Why Your P-Card Auditing Stance Could Be Risky

Does this portray your organization? The P-Card cycle just ended and now one or more people—maybe even you—are consumed with auditing cardholders’ transactions. Time is limited, so the focus is on ensuring there is supporting documentation for each transaction or perhaps the audit is based on a sampling only. A quick match of vendor name and dollar amount, then on to the next transaction. There is little to no time for program metrics, strategy, or expansion. Why, then, don’t more organizations pursue an external auditing solution? Below are three risky examples of things that could be standing in the way. Also included is the surprising benefit the program manager or administrator can achieve when an auditing solution is used.

Reasons Why an Auditing Solution is Not Used

Belief that Manual Efforts are Sufficient

Manual audits, especially when 100% of transactions are included, cannot possibly cover every aspect that could reveal fraud or even modest policy infractions. As indicated above, an organization might have just enough time to check off whether or not a receipt matches transaction information from the card issuer. A lot gets missed. Notable time is expended, but the results are weak.

Belief that Cardholders’ Managers Will Find Any Issues

Some organizations forego a consistent auditing approach altogether and instead rely on the reviews by manager-approvers. Yet, it is common knowledge that many managers do not do a thorough job. Compounding the problem, many organizations do not hold managers accountable. If a cardholder issue is found, there are often no consequences for the manager. Without consequences, why would they bother to do a robust review? Further, managers are often not required to complete training or sign an internal agreement related to their card program role. This increases the risk that they are not prepared.

There is also the risk of collusion between an employee/cardholder and their manager—something that can happen even without a card program. Effective auditing is one of the best controls for combatting this.

Here is a sobering fact: According to the Report to the Nations—2018 Global Study on Occupational Fraud and Abuse by the Association of Certified Fraud Examiners (ACFE), manager review is the initial detection method (for fraud or abuse) by only 13% of organizations. Tips are far more common, cited by 40% of respondents.

Fear of Job Loss

Just as accounts payable and/or procurement personnel might be anxious about Purchasing Cards taking over their jobs, the P-Card program manager/administrator (PM/PA) might worry that an auditing solution will negatively impact their job. I discussed this with Doug Hindsley, senior partner of Card Integrity, who remarked, “I actually see the opposite happening. A PM/PA often gets promoted because they are able to act on information provided via an auditing solution. Their time is no longer spent wading through transactions and receipts. An auditing solution allows them to be more strategic with the program instead of task oriented.” This makes sense to me; it gives the PM/PA a better chance to shine. Conversely, if most of a PM/PA’s time is currently spent on auditing, then it reinforces the scenario described in the introduction above. They are not doing much in the areas of program metrics, strategy (including training and program promotions), or expansion.

Final Thoughts

For some organizations, an auditing solution might be appealing, but seem unattainable for more practical reasons like cost and lack of resources to pursue. To this I say, do not give up without at least exploring further. Carving out a little time now can yield big savings in the long run.

If you already have an auditing solution, ensure you are taking full advantage by utilizing the resulting reports to make your card program stronger.

Related Resource

  • Stop Blaming P-Cards, a 2018 blog post about knee-jerk reactions and what the real problem is when internal fraud occurs

A P-Card auditing solution is easier and more effective than someone doing it manually on their own.

A P-Card auditing solution is easier and more effective than someone doing it manually on their own.



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About the Author

Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more

The Emerging Trend of Integrated Payables

Before you write off integrated payables as something that is out of reach for your organization, I encourage you to learn more. It could be the solution you need to streamline accounts payable processes. Following are some of the advantages, potential challenges, and recommendations. First, though, what is it? People often have differing definitions. Integrated payables allow an organization to submit to their designated provider a single electronic payments file that encompasses multiple payment methods—check, ACH, and card. The provider facilitates the payments to the specified suppliers, as directed by the end-user organization via that file. It is sometimes called consolidated payables as well.

Last week, I had the pleasure of attending the CPI Middle Market Summit and integrated payables was one of the discussed topics. Providers/banks are increasingly offering these solutions—often through a partnership with a fintech company—to give corporate/business clients another option in relation to their payment strategies.

Advantages

As indicated above, for an end-user organization, integrated payables (IP) can mean simplicity and process ease from payment initiation through reconciliation. The single file approach eliminates the need for AP to send a check file to the printer, an ACH file to the designated bank, and an electronic accounts payable (EAP) file (for Virtual Card and/or buyer-initiated payments) to the designated provider.

In addition to process ease, your organization may reap greater financial benefits by consolidating your payments with one provider/bank instead of using multiple banks. Further, you would have fewer providers to manage.

Potential Challenges

Following are potential challenges only. Do not make any assumptions without researching first.

  • Getting internal buy-in from stakeholders could be difficult. Everyone is used to their current processes. Some employees will resist any option that means losing the relationship they have built with the existing banking/payment partner.

  • Traditionally, organizations do a “card program” request for proposal (RFP) process that excludes other payment methods. Doing an integrated payables RFP would be a change that involves more departments/employees.

  • Older ERP systems may not be able to accommodate an IP process.

  • Implementing an integrated payables solution may require more IT resources than what you have available.

Recommendations

If you start talking with a bank or provider about IP, be sure to define it up front, so everyone is talking about the same thing. Accounts payable expert Mary Schaeffer of AP Now agrees. She observes, “Integrated payables is an area where the banking community needs to educate clients. There is often a lot of confusion about what it is.”

If your organization decides to pursue integrated payables, shop around first. Find out how each provider’s solution works, any fintechs behind the scenes, the related security controls utilized by each entity, who would be responsible for what, and so on.

Final Thoughts

In today’s world, it’s all about devising a payment strategy that takes all payment methods into consideration. Integrated payables is something you will likely hear more about going forward. I even suggested to the NAPCP that they do a future poll on this topic. It is beneficial to keep learning more, as the solution will continue to evolve.

In the case of integrated payables, putting all your eggs in one basket  can  be a good thing.

In the case of integrated payables, putting all your eggs in one basket can be a good thing.



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About the Author

Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more

How to Help Your Card Program Rise to Its Potential

What is a key reason why some Commercial Card programs excel and others remain sluggish? Industry veteran Erika Jennings, CPCP, shares her insight below along with five pieces of advice that apply to all programs. See whether your organization is doing all five. If not, prioritize where to start making progress.


Unify Your Card Program with Organization Goals

by Erika Jennings, CPCP, Umpqua Bank

Across all industries and all organization sizes, the thing that I find differentiates a best-in-class card program from one that just does “okay” is how well it is aligned with the organization’s goals. The more unified the goals are, the more effective and successful the card program will be.

Success Story

One example that stands out in my mind is a middle market client I worked with a few years ago. They had a One Card program to accommodate all kinds of purchases, including travel expenses. The C-suite insisted that the cards be easy to use. They did not want the employees out in the field—whose priority was selling and serving clients—to spend time on tedious administrative tasks. The card program fit right in with a customized expense management tool to decrease the time and effort required to file an expense report by 50% or more. Because the card program helped the organization reach this key goal, executives sought additional ways in which card payments could increase efficiencies and reduce checks. They started to mandate that their vendors take cards for invoice payments if they wanted to keep the company’s business. They grew a best-in-class ePayables program in their first year by adding card payment language to every possible new (or renewed) vendor contract. As AP received invoices, they took the opportunity to determine if a card could be used.

Programs that Struggle to Take Off

If a card program is thought of as merely a credit card—versus a way to achieve organization goals—it rarely receives the support it needs to really take off. For many organizations, building a card program keeps sliding down their priority list. It’s the inertia of doing what they’ve always done. Some of them do not want to invest in the work involved with establishing a strong card program. Others want to focus on a card program, but just cannot get there due to day-to-day operations consuming all their time. Still others face technology challenges, such as an old ERP system that cannot handle card payments/ePayables.

Middle Market vs. Large Market Companies

Success is possible for every program, but the biggest difference I see between middle market and large market companies is the resource constraint. Everyone is trying to do more with less. Most program administrators I talk with in the middle market are wearing at least three or four hats in their organization, so it is nearly impossible for them to focus on a supplier campaign or even be out of the office for continuing education purposes.

The larger companies have their own challenges, such as working with disparate financial systems and conflicting IT priorities. However, they have more people and more time to effectively run and grow their programs. They are more strategic with their initiatives and less reactive to the changing demands of their finance organization.

Advice for All Programs

If I had to narrow down my recommendations for building a successful card program, it would be the following five actions—no matter what the organization or program size.

  1. Understand your organization’s payables/purchases, including the related hard- and soft-dollar costs. Ultimately, I have seen some organizations finally shift payments from checks to cards to reduce their federal 1099 reporting responsibility. (Please consult your tax advisor about 1099 reporting requirements). 

  2. Seek more information about where cards would best fit. Check, wire, ACH, and card could all have a place in your payables mix. Make sure you understand the cost, benefit and function of each type of payment, and how they benefit your company.

  3. Take advantage of your card provider’s expertise and solutions (e.g., supplier enablement) as much as possible. They should act as your partner. At Umpqua Bank, we see a lot of demand in the middle market for consolidated payment solutions, vendor payment tools, and electronic invoice presentment. Clients love hearing that these are needs we can meet.

  4. Regularly measure your progress toward established goals. Include an annual review of the card program to make sure it’s meeting current business needs.

  5. Identify what’s next. If progress is sluggish, what can you change? If the program has already met the goals, set new ones to continue the success.

Being intentional is such a buzzword these days, but it’s true. Because businesses change and grow, card programs should adapt along with them.

About the Author

Erika Jennings, CPCP, has been involved in the world of P-Cards for nearly 20 years. She started in the industry as a program administrator in the AP department of KinderCare Learning Centers. From there, she joined U.S. Bank in a sales manager role. After 13 years, she moved to Umpqua Bank as a strategic development manager for Commercial Cards. She enjoys being part of Umpqua Bank’s team, working with growing middle market organizations to improve their payables processes.

Umpqua Bank is an Oregon-based community bank recognized for its entrepreneurial approach, innovative use of technology, and distinctive banking solutions. Umpqua Bank has locations across Idaho, Washington, Oregon, California and Nevada.


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Accounts Payable in 2020: How Do You and Your Company Compare?

The AP function is evolving at an ever-increasing rate. This survey, conducted by AP Now, explores AP salaries, invoice challenges, payment strategies, and more. Every participant will receive an executive summary of the survey results and an invitation to attend a related webinar on August 14. Click here to begin.

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Lynn Larson, CPCP, is the founder of Recharged Education. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all.