Metrics that Turn the P-Card Tables Around

If your management fails to see the value of Purchasing Cards beyond the potential rebate, then you might need to beef up your metrics. First, be sure you are quantifying and sharing the positive impact of P-Cards within your organization (e.g., process savings). However, you might need to go a step further by painting the picture of what your procure-to-pay processes would look like and cost without cards. After I recommended this action within the previous post about rebates, a subscriber asked me how to begin and what metrics to include. In short, the exercise involves quantifying how accounts payable (AP) would be affected and outlining the resulting added burden on other employees. Keep reading to see the details. Would such an approach grab your management’s attention?

Additional Invoice Volume = Additional Staff

If there were no P-Cards, how many more AP full-time equivalents (FTEs) would be needed to process the increased invoice volume and how would this translate into dollars (e.g., average salary of an AP FTE)?

First, how many invoices are processed by one AP FTE per month today? Using data from various AP Now surveys, 2000 invoices per FTE per month is within the realm of possibilities. It will vary by organization, based on the invoice process and extent to which technology is used. Find out what applies to your AP staff.

Now let’s assume a modest P-Card program of $10M per year. If you divide this by an average transaction amount like $400, this would be 25,000 transactions per year or nearly 2100 per month. Moving the P-Card volume back to AP would require an additional AP FTE. Again, pull the applicable data for your program to make the metrics meaningful.

More Suppliers = A Ballooning Master Vendor File

Non-card payments mean adding suppliers to AP’s master vendor file (MVF). Based on your P-Card data, how many suppliers would this be? Would even more AP FTEs be needed to manage it? Think about the supplier information that would be required and the added burden on your 1099 reporting process.

No Cards = Tedious Procure-to-Pay Processes

In addition to the metrics noted above, map out the various potential procure-to-pay (P2P) processes in a “non-card” world and make comparisons to the efficient P-Card P2P process currently in use. For example:

Limited Use Suppliers

Consider all the suppliers currently paid via P-Card for a one-time purchase. Not only would you need to set up these suppliers in the MVF, the procurement aspect would likely be more difficult. Identify a common example from your P-Card data; for instance, employees needing to register and pay for a business conference. Without a card to easily take care of it, what would an employee need to do? All of the options are tedious and slow for your employees and suppliers.

Recurring Suppliers

The procurement process might remain the same with suppliers from which cardholders order through a designated website today, such as Staples and Grainger. However, you would need to work with the applicable suppliers on the desired invoice process. How would invoices arrive? Would AP need to manually break down by cost center? Maybe some suppliers would send an appropriate electronic interface file to eliminate manual keying by AP, but this requires extra work, too, to establish.

Conclusion

There are all kinds of P-Card metrics to demonstrate the status of a program, but sometimes the most eye-opening metrics are the hypothetical ones.

You don’t know what you’ve got ‘til it’s gone.
— "Big Yellow Taxi," Joni Mitchell

Related Resources

If management can’t see past Commercial Card rebates, present the costly realities of a payment strategy without cards.

If management can’t see past Commercial Card rebates, present the costly realities of a payment strategy without cards.



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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

Who is your executive champion?

Beyond the initial P-Card program implementation, which was many years or even decades ago for most organizations, the role of an executive champion evolves. As a program manager or administrator (PM/PA), are you actively engaging your champion to help enhance their role and prevent their support from waning? We know that executives have the power to make or break a card program, so keeping them involved is a must. Following is a look at what you can do, as well as examples of what the executive champion can do.

Know Your Executive

You might be working with the same executive who approved the original program or someone new. Either way, consider the following.

  • What is their current view of the program? 
  • Which aspects are most important to them?
  • What do they expect of you?
  • How often do they want to see a report of program progress?
  • How do they want to receive program updates?
  • Do they prefer details or summaries? Graphs can be a great way to provide at-a-glance information.

Inform Your Executive

Having a better understanding of your executive allows you to tailor your communications accordingly. Following are ways to keep him or her informed. In addition, occasionally verify if what you are providing is valuable and, if not, what you can do differently.

  • Report program status; for example, progress toward goals, comparisons to previous years, and missed opportunities (see also information on metrics).
  • Share P-Card best practices and how your organization compares.
  • Outline any issues and propose solutions.
  • Make suggestions regarding program improvement and/or expansion possibilities.

During my time as a P-Card program manager, I identified how my organization had surpassed goals and outgrown the initial revenue share grid. I reported as such to the executive champion and, together, we renegotiated the contract with our card provider.

The Ongoing Role of a Champion

An executive champion can directly execute and/or delegate the following actions. 

  1. Enforce cardholder and manager accountability, and demonstrate corrective action consistency across job levels.  
  2. Support training initiatives; for example, email participants about the importance of training and attend in-person sessions (if offered) from time to time.
  3. Promote the program; for example, encourage “lunch and learn” sessions, make P-Cards a topic at budget meetings, and introduce the P-Card program at new hire training.
  4. Routinely review program status; subsequently, this could mean asking questions of the PM/PA and participating in calls/meetings with the card provider.  
  5. Help steer the program; for example, endorse policy changes to expand card usage.

An active executive champion can take a program to the next level.

Related Blog Post

Does program buy-in seem out of reach?


About the Author

Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With more than 15 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more

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Cards are king for one city.

This fact is astounding: The City of Lenexa (Kansas) uses traditional P-Cards for more than 70% of its business-to-business (B2B) payments. How have they done it? What are their future plans? My interview with Dana Simms, Senior Accountant, follows. It demonstrates the value of organization-wide support, patience, and perseverance. 

Keys to Success

Q: To what do you attribute such great success?

A: One, the support of our management team. Without their support and backing, there would be no motivation among city staff to use Purchasing Cards. Two, employees appreciate the ability to make purchases they need when needed. Employees do not want to process a requisition or a check request and wait two days to maybe two weeks for a check to make the purchase. Three, the implementation of select ghost accounts. We have established ghost accounts for Verizon, the Information Technology department, and the Finance department. These two departments can pay invoices on a Purchasing Card that may be over the normal card limits, which are $2,500 per transaction and $5,000 per month.

Editorial note: Some end-user organizations, like the City of Lenexa, have proven that traditional ghost accounts work for them. These accounts, with limits that refresh each month/cycle, function like a regular P-Card. However, common drawbacks include lack of dispute rights and difficulty identifying or enforcing accountability since the account is not issued to a particular employee. An organization should discuss the pros and cons of ghost accounts with its card provider.

Q: What do you think are unique characteristics of Lenexa (regarding your card program) compared to other cities or even other organizations?

A: Our management team and governing body have always been progressive with their thinking and actions.  If something makes sense, saving time and money, then they are eager to take advantage of the opportunity.

Early Challenges

Q: What were some of your biggest challenges to overcome to get Lenexa to where it is at today?

A: The biggest challenge was getting the employees to use their cards at the point of purchase. It was easier for them to place a purchase on a house account and/or have the vendor invoice the City. The first step was to close all house accounts. Then, if an invoice was entered for payment, we contacted the employee (purchaser) and asked them to place it on their purchasing card. It only took a few times of returning invoices to employees for them to realize the payment process was easier via card.

Editorial note: Access a previous blog post that addresses the importance of ensuring cards are easy to use and three key elements to assess in this quest.

With the right support, cards can emerge as the focal piece of your payment strategy.

With the right support, cards can emerge as the focal piece of your payment strategy.

Current Challenges

Q: What are your biggest card program challenges now?

A: Two things, both of which pertain to vendors and card acceptance. Some vendors want to add a surcharge to accept purchasing cards. Kansas has a “no surcharges” law, but there really are not any enforcement processes in place. If a vendor applies a surcharge, we attempt to contact them. Another challenge is the card acceptance fee. Some vendors are willing to absorb the fees on small-dollar items, but not on bigger items such as construction or equipment/vehicles.

Editorial note: The merchant ID and physical business address for that ID determines whether surcharging is permissible. In other words, a merchant abides by the laws in the merchant’s state, regardless of the laws in other states to which the merchant ships goods or in which it provides services. See more on surcharging...

Current/Future Plans

Q: Where does Lenexa plan to go from here? Perhaps you just want to maintain your current level.

A: We would like to continue to grow the program. Employee and vendor education, along with monitoring purchases, are big factors in being able to do this.

Final Thoughts

The City of Lenexa has the right idea. When you have achieved a high level of card success, do not simply stop. Continue to look for new opportunities.

Another thing to focus on is program management and the elements that could be improved. What are your pain points? Could your policies and procedures be revitalized? Could you expand or refine the training program? What about purchase-to-pay efficiencies?

If your organization would like assistance with any program improvement endeavors, submit a contact form to learn how Recharged Education can help. 

 


About the Author

Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With more than 15 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more

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