Rebates rehashed, part 1—the dark side.
Dark side? Yes, when rebate clouds judgment, driving us to make decisions that, in the long run, negatively impact business operations and/or suppliers; see the two examples below. Rebates were not the goal in the early years of Purchasing Cards. The goal was purchase-to-pay process efficiencies, which result in a multitude of benefits. Rebates were simply a bonus. However, it did not take long for a gold rush to ensue.
Two Drawbacks of Rebate
Reducing P-Card Benefits
In pursuit of a rebate, you might complicate a process and/or detract from the benefits of card acceptance for suppliers. I remember putting inventory purchases on a P-Card, even though we had to add steps to the related receiving and accounting processes tied to the ERP system. Did the extra rebate make up for this? Unfortunately, we did not quantify the options, so our decision was made blindly. Is your organization making similar blind decisions, failing to weigh the costs against the benefits?
Another example is requiring your suppliers to provide an invoice that you end up paying via P-Card 30 or more days later. This does not benefit your suppliers. Card payments must offer rewards to all parties or we risk industry stagnation.
Choosing the Wrong Issuer
End-user organizations are notorious for sending lengthy RFPs to card issuers. Yet, they often choose an issuer based on rebate. You could end up with an issuer who is not the right fit for your organization and its needs.
Just because an issuer offers substantial rebate incentives does not mean they will partner with you and help you grow the program. Without a partnership, you might not even earn the great rewards offered. Are you maximizing your rebate incentives today? This is the subject of the next blog post. See also more rebate information.
The Gold Rush
History.com offers a nice synopsis of the California Gold Rush of 1849—one that reminds me of P-Card rebates:
Gold Rush: “As news spread of the discovery, thousands of prospective gold miners traveled by sea or over land to San Francisco…”
P-Card rebates: “As news spread of the money, thousands of organizations flocked to P-Card programs…”
Gold Rush: “Sam Brannan set off a frenzy when he paraded through town displaying a vial of gold obtained from Sutter’s Creek.”
P-Card rebates: “The end-user set off a frenzy when presenting at the conference, sharing the amount of their rebate check from the card issuer.”
Don't rush for rebates at the expense of P-Card best practices.
The Gold Rush declined gradually; people were eventually forced to move on. While rebates are still going strong, I wonder how long the high levels are sustainable. I have always likened a rebate to overtime pay. It is a bonus to be appreciated, not the foundation on which to build your lifestyle, er, card program. We should move on by moving back to concentrate on efficiencies.
About the Author
Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With more than 15 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more…