How purchase cards minimize unintended spending and risks?
Businesses have to deal with multiple types of expenditures as the business scales with time and growing industrial demands in today's times. The purchasing process can be a daunting and expensive process for the majority of corporations.
Traditional procurement processes can cater to the growing demands to a certain extent, but they have the same costs for small and as well as major purchases, which turns out to be a pointless option for smaller purchases. In that case, corporations are making a rapid switch to purchase cards or procurement cards that turn out to be a cost and time-saving solution.
What are the purchase cards?
P-cards also referred to as purchase cards or procurement cards, basically work credit cards that allow employees with regular and smaller purchases and enables businesses with ample opportunities in streamlining processing and improving working capital.
Purchase cards help corporations minimize operating costs, automate expense reconciliation processes, and offer real-time insights on spending patterns. Apart from that, businesses can experience improved risk controls and rapid payment that strengthen supplier relations and help organizations earn great rebates.
How electronic payments are replacing the paper-based approach?
In recent times, major businesses are migrating from paper-based payments to electronic payments. However, when it comes to B2B transactions, traditional paper checks are still mainstream and most of the payments from middle-market companies are paper-based.
So, businesses are still using the obsolete paper-based invoice and payments processing system that consumes a lot of time and effort. Not only this, the paper-based approach accompanies endless errors and is prone to fraudulent activities. Due to this, businesses seek better alternatives to stay on the safer side by getting rid of the frauds and saving their time, costs, resources, and efforts.
At this point, purchase cards can prove their true potential by automating suppliers' payments while replacing checks when an organization purchases goods and services. Purchase card turns out to be an ideal alternative for high-dollar and low-dollar transactions with all vendors accepting credit cards. Not all businesses are aware of the benefits offered by purchase cards and fail to understand the vast contribution of purchase cards to a business's overall payment efficiency.
When it comes to minimizing risk exposure, purchase cards give full control to businesses and let them implement daily weekly, or monthly spending limits on the employees and give controls as to which merchant categories must be utilized. All these controls help in minimizing the scope of risk exposure and eventually bring your business on the safer side.
Practices to adopt for an ideal purchase card program
Corporations who are planning to implement purchase card program in their business can reap the maximum benefits by incorporating the effective practices of industry leaders in purchase card usage. First of all, you need to choose a seasoned financial payments partner and banks that have specialized expertise in payments technology positively impact businesses from strategy through implementation. Moreover, a reputed bank partner works seamlessly with the organization in optimizing purchase card utilization consistently soon after the program launch. Notable practices for a great purchase card program comprises of:
- Creating a cross-functional team that remains committed to the purchase card project thoroughly.
- Getting corporate buy-in and executive sponsorship so that the program gets more priority.
- Carrying out a complete vendor-match analysis for gaining insights into the thorough card opportunity and regulate where to target purchase card spend.
- Creating a business case that comprises a review and documentation of the existing procurement process, costs, determination of the costs of paper management vs. purchasing card utilization, determining on the mix of P-card types to utilize, and quantification of the projected return on investment, plus potential rebate chances.
- Set targets against which the program can be analyzed, creating or updating expense policies, procedures, and the audit and compliance framework.
- Distributing purchase card adoption in all business segments.
- Create and execute communication as well as training sessions so that the card users and program participants stay informed at all times.
The wide adoption of purchase card programs in today's electronic payment landscape is eventually becoming the new norm since purchase cards enable businesses to optimize cash flow, streamlining the business processing, minimizing expenses and safeguarding the business from all sorts of fraudulent and other malicious activities.
Reducing the risk exposure helps in strengthening the relationships within your business, customers, stakeholders, and other members who are directly or indirectly connected with your business. Moreover, purchase card programs help businesses track their expenses and spending and benefit out of supplier discounts and revenue in the form of rebates that further help minimize or redirect staff in the accounts payable department.
Purchase card programs have a long way to go in the coming time ahead for businesses. If your business is planning to upgrade to purchase cards and wish to explore more about purchase card programs, TERA experts can guide you! Connect with us at any time!