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Survey Shows How Purchase Cards Can Save Time, Money

Since the early 1990s, banks have promoted the corporate purchasing card (p-card) as a convenient and cost-effective way for businesses to pay for low-cost goods and services. On paper, the strategy seems simple: Save time by letting employees use p-cards to buy necessities without running the purchasing department gauntlet. And, along the way, save money by eliminating paper requisitions, purchase orders and invoices for thousands of minor transactions. How much of this bounty can p-card users expect to realize? A new survey provides some answers and brings the current state of p-card affairs into sharp focus. In fact, companies in a wide range of industries have incorporated p-card use into their financial operations and reaped the benefits. But while initial projections indicated p-card spending could top $300 billion per year, banks now acknowledge that only $15 billion to $25 billion of the projected market has materialized. And recently, some organizations said their p-card programs delivered only a fraction of the savings card issuers promised. The solution to this problem, according to recent research, lies in changing a company's culture and in its management's willingness to loosen controls for the sake of improved efficiency and reduced expenses. In order to assess the impact of p-card use on business efficiency, the AICPA Center for Excellence in Financial Management funded a survey of companies who use the cards. The survey examined their experience and identified best practices for p-card use. The survey's key findings were as follows: * Most companies realized only some of the benefits of p-card use. * Underachieving programs often were burdened by stringent controls applied to inexpensive items. * P-cards significantly reduced costs and improved turnaround time in "progressive" companies. * Almost all companies could significantly improve their p-card programs with a few important modifications. When They Work, They Work Well Survey results offered proof p-card programs can be effective. According to the companies that responded, the average cost per p-card transaction was only $15, while it cost $91 to pay for an item using traditional methods. Also, p-cards cut order fulfillment time, ordinarily 9.1 days, down to zero. To gain insight into why some companies shifted millions of dollars in spending to the p-card and others only thousands, the survey compared large companies with similar sales revenues that had p-card programs in place for the same length of time. The large corporations were divided into two groups: (1) a high-spending group consisting of 26 companies with monthly p-card spending of $1 million or more and (2) a low-spending group consisting of 30 companies with spending of less than $1 million per month. On average, high-spending companies had almost 80% more employees than low-spending companies. So, the greater number of p-card transactions by high-spending companies appears to be partly due to larger workforces. However, the 1.8-fold difference in the number of employees is eclipsed by the fact that high-spending companies reported 5.6 times as many cardholders, 6.6 times as many cards, nearly 3 times the percentage of employees in possession of a p-card and 9.2 times as much in p-card charges per month as their low-spending counterparts. Further, employees in high-spending companies used the card more often than their low-spending counterparts (5.3 vs. 3.8 transactions per month) and had a significantly smaller percentage of inactive cards (28% vs. 44%). High-spending companies, therefore, were able to reduce staff by an average of 18.2 employees, or one clerk for every 10,312 invoices shifted to the p-card. …