What is a purchasing card program?
What is a purchasing card program? It is an alternative to using the traditional purchasing process by using purchasing cards for high-volume, low-value transactions that are needed by businesses. What is a purchasing card? It is a type of commercial charge card that allows employees to make purchases for their employers.
The balances month-to-month, so they will not incur interest. Businesses can set restrictions on the cards that they distribute to their employees to prevent unauthorized purchases. Because of their features, purchasing card programs have become increasingly popular. In the 28 years from 1990 to 2018, purchases made with these types of cards grew from almost nothing to more than $350 billion.
Despite their popularity, purchasing cards still have room to grow. Some companies that adopt purchasing card programs do not implement them properly. As more companies learn how to implement these types of programs properly, the use of these cards is likely to expand even more because of how the cards help to prevent fraud, cut expenses, and streamline payments.
What are the different terms for purchasing cards?
When answering what a purchasing card is, the cards are called several different things. Some other terms that are used for these types of cards include p cards and procurement cards.
These are business cards that are not credit cards. Businesses can set spending limits and restrict their use by merchant category codes. Companies deposit money into a central account and choose how much money to make available on each card.
P-cards can be virtual or plastic. Virtual p-cards are random credit card numbers and CVV codes that represent the underlying deposit account but that do not allow access to the money contained in it. They can are generated and used to make secure remote purchases.
Other types of virtual cards include virtual debit cards and ghost cards. Virtual debit cards are one-use numbers that immediately expire after a single transaction. Ghost cards are numbers that can be assigned to departments within a company or to specific suppliers for better tracking of expenses.
What are the benefits of a purchasing program?
There are multiple benefits of a purchasing program that uses p-cards, including the following:
- Can eliminate the need for purchasing orders for day-to-day purchases
- Can benefit from expedited delivery of needed goods
- Reductions in paperwork
- Simplification of payment and purchasing processes
- Reduced transaction costs per purchase
- Can set and control spending limits
- Can help to reduce expenses
- Can help to prevent unauthorized purchases and fraud
Who uses purchasing card programs and why do they use them?
Businesses of all sizes use purchasing card programs because of the benefits that they offer. When a business implements a p card program, it can get rid of the traditional purchasing process. This can help to save from $50 to $80 per purchase on transaction costs, according to the NAPCP.
Businesses also use p-cards so that they can have more control over their expenses. Businesses can set individual spending limits for each card, restrict where the cards can are used, and determine when the cards will work. Finally, using procurement cards can help businesses to get rid of reimbursements and petty cash systems.
What are the benefits and disadvantages of a purchasing card?
A purchasing debit card offers several benefits and a few disadvantages. A purchasing credit card or debit card lowers transaction costs and reduces paperwork. Cardholders do not need to submit purchasing orders, and the companies can obtain the goods that they need much faster.
Some of the disadvantages of procurement cards include the fact that not all suppliers or vendors accept them. When the purchases are for large amounts, the suppliers or vendors might be more reluctant to accept a p-card because of giving up a percentage of the price.
How can a purchasing card help make a difference for a business?
Using procurement cards can help to make a difference for business in several ways. When businesses rely on traditional purchasing processes, the transaction fees that they may remain the same for every purchase regardless of its value. In some cases, the transaction costs that are involved with drafting purchasing requests, processing them, approving them, issuing purchase orders, processing invoices, and issuing checks can far exceed the value of small items.
Procurement cards can help businesses to cut their costs. Because of the expense controls that are available on the cards, they can also help businesses to gain more control over the spending at their companies and to stay within their established budgets.
Purchasing card training
Businesses that intend to implement a p-card program should complete procurement card training. Training is crucial for the proper implementation of p-card programs so that employees understand how to use the cards and the expense policies of the companies for which they work.
P-card training can help to prevent unauthorized purchases and other issues that could otherwise occur.
Explain the importance of training for maximum effect. Businesses can also complete p-card training online through the Association of Certified Fraud Examiners.
How can a properly implemented purchasing card program help reduce the risk of business fraud?
Fraud is a major problem for both small companies and large businesses. The ACFE found in its 2018 Report to the Nations that small companies with fewer than 100 employees suffered median losses of $200,000 while large businesses suffered median losses of $104,000.
Small businesses tend to suffer greater losses per fraud incident because they do not have robust internal fraud controls. Not having these controls makes it harder to detect fraud schemes and allowing them to continue for more extended periods.
Using procurement cards can help businesses to stop reimbursements, which are a common target of internal fraud schemes. One case that illustrates the problem of reimbursements is that of a 50-year-old firefighter named Michael Cowger, who was employed by the City of Beckley, West Virginia. Cowger was able to steal $20,000 from the city by submitting duplicate reimbursement requests to the city for his work as a firefighter as well as for his work at West Virginia University.
If the city and the University had used procurement cards, maybe Cowger would not have been able to submit fraudulent reimbursement requests. Using a good p-card program could have helped prevent the incident.
Purchasing card best practices
It is important for companies to follow best practices for implementing purchasing cards. They should start by researching so that they can identify areas in which the p-cards can help to save money. A business should write a good purchasing card policy. A purchasing card policy should identify the expense policies of the company and how the cards will implement them.
Employees should undergo training before they receive their p-cards. Training can help to avoid mistakes and to prevent unauthorized purchases. Businesses should not simply layer p-cards on top of other payments processes. Companies should replace antiquated paper-based methods with their card programs.
Benefits of implementing a purchasing card program
The Bento for Business Visa debit cards are purchasing cards that come with expense control software. The cards have features that help businesses to keep control of their expenses and to prevent fraud.
Businesses can set limits and restrictions on their cards that reflect their expense policies. They can place merchant category code restrictions so that their employees can only use their cards to make purchases from the preferred vendors’ list.
The cards also allow businesses to decide how much money to allocate to each card and to set individual spending limits by the day or week. Companies can turn the cards on or off at any time from their online dashboards. They can also view transactions as once completed.
Bento has earned great reviews and has thousands of happy customers. It offers a free 60-day trial to businesses so that they can see how the cards function within their companies. There is also a free demo that businesses can request to gain a visualization of how the cards might work for them. To learn more, call 866.220.8455 to speak to a customer service representative.