As your business grows, you might find that it is increasingly difficult to keep your expenses under control. Having strong expense management tools at your business is crucial for its business health. Small business owners may not have the resources available to them or the time that they need to effectively manage their purchases on their own. According to the Association of Certified Fraud Examiners, small companies lose almost twice as much as large companies because of having a lack of internal controls.
In their study of losses that were suffered by small and large businesses in 2017, the ACFE found that small companies lost a median of $200,000 while large companies suffered median losses of $104,000. One way that you might be able to take more control over your company’s spending and prevent fraud is to get rid of processes such as expense reimbursements, petty cash and check writing in favor of using pcard apps to generate cards that your employees can use to make payments and purchases for you.
What is a pcard and how does it work?
A purchasing card is a type of card that businesses give to their employees to make business-related purchases. The cards charge the purchases back to the company. The pcard company that issues the cards normally will allow businesses to set their own merchant category codes and spending limits so that the companies can control the types of spending and the amounts that can be spent by each employee.
What are purchasing cards used for?
Purchasing cards are used to make payments and purchases without needing to go through the normal process of requests and approvals. Since businesses can restrict how the pcard can be used, they may avoid the traditional process of submitting requisitions, processing them, approving them, issuing purchase orders, receiving invoices and processing payments. In addition to businesses, the government has also increased its use of purchasing cards.
Why are pcards important?
Pcard apps are important for companies because they can help to reduce the high transaction costs that would otherwise be involved with following the traditional purchase-to-payment process. They are also useful for controlling your company’s expenses because of the built-in control features that the pcards have.
How can using pcards help your business?
Using pcard apps can help to streamline the way in which your business makes purchases. Your employees will be able to make purchases in a timely manner instead of waiting for approval and for a check to be issued and signed. Making prompt payments can help to build your reputation and your credit as you work with your suppliers and vendors. Purchasing cards also help to reduce the risk of fraud and help you to more effectively manage your spending and your budget.
How purchasing cards help to reduce fraudulent purchases
Purchasing cards can help to prevent fraud from both inside of your company as well as outside of it. A pcard company like Bento for Business allows businesses to restrict their employees’ ability to purchase items to the categories that the companies have preselected. A pcard company prevents employees from using the cards to make unauthorized purchases for themselves. The cards also can be used to withdraw cash or to access your bank account, preventing fraudulent transfers. Getting rid of systems such as expense reimbursements and check writing in favor of purchasing cards also eliminates many areas in which fraud is common.
Pcards vs. ghost cards
Ghost cards are another payment solution that is generally more appropriate for larger businesses that have multiple departments. With ghost cards, the companies are able to issue the virtual card numbers that they need to the different departments instead of simply giving a select group of employees pcards.
All of the employees in each department can then use the department’s virtual ghost card number to make purchases for the department. The numbers can have restrictions for the transaction types that the individual departments need to be able to make. When employees from the department make purchases, the purchases are then charged back to the department.
This can help larger companies or companies that are growing to track the expenses by the department instead of by individual employees. Purchasing cards are more appropriate for smaller businesses that want to give specific employees the power to make purchases on behalf of the company.
Pcards vs. virtual cards
Pcard apps are a type of virtual card, but there are several different types of virtual cards that can be used to accomplish different purposes. Virtual cards are not made out of plastic but are instead virtual credit card numbers that are provided by the issuer of the cards. These numbers are not linked directly to the company’s accounts and are not able to be used by thieves to access your business’s money or information.
Virtual card numbers may be given to employees or used by your company to pay suppliers. You can limit what can be purchased with the numbers. The numbers can be used for one-off purchases and will not work after they have been used. You can also choose to make them work for a couple of transactions and can turn them off between the purchases or payments so that they won’t work during the intervening time. Purchasing cards are normally given to the employees that you choose to make purchases or payments for your company over a specified duration, which can be on an ongoing basis.
How do pcards make it easy to keep track of business expenses?
A good pcard company will use a virtual API that fully integrates with your company’s expense management software and platform. When your employees make purchases or payments, the transaction data will automatically transfer into the corresponding category in your program. You can also check the activity on any card to see how much money is left on it and what purchases each employee has made. These features can make tracking and controlling the expenses at your company much simpler.
How pcards help to streamline your payment processing
Purchasing cards can help to streamline your payment processing by eliminating the need to request approvals for every single transaction. Your employees will be able to purchase the items that your company needs when they are needed rather than filing requests and waiting for the approvals to be processed.
Pcards help to save money for every transaction that you make
The National Association of Purchasing Card Professionals reports that the cost of completing a transaction is the same regardless of how much an individual transaction is worth. For example, the transaction cost involved with purchasing an item for your business that is priced at $30 is the same as the transaction cost that is associated with purchasing an item that costs thousands of dollars.
This is because the cost of submitting a requisition, waiting for the approval and purchase order, waiting for the invoice and then processing the invoice costs the same no matter how much the item is worth. The NAPCP estimates that the average savings that businesses can enjoy when they use purchasing cards to make purchases instead of the traditional payment process are $63 per transaction.
Pcards reduce work from other departments like accounting
Using purchasing cards can help to reduce the work that your other internal departments such as accounting must complete. Since the accounting department won’t need to review and process requisition forms and reimbursement requests, they can concentrate on other tasks that are more important. Having a reduced workload at your business may also allow you to reduce your labor costs.
Pcards are great for making a high volume of transactions
Pcards are ideal when businesses need to make a high volume of small transactions. Instead of your employees being forced to request permission to purchase every item that is needed by your company, they can simply use the purchasing cards that you give them to make those purchases.
Since you are able to restrict what can be purchased by each employee on his or her card, you can restrict an employee who routinely purchases a type of item as a part of his or her job to that transaction type. This can eliminate the need to go through the requisition and purchase order process so that your employees can make timely purchases of the supplies that they need to keep your company operating smoothly.
Pcards help protect you from untrusted suppliers
Many businesses trust that their suppliers and vendors will operate in an above-board manner. However, vendors and suppliers routinely commit fraud, according to Fraud Magazine. Vendors may perpetrate fraud in a variety of different ways. If your business is working with a new supplier or vendor, it may be a good idea to use purchasing cards to purchase your supplies and to pay the invoices.
You should also conduct vendor audits to double check the underlying data that the suppliers or vendors are claiming on their invoices. Using purchasing cards that you assign to a supplier that you do not trust can prevent anyone there to use your number to access your accounts. It can also allow you to track the purchases that you make with the supplier or vendor so that you can look for any questionable patterns.
Bento for Business’s purchasing cards are great solutions for companies that want to streamline their purchases and control their expenses more efficiently. The company offers a free 60-day trial and a variety of different packages. The deposits are insured up to $250,000 by the FDIC, and the company uses 256-bit SSL encryption for an added layer of security. To learn more, call 866.220.8455 or start a free 60 day trial.