How a P-Card Program Can Save You Money and Time
P-Cards have been around for over 20 years, but you may not have previously seen the need for a P-Card program. Perhaps you’ve just started your business and have not yet been introduced to the concept. Either way, advancements in technology are shifting business processes from paper to electronic and you need to be aware of the options that are available to your business. Plus, in an evaluation by the NAPCP, P-Card users saved an average of $63 on each transaction. Learn about P-Card programs, how your business could benefit and what you should know before implementing the program.
What is a P-Card program?
A P-Card, or Purchasing Card, is a commercial card that can be used for business expenses —most commonly vendor payments. While the traditional process of purchasing from a vendor requires many steps, the P-Card program reduces these steps and streamlines the purchasing process, saving you time and resources.
With traditional purchases, you might complete the purchase order for the identified needs, send it to the vendor, receive an invoice, send in a check payment then acquire a receipt. A P-Card acts somewhat like a credit card. The cardholder makes a purchase on the vendor’s website and the cardholder’s information is tracked by the network. The institution that has issued the card then sends an electronic invoice to you, the P-Card user or “end-user,” once a month.
As you can see, the time required by your business to complete the transaction is greatly reduced by using a P-Card. Vendors also benefit from the program by having the ability to complete more transactions as a result of the reduction in transaction steps and an increased speed of the sales process.
How do I know if my business will benefit from a P-Card program?
Your business may or may not benefit from having a P-Card program. In addition to the key leadership from your business, those who handle your financials should be a part of making this decision. A lack of understanding often leads to the resistance of implementing the P-Card program, so your entire team needs to be on board with the decision and willing to participate. When meeting with your team, discuss the costs and inefficiencies in your existing processes. If your business is processing a large percentage of low-cost purchases, for example, a P-Card could streamline purchasing.
P-Cards were introduced in the 1980s for the United States federal government and the simple, routine purchases of the General Services Administration (GSA). The popularity of P-Cards grew because of the reduction in overhead costs and improved use of company resources. This motive still exists today, except many businesses are making big-ticket purchases with their P-Cards too.
How do I implement a P-Card program?
If you choose to implement a P-Card program, be prepared for a process that is much different from a standard card program. The implementation of a P-Card program typically takes three to six months to complete, depending on the number of cardholders and the number of vendors included on the approved list. There is no fee to set up a P-Card program and no annual fee.
The P-Card program offers an online card network through which your business sets up vendors, employees and approval managers. The coordination between these groups will depend on the number of vendors and cardholders your business includes in the program. Unlike traditional credit cards, you will need to work with your vendors so that your business has the ability to send payments to them and their business has the ability to receive payments from you. Although your business will need to dedicate time and energy to begin this program, a team from the P-Card issuer should be available to assist with the setup and implementation of the program.
Before fully implementing your P-Card program, develop a model off of which your business will base its goals for the program, outline responsibilities and establish policies and procedures for its use. A model makes it easier to identify challenges with the program before introducing it as a formalized process for your business.
What are the benefits to having a P-Card program?
A P-Card program offers advantages unlike a traditional debit or credit card, including:
- Reduction in time and resources to process purchases, particularly when purchasing small items that have high overhead costs.
- Increase in employee efficiency and ability to focus efforts on alternative business efforts that generate revenue.
- Improved accounts payable and additional float time (20-30 days) for when payments are due.
- Realization of purchasing patterns, simplifying the process of controlling expenditures.
- Building a credit history for your business with no minimum time in business requirements.
- Streamlined vendor payments and improved record keeping by keeping the business and personal cards of your cardholders separate.
- Controlled spending (limits and frequency) and purchase types of employee cardholders.
- Instant access to reports that categorize and detail your business spending by merchant, by employee, or by purchase type.
- The benefits of an internationally accepted card (such as Visa® or MasterCard®) and the service for assistance that accompanies the card type.
- Acceptance of P-Card balance payments online, by phone or through automatic withdrawal from a business checking or savings account.
- Reduced environmental impact of your business by reducing or eliminating the use of paper.
- Tracked vendor spending history to negotiate lower pricing.
- Earned reward points for the spending of the combined purchases of the cardholders (in certain P-Card programs).
Am I liable for fraudulent charges made with a P-Card?
By tracking the purchases of your cardholders, you can be on the lookout for fraudulent charges made to your business’ account. Many P-Card programs include protection from unauthorized purchases made by terminated employees or if a card is lost or stolen. You can also often receive the same fraud detection and notification benefits that you might receive from a business checking or savings account such as alerts of suspicious activity. Plus, your account number and expiration dates are omitted from your receipts, making you less vulnerable to vendors or outside sources who gain access to your receipts.
I’m considering moving from paper to electronic transactions. Is a P-Card program a step in the right direction?
The P-Card program is an ideal option if your business is making the switch from paper to electronic transactions. If you have already moved to other electronic transactions, you may understand the benefits and have likely seen an improvement in the speed, security, cost and convenience of your purchasing process. As businesses become increasingly aware of the environmental impact of their paper processes and move to electronic, keeping up with your vendors (and competitors) will be crucial to the success of your own business.
Like many programs that maximize the use of rising technology and process efficiency, a P-Card program gives business owners more control over their payments and an improved sense of the financial health of their businesses. Plus, with the P-Card program offered through Anchor Bank, users are given a competitive edge through an offering of online workshops with experts and consultants on a variety of topics such as brand building, product pricing and defining target markets.