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The problem with pCards - 5 steps to better compliance.

August 16, 2022
Professional woman buying something online with pCard

Purchasing cards (pCards) can be a convenient way to empower people to buy the products and services they need to do their job. But if not implemented wisely, pCards can be a major obstacle on your journey to a more cost-effective, compliant, and streamlined procurement process.

We explore the problems that stem from relying too heavily on pCard use and ways to get more of your organization’s spend under control without sacrificing ease.

Convenience comes at a cost

The convenience that pCards offer comes at the expense of control. No matter how many rules you set for approvals and spending limits, control often comes after the fact.

A pCard purchase may be faster than the purchase order (PO) process, but there’s no record of that order until it appears on a statement and the transaction is complete. Was the purchase in the organization's best interests? Was it with a preferred supplier? Was it potentially fraudulent? By the time you discover a problematic pCard transaction, it’s too late to do anything about it.

Another major drawback is that the back-end reconciliation process can be time-consuming and challenging for both users and procurement.

Let’s say an organization has 500 pCards in circulation and each is used for an average of 10 purchases a month. That’s 5,000 line items to check and charge back to departmental budgets per month, ensuring compliance with institutional and tax compliance requirements for each. There’s even more hassle involved with tracking down and submitting receipts if your company policy requires them for purchases over a certain threshold.

Rebates are often touted as one of the major benefits of pCards. But when factoring in the time and labor costs involved in processing expense reports, plus the potential added cost of purchasing from non-preferred suppliers, your rebate earning may not have been worth the effort.

Finally, the use of pCards makes spend analysis more difficult because they don’t offer reporting capabilities that are aligned with other spend analytics tools.

Five ways to improve pCard management

So, how can you maximize the benefits of pCards while mitigating the problems? Here are some ideas to consider.

1. Limit pCard use to where it’s needed

There’s no doubt a pCard program has a place in many organizations, especially in those where people need the flexibility to buy what they need when traveling. But they’re not the right choice for all people and circumstances.

Assess the procurement needs of the people in your organization and aim to limit the use of pCards to areas of spend where there is no sensible alternative. You’ll reduce the administrative burden on your team, drive more spend to preferred suppliers, and make it far easier to deliver a compliant, effective procurement policy. You’ll also ensure the people who need them can benefit from the convenience of a pCard.

2. Give users a better shopping experience

A major reason users prefer pCards is the perceived complexity of the alternative; using a pCard is a similar experience to how we buy things in our personal lives. If you can make the purchase order process just as easy, users will be much more inclined to ease off pCard use.

Your users don’t define themselves as “purchasers” and they don’t expect to negotiate complicated or unfamiliar tools to buy what they need. Modern procurement marketplace solutions like Unimarket’s provide an intuitive shopping experience that users enjoy using and they can be just as convenient as using a pCard, or even easier.

Your users get a simple purchasing solution that works for them and your organization benefits from greater compliance and the ability to direct more spend to your suppliers at your negotiated prices. The result is volume savings and alignment with corporate policies.

3. Build pCard and virtual card capabilities into an eProcurement system

By building pCard capabilities into your eProcurement system you can make the purchasing process super simple and streamline the process for low-value orders.

Virtual cards can offer even greater security and convenience. Unlike physical pCards, virtual cards are exclusively used online and can be fully integrated with an eProcurement system.

Virtual card transactions are quick, efficient, and highly secure as there’s no need for suppliers to share bank account details. Purchases follow a purchase order process, but the payment is made by virtual card. You get compliant purchasing while still being able to earn cash rebates on all payments to suppliers who have opted to be paid by virtual card.

4. Give everyone greater spend visibility

Digital procurement solutions provide the spend visibility that incentivizes people across your organization:

  • Department managers and users can track their spend against budget
  • Finance and accounts can see spend against budget at a glance
  • Procurement gets a bird’s eye view over the entire procurement process

Purchases made against catalog items have clear descriptions, which means procurement and finance no longer have to rely on the often vague descriptions entered by pCard users. “Heavy-duty stapler and staples” on a purchase order is a description that needs no interpretation, while “office supplies” entered on an expense report could include almost anything in a work environment.

Transparency is also better for buying departments, giving them better leverage when negotiating their budgets for the next year.

5. Highlight time savings

Typically, pCard holders must submit an expense report that documents the details of all purchases made. This means that the more pCard purchases there are, the more time is needed for admin and reconciliation. Compare this to the purchase order process in which the user has nothing more to do once they’ve made their purchase, freeing them up to focus on the work that adds value to their organization.

Make this time saving clear to everyone – it’s a real incentive for people to use pCards only when there’s no sensible alternative.

 

Want to know more?

For over 15 years we’ve helped organizations with decentralized procurement models optimize procurement and get the best from their pCard programs.

Get in touch today and let’s find out how we can help you get procurement done right.

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