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.
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.
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.
More on P-Card metrics
The previous blog post, as referenced in the introduction above, Commercial Card Rebates in the United States: A Wild Ride
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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…