cards immediately and handle the issue with the employees as they see fit. Using these cards can also let businesses end their petty cash and expense reimbursement systems entirely. Finally, the cards can help businesses to stay within their budgets because the owners can set spending limits by the day, week or month.
How are procurement cards different than p-cards?
P-card is a term that is used interchangeably with the term procurement cards. However, there are some minor differences. A procurement card can be used to pay for supplies at the time that they are purchased instead of waiting for an invoice at the end of the month. The p-card process involves employees purchasing items from a supplier using their p-cards. At the end of the month, the supplier sends one invoice that lists all of the transactions made with the cards to request payment.
Procurement vs. credit cards
The cards that are used for procurement from Bento for Business also differ from business credit cards. Approval doesn’t require that you have a certain credit score or that your business has been operating for several years since the cards are prepaid with your own funds. This means that your credit will not be checked when you apply. You also will not be charged interest on the balances on the cards since the money is yours and not that of the cards’ issuer. You can also limit the spending categories and amounts yourself, and there isn’t a limit on how much you can place on each card. You decide how much money you want to deposit into a central account and choose the amount that you want to place on each card.
Procurement vs. prepaid virtual cards
The cards also differ from prepaid virtual cards. The cards for procurement from Bento for Business are real plastic cards and can have your individual employees’ names on them for greater flexibility. They can be used anywhere that a debit or credit card is accepted, subject to the restrictions that you place on the cards. Prepaid virtual cards are card numbers that are linked to your account that can be used to make online purchases. Once a purchase is made, the number no longer works, making them useless for thieves.
Procurement vs. ghost cards
Ghost cards also differ from cards for procurement. Ghost cards are typically used by larger companies and are assigned to specific departments. The employees within that individual department may make purchases using the department’s ghost card but do not have their own individual cards. This allows large organizations to track spending by department. Procurement cards can be assigned to individual employees so that they can make purchases for the company according to the needs of their individual jobs.
Fraud prevention illustration: Case study
One case involving an employee of the Georgia Military College illustrates why businesses might benefit by choosing cards with spending controls instead of credit cards to reduce the risk of fraud and embezzlement. The employee used the company credit card of the college to spend $3,126.70 over several transactions that were unauthorized, including a $1,000 payment on her condo. Using prepaid cards for business purchases that allow you to limit what the cards can be used for can prevent this type of fraud by employees. The procurement cards also cannot be used to withdraw cash or to access your money so that you are more protected.
Bento for Business’s procurement cards are designed for small businesses so that they can have greater protection against fraud and waste. Deposits are insured by the FDIC up to $250,000, and Bento uses the same level of SSL-encryption technology that is used by big banks. The application process is simple, and the approval takes less than a week. Bento for Business also offers a free 60-day trial so business owners can have the time that they need to determine whether the cards are a good solution for them. Call 866.220.8455 to learn more.