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Purchase Cards: Control, Visibility & Credit Optimization

At its simplest, Purchase cards are commercial credit cards that allow companies to make business payments. They are considered a better, secure and efficient to shorten business payments cycle than a general long procurement process. With a streamlined procure-to-pay process, purchase cards are a more modern alternative to do business payments.

P-Cards provide a mechanism for authorized staff to make routine purchases without involving the accounts payable and purchasing staff. The major benefits of purchase cards are mounted around the key business pillars of efficiency, process compliance and improvements, convenience and cost savings.

Overall, for most businesses, purchase cards offer the best medium for business payments — simple, easy to use, and with some cash flow benefits, too. What makes purchase cards one of the most sorted financial instruments, are some of the following benefits

Accelerating operational efficiency

Purchasing Cards help in faster payment to vendors and elimination of the need for manual interventions. .

P-Cards can effectively transform the traditional, manual, paper-based procurement & accounts payable processes into a swifter and seamless payment processes. In addition to the best use of technology, they provide better control levels and spend visibility, generating cost savings.

The finance and purchasing team has to no longer go through the tiresome manual data entry and paper receipts and trails. Purchase cards are the smart alternatives that eliminate the need for purchase orders (POs). They’re fast, efficient, and even save the company money. Most effective purchase card programs come with built-in approval flows, which not only helps in better control and visibility, but also fastens the entire procurement process.

Greater control and security

Purchase card programs allow administrators to restrict usage of cards based on a variety of business rules, including spend restrictions per transaction and per time period. Also, restrictions can be set for particular types of businesses eligible for P-Card payments.

The purchasing or finance department has visibility on overall spending through purchase cards. With individual logins and built-in approval matrix for every team member, the financial controller or CFO can track every single payment, receipt, and approval. The managers are able to track just their own teams and the employees, just their own payments.

P-cards offer both buyers and suppliers many benefits including better expense tracking, reducing fraud by setting credit limits on each card , and setting designated Merchant Category Codes (MCCs) on vendor-specific cards to prevent unauthorized spends. Purchase Cards create clear accountability and ownership of transactions, and provide more information about buying habits than is usually available.

Credit cost optimization

With the different options for spending caps offered on various P-card programs, companies that use purchasing cards rarely go over budget. They can choose the card based on their spend requirements. Limiting spends means no overspending, leading to cutting down on unnecessary card fees and interests

Corporates can identify vendors who are looking for an early payment discount or agree on bill discounting. They can then use the purchase card to pay them the discounted amount, or split the MDR (Merchant Discount Rate) charge between the two. This means the corporate can not only save on the charge but also avail (interest free, in case the entire charge is borne by the vendor) credit period for the same.

Traditional procurement processes can turn out to be costly. Whether it is human resource cost, or bearing the cost of printing documents to be sent to vendors/ contractors/ suppliers. Overall, payment processing cost needs to be curtailed and p-cards offer the best alternate.Clearly, P-cards are a more sorted mode of payment leading to more savings

Covering all business payments

Purchase cards are used for both core and non-core business payments. The core business payments are payments which are most essential to the business — that impact the main revenue source of the business. While it depends on the nature of the business, typically critical vendor/supplier payments fall under this category.

Non core payments are payments on secondary activities, which are not considered central to business operations. These typically include rental payments, GST payments, and even utility payments in the majority of cases. Globally, there are fintechs working to resolve acceptance challenges through their platforms, thereby making p-cards as an integral part of the ecosystem.

Accountability for spenders

Every finance team knows the constant hassle that comes with sharing company credit cards. With p-cards, and the elimination of purchase orders, it can be a huge time saver. Every payment will not require multiple discussions, approvals and paperwork between the employee and the finance team. With easy and approved access to funds, purchase cards avoid several manual, time-consuming processes that are unproductive. These manual work is also generally error prone leading to a double edge sword of unproductive processes With purchase cards, the more man-hours saved, the better for the company.

In conclusion, the potential of purchase cards is potentially limitless.

It acts as a complete comprehensive solution which can save genuine time and money for busy procurement departments. It is an easy to implement, digital solution that enables monitoring and control through automation of the reconciliation process. It creates a more transparent, accountable and flexible option of business payments. With multiple benefits aligned to the future of digital and save business payments ecosystem, the P-card program is here to stay.

In India, we work closely in issuance of Purchase Cards across business segments and company sizes. The above has come from our experience in P-card issuance & acceptance program. 

 

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