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Home / Procurement / The Benefits of using a P Card

The Benefits of using a P Card

I think using a P Card is essential if the organisation deals with high volume low-value transactions.

Why use a P Card (Also known as purchasing card)

Purchasing cards are just like credit cards or more exactly corporate or charge cards. They are physical pieces of plastic that allow the holder to spend money but they are different from ordinary credit cards, corporate cards or charge cards in a few key respects.

With an ordinary credit card, the card statement contains very simple information: The date of a transaction; the merchant name; the amount of the transaction. This level of information is not sufficiently detailed for businesses which is why, when credit cards are used for business purchases, invoices are retained because these contain more detail about what was bought.

Purchasing Card statements are different. The statement contains all of the information that would normally be expected in an invoice including Description of goods bought; quantity; amount paid; tax paid. This level of detail (and much more detail is possible) allows the business to use the card statement and dispense with the need to retain invoices. This is especially advantageous if the statement is received electronically because it allows the business to reconcile the statement automatically with purchase order if they have been used and or record the card transactions in the finance system automatically.

Using purchasing cards can dramatically reduce the administration cost of small purchases for a business.

The cost of processing an invoice after taking into account all of the actions required to pay the final invoice is expensive, a traditional P2P process involves getting authorisation to raise a requisition, raise a PO, goods receipt regardless if the invoice is for £10 or £100,000. Sometimes the cost of raising a requisition and making the payment can cost more than the goods or services bought.

A P Card streamlines the process and is especially useful for low-value transactions.  Most organisations will have a large number of transactions for low-value items, this can become inefficient to process, it can tie up management time making approvals and it can also make the supplier list extremely long and difficult to manage.

P Cards make it easier for staff to make purchases that have an audit trail.

Suppliers like accepting P cards because they get paid on time.

Benefits include:

  • cost reductions, such as eliminating invoice creation, handling and mailing; depositing payments and collection activities
  • electronically deposited funds
  • faster receipt of payments and improved cash flow
  • increased sales, as many organizations solicit only suppliers that accept P-Cards as payment
  • customer satisfaction
  • potential staff reductions within accounts receivable and the ability to redirect staff to more value-added activities

Public sector organisations can use an existing framework  When this expires it is likely that there will be a replacement framework.

 

 

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