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Keeping Your P-Card Program in Check

Purchasing card programs are a well-known way of keeping track of smaller purchases within a business. But, having all those cards out there requires a tight rein on the process. While the benefits are clear, so is the risk of misuse. Accounts Payable departments have a lot to gain, so let’s take a look at how to keep it in check and reap the benefits.

The Benefits
The primary benefit of P-Cards is the potential cost savings achieved by taking several steps out of the traditional procurement process. The number of transactions accounts payable staff much process is reduced and urgent repairs and purchases can be expedited. A streamlined process that is fully integrated with your existing financial systems prevents those smaller purchases from bogging down the system. Plus, you end up with complete analytical data on all your purchases which makes reviewing and compliance monitoring much simpler.

Actually, more and more accounts payable departments are using P-Cards as a strategic form of payment in addition to the high-volume, low-dollar transactions. By replacing checks with purchasing cards and automating supplier payments, purchase order and invoice processing is minimized. Attesting to their popularity, according to the most recent Palmer and Gupta survey, P-Card spending has more than doubled over a ten year period. A mere $80 billion was spent in 2003 versus $196 billion in 2011!

The Risk
Fraud can occur in any department and by a variety of methods; but, P-Cards are both readily available and highly tempting. Therefore, P-Card programs should be well-planned and even piloted before being fully implemented.

Broniec Assoicates recommends these key control best practices will help deter and detect misuse:

  • Background Checks on all Cardholders
  • Dollar Limits on Transactions
  • Restrictions by Merchant Classification Codes (MCC)
  • Monthly Reviews and Approval by a Supervisor (or Two)
  • Card Use Put on Hold for Users on Performance Probation
  • Software Monitoring
  • Ongoing Cardholder Education

Even a well-controlled program will have its bumps and bruises because each cardholder is being given the equivalent of a petty cash fund at their immediate disposal. It is common for things like gas, gift cards and groceries to occasionally make their way to the card. Diligent monitoring will catch those things, and appropriate action can be taken.

Not every misuse of a P-Card is intentional, and it’s important to know how to investigate this type of fraud properly and avoid wrongful accusations. You also don’t want to alert an accused employee that an investigation is underway. Red flags might include late monthly reconciliations, last minute reconciliations or multiple reconciliations presented at one time. After-hours purchases also warrant a closer look.

All-in-all, most organizations find that purchasing cards are worth the risk as long as the programs have effective controls in place. Simplified processes and data analysis can be the oil that your accounts payable machine needs. An expanded program can even enable you to use P-Cards for convenient and comprehensive suppler management.

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