Rebates rehashed, part 2—maximization tactics.

June 10, 2014 Lynn Larson

When you steer clear of the dark side of rebates (the last blog topic), you can focus on how to best maximize your incentives. How is your P-Card program performing in this regard? Do you know the specifics of your rebate contract terms? Following are three common factors; see more on the related webpage.

Average Net Spend per Card

If your rebate calculation involves this metric (total spend divided by average number of cards), you can make the average higher/better by closing inactive or under-utilized cards. This is a simple administrative action that can also reduce risk. Regardless of rebate, addressing such cards is a best practice. Ensure your organization defines inactive as part of its policies (e.g., nine months of no activity) and has procedures for taking action. The internal agreement that employees sign prior to obtaining a card could also include a stipulation that your organization reserves the right to close inactive cards.

File Turn/Speed of Pay

How quickly do you pay your card issuer? If your rebate incentives reward quicker payments, then work with your treasury/finance department to evaluate the benefit of paying more quickly against the value of holding on to your cash longer. Do not allow payments to your issuer to be delayed by cardholders’ reconciliation of transactions, which should be a separate process.

Total Annual Spend

Last, but not least, maximize card spend to improve your rebate and, more importantly, increase process efficiencies and savings. You should have a policy stating that all purchases under a certain amount (e.g., $2,500) must be paid via P-Card if a supplier accepts it. Enforce it!

Increase card limits and unblock MCC restrictions accordingly to support the policy.
Educate employees about P-Cards and how they benefit your organization.
Train procurement and accounts payable staffs to decline PO and check requests when a P-Card should be used.
Quantify and report the missed opportunities, such as the lost process savings, to management.

Is your P-Card program producing savings or leaking missed opportunities?

Maximizing rebate incentives through good decisions, policies, and procedures is just one aspect of a successful P-Card program. Access additional tips from past blog posts and other complimentary education.

If your organization needs assistance with identifying improvement areas, consult with your card issuer and/or submit a contact form to Recharged Education to relay your needs.

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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Rebates rehashed, part 1—the dark side.

June 2, 2014 Lynn Larson

Dark side? Yes, when rebate clouds judgment, driving us to make decisions that, in the long run, negatively impact business operations and/or suppliers; see the two examples below. Rebates were not the goal in the early years of Purchasing Cards. The goal was purchase-to-pay process efficiencies, which result in a multitude of benefits. Rebates were simply a bonus. However, it did not take long for a gold rush to ensue.

Two Drawbacks of Rebate

Reducing P-Card Benefits

In pursuit of a rebate, you might complicate a process and/or detract from the benefits of card acceptance for suppliers. I remember putting inventory purchases on a P-Card, even though we had to add steps to the related receiving and accounting processes tied to the ERP system. Did the extra rebate make up for this? Unfortunately, we did not quantify the options, so our decision was made blindly. Is your organization making similar blind decisions, failing to weigh the costs against the benefits?

Another example is requiring your suppliers to provide an invoice that you end up paying via P-Card 30 or more days later. This does not benefit your suppliers. Card payments must offer rewards to all parties or we risk industry stagnation.

Choosing the Wrong Issuer

End-user organizations are notorious for sending lengthy RFPs to card issuers. Yet, they often choose an issuer based on rebate. You could end up with an issuer who is not the right fit for your organization and its needs.

Just because an issuer offers substantial rebate incentives does not mean they will partner with you and help you grow the program. Without a partnership, you might not even earn the great rewards offered. Are you maximizing your rebate incentives today? This is the subject of the next blog post. See also more rebate information.

The Gold Rush

History.com offers a nice synopsis of the California Gold Rush of 1849—one that reminds me of P-Card rebates:

Gold Rush: “As news spread of the discovery, thousands of prospective gold miners traveled by sea or over land to San Francisco…”
P-Card rebates: “As news spread of the money, thousands of organizations flocked to P-Card programs…”

Gold Rush: “Sam Brannan set off a frenzy when he paraded through town displaying a vial of gold obtained from Sutter’s Creek.”
P-Card rebates: “The end-user set off a frenzy when presenting at the conference, sharing the amount of their rebate check from the card issuer.”

Don't rush for rebates at the expense of P-Card best practices.

The Gold Rush declined gradually; people were eventually forced to move on. While rebates are still going strong, I wonder how long the high levels are sustainable. I have always likened a rebate to overtime pay. It is a bonus to be appreciated, not the foundation on which to build your lifestyle, er, card program. We should move on by moving back to concentrate on efficiencies.

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A move to redefine Commercial Card controls.

April 8, 2014 Lynn Larson

Commercial Card/P-Card controls are expanding. They are no longer limited to preventing and detecting card fraud. Transaction audits and process audits are not enough. We are also responsible for protecting against crimes like money laundering. This applies to everyone, including end-user organizations and providers.

Cardholders’ Personal Information

At least one large card issuer has already redefined the Commercial Card application process by requiring personal information on all cardholders, such as an employee’s home address, date of birth and country of nationality. Corporate liability does not matter. Issuers need to know who the cardholders are, regardless of whether end-user organizations perform credit checks and background checks on their employees. After all, if a Commercial Card is used to facilitate money laundering or support terrorist activity, a spotlight will be on the issuer and litigation is sure to follow.

Why all the fuss now? The Bank Secrecy Act (BSA)—sometimes referred to as the Anti-Money Laundering Law (AML)—is nothing new. However, subsequent laws, such as those stemming from the Patriot Act, have added to the provisions. Banks (issuers) might just be behind the times in enacting a process for Commercial Card programs.

Action Items for Your Organization

As an end-user organization, what can you do? Employees may resist against providing personal information on a Commercial Card application, but, as individuals, our information is already “out there”—with our medical providers, insurance agents, accountants, banks, etc. Ensure card applicants understand the rationale and regulations behind the requirements. Such information serves a clear purpose. Can your organization do more to know who its employees are? Increasingly, end-users are doing “OFAC checks” on their suppliers, utilizing the Specially Designated Nationals List (SDN). Are you taking similar measures for employees? Protect your organization by making the move to redefine your internal controls—for Commercial Cards and more.