P-CArd P2P Process: Omitting Invoices
By utilizing a streamlined P-Card purchase-to-pay (P2P) process that eliminates invoices, as outlined below, organizations capture notable process savings. However, even when P-Cards are used in the ideal manner, suppliers might still send an invoice, which can create confusion for your buyers and/or accounts payable. Worse yet, it could result in a duplicate payment. As such, below are steps every organization should take, as well as a key question to answer.
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Ideal P-Card P2P Process
The P2P space has evolved greatly in the past 20 years and sometimes the ideal P-Card P2P process gets overlooked. Returning to “P-Card 101,” the ideal process is one in which a cardholder provides payment via a P-Card at the time of order placement—like the online orders we make as consumers—and the supplier charges the card when the order is fulfilled. This eliminates an invoice altogether. A priced packing list or similar serves as documentation. To help make this scenario a reality and reduce the risk of duplicate payments, do the following.
Communicate the documentation requirements to recurring suppliers, including specifying the omission of invoices. At a minimum, anything from a supplier that resembles an invoice should be distinctly marked as “paid via card.”
Avoid paying suppliers more than one way, but, if you must, have clear criteria about when each payment method should be used and train the applicable employees.
Eliminate from the master vendor file (MVF) any “P-Card only” suppliers. Per AP Now’s AP Practices Survey (www.ap-now.com), fewer than half of the respondents’ organizations follow the best practice of cleansing the MVF at least annually.
Ensure AP staff does not automatically add a supplier to the MVF without verifying the appropriate payment method first.
In some organizations, cardholders might, at times, first receive invoices that they ultimately pay via a P-Card. Is this wrong? Not necessarily, but it does add steps to the process. It also leads to a key question.
Key Question: When is an Invoice Needed?
Has your organization identified the types of purchases that do and do not warrant an invoice-based P2P process? Every organization is unique, but answering this question is a fundamental part of creating an efficient and cost-effective payment strategy.
When invoices are required, directing all invoices to AP (instead of leaving some in the hands of cardholders throughout the organization) can be optimal for invoice management and timely payments to suppliers. There are various payment options for invoices. While P-Card is one, an electronic accounts payable (EAP) solution—also known as ePayables—managed by AP can be better. ACH is another good option.
No need to burn unwanted invoices. Ensure your organization communicates its purchase documentation requirements to suppliers.