Fact: Purchasing Cards are intended to simplify the purchase-to-pay (P2P) process, resulting in cost savings and efficiencies. Yet, some organizations make P-Card usage and/or program management overly difficult. To improve card program efficiency, take a cost-versus-benefit approach. Even though it is a P-Card 101 concept, maybe your organization has not thought about its processes in years. Take a moment to determine whether the time involved with doing something justifies what your program or organization gets out of it. Following are examples of tedious procedures or controls that often come at a cost that exceeds the benefits.
Is the Cost Worth It?
The examples below are just the beginning, intended to help you start thinking about possible inefficiencies within your program.
Shopping Around for the Best Price
Some organizations direct their cardholders to ensure they are getting the best possible price for what they need—if the item is not already provided by an approved vendor. The intent is good, but is the benefit worth the cost? If a cardholder is shopping around for what will be a low-value purchase:
Their time spent might exceed the order total.
The amount saved might be insignificant; for example, spending $179 instead of $185 for an item.
They could get distracted in the process, thereby spending more time than what is necessary.
Using Amazon Business might help with the best price quest, but there could still be the distraction factor. Consider implementing a dollar threshold under which shopping around is not necessary.
Pre-purchase Approvals
Are cardholders required to obtain pre-purchase approval for every purchase? While this might be warranted for a few select purchases, it creates more work and slows the process down. Does it really add value, especially for low-dollar transactions? The post-purchase review by managers, as well as independent transaction auditing, should catch any inappropriate purchases that violate program policies. Subsequently, the cardholder should be subject to consequences appropriate for the offense.
Overly Restrictive Limits
Overly restrictive merchant category code (MCC) blocks and/or spend limits are the main reason legitimate transactions get declined. Whether sporadic or chronic, declined transactions is another issue that creates more work for everyone and slows the process down—in addition to being frustrating.
To help prevent the problem, ensure card controls align with P-Card goals and targeted purchases. It might also be time for your organization to expand allowable purchases and/or limits.
Stemming from declined transactions is the need to make limit adjustments. If you need to temporarily raise a limit or unblock an MCC to accommodate a legitimate purchase, then do so as expeditiously as possible. If a cardholder needs to wait for their manager to provide approval to the card program manager (PM), then the P2P process is delayed again—sometimes right at the point of sale. In the interest of efficiency, if the purchase is allowed per program policies, then it makes more sense for the PM to instigate the necessary adjustment first and then email the cardholder’s manager, copying the cardholder.
Final Thoughts
Start making a list of inefficiencies within your program. Document the costs and benefits wherever possible, and determine which ones to focus on. Some might be easy to change; others will likely require management buy-in first. You may not win every battle, but every victory counts.
Spending time on things that do not yield value ultimately waste time AND money.
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About the Author
Blog post author Lynn Larson, CPCP, launched Recharged Education in 2014. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more…