From the October 2007 issue of Treasury & Risk magazine

Good or Good Enough?

Byrne: They could look at best practices to see how they compare. According to the 2005 Purchasing Card Benchmark Survey Report by RPMG, a best-practice card program has a handful of defining characteristics:

  • Card distribution: Best-practice programs distribute cards to 12.2% of employees, more than double the distribution of low performing programs. Best-practice organizations allow departments or business units to decide on how many cards should be distributed.
  • Spending limits: Best practice programs have per transaction limits that are, on average, twice as high as low transaction capture purchasing card programs. The mean transaction limit among high performing organizations was $3,065, with a mean monthly spending limit of $10,981. Eighty-two percent of organizations enforce per transaction limits and all respondents have monthly limits. Best-practice organizations vary the spending limits based on the type of merchant.
  • Spend categories: Best- practice organizations have a wider "allowable span of spend" and are more likely to use p-cards for any given category of goods or services.
  • Program policy: Best practice organizations are more than twice as likely to require the purchasing department to refuse to process requisitions that could be bought on the p-card and more than three times as likely to require Accounts Payable to send a memo reminding employees who requisition goods or services that these items can be bought with the purchasing card.
  • Training: Best-practice organizations are significantly more likely to have an ongoing method of communicating purchasing card information to cardholders and managers, use a Web site to answer purchasing card questions and support program administrator attendance at purchasing card user conferences.
  • Audit and review: Best-practice organizations are more likely to evaluate the spending patterns of their cardholders and formally audit and review the spending approval process for purchasing cards.
  • Top management support: Best practice organizations have a higher level of top management support than low performing programs.
  • Supplier management: Best-practice organizations are more likely to restrict some or all of their spending to "preferred suppliers," as well as to use the p-card spending data to negotiate higher discounts from preferred vendors.

Not all companies that fail to meet these standards need to overhaul their card programs, but it is simply a healthy business practice to take the time, periodically, to evaluate whether better programs or solutions are available. If a company finds that the growth of its card program is not delivering the desired benefits, or that employees are not utilizing travel card programs, for example, it may be time to research an alternative card program.

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