Does your company know the risks (and rewards) of implementing a company-wide procurement card system?
Today’s post is by Mark Davis; Sr. Vice President and COO at SafeSourcing. Mark asks
For the last 15 years or so the mainstream use of company procurement card programs has gained continued to gain momentum as companies look to improve the efficiency of their procurement process. The attraction is understandable.
P-cards can greatly reduce the amount of time it takes departments to get the frequent small spend items they need and can actually provide a clearer view of reporting on where the spend is being broken up and sent to, allowing procurement teams the capability to focus large aggregated spends into projects of their own. Throw in intrinsic benefits such as improved relations with suppliers due to quick payment and allowing employees to feel more empowered in their purchasing decisions and it is easy to see why thousands of companies have employed such a program.
In today’s blog we will be looking at the flip side to that coin and some of the things that should be considered and thus accounted for when implementing or revamping an existing p-card program in your company.
Abusing the system – The number one downside of p-card programs is when they are implemented without the full controls necessary to control fraud and abuse of the program. Because of the nature of p-card programs and the fact that they are meant to streamline purchasing without having direct approval of each transaction the potential for fraud and the time it can take to comb through transactions to find it make this a serious concern. With proper controls in place such as purchasing from selected vendors only, spend limits and category purchase types, many of these concerns can be eased.
“Just buy it” – There are times when fraud is not at play but something just as damaging for a company comes into play in a p-card program; the attitude of buying without thinking because “it isn’t my money.” In legacy procurement programs that require more red tape, people evaluate decisions much closer before making purchases because of the effort involved in making it happen. The easier the process for purchasing items becomes, the more apt people will be to buy first and evaluate whether they really needed a product or service later. This mindset can be just as damaging to a company and harder to control because the need of the products are often legitimate, just not always as critical as the purchase of it would make it seem. Controlling this from a higher aggregate total will show the individuals and departments that are purchasing outside of the norm.
The Devil is in the Details – There are so many different meanings for this saying but I believe the most applicable to p-cards is the time suck that develops when people get their hands on granular detail they never had before. Immediately you have people pouring through millions of transactions to analyze areas where the above two situations are happening. This can cause inefficiencies in a company where the p-card was hoping to streamline the process. Applying proper spending controls and developing a data analysis strategy in advance can help with this process and in ensuring the efficiencies created are kept intact as the program grows.
There are many advantages to p-card programs and with the proper foresight and controls built around it, they can be very successful while minimizing the risk for your company.
For more information on how SafeSourcing can assist with ideas or p-card vendor suggestions or on our “Risk Free” trial program, please contact a SafeSourcing Customer Service Representative. We have an entire customer services team waiting to assist you today.
We look forward to your comments.
One Response to “The Pitfalls of the P-Card”
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