The magic of Declining Balance Cards.

June 22, 2015 Lynn Larson

No magic wand needed. Declining Balance Cards are readily available and can help resolve different pain points, such as managing expenses for infrequent travelers, capital projects, and meetings/events. Two end-users shared their experiences with me, highlighting the value of these cards.

Successful Uses

Infrequent Travelers

Many organizations, in their travel expense management efforts, face the dilemma of how to address employees who travel for business only occasionally (e.g., less than twice per year). For Intermountain Healthcare, the best answer is Declining Balance Cards, which they call a Single Event Travel (SET) Card. Margie Strong, Senior Card Program Coordinator, summarizes the benefits of their program, “Prior to implementing SET cards, infrequent travelers submitted reimbursements, creating not only a large loss in rebate to our card program, but a significant loss in recapturing state sales tax due to our tax exemption status.”

The program management team maintains a block of inactive cards, so they can readily be set up and issued. This includes establishing an appropriate card limit, travel-related Merchant Category Codes (MCCs) and expiration date. When loading the limit, one lesson they learned early on was to add some padding to the employee’s estimated travel expenses to help prevent transaction declines during the travel period.

In Review: What They Are

A Declining Balance Card (sometimes called a Controlled Value Card) is related to a P-Card, but spend limits do not refresh each month; rather, a spend limit and/or expiration date are established up front, giving it a specific “shelf life” to accommodate a special project, purpose or budget. As such, the card might be called a Meeting Card, Project Card or similar.

Consider how Declining Balance Cards could add a little magic within your organization to solve an ongoing problem.

Communication is critical to their success. They post information about the SET Card program online, offer a fact sheet, promote within internal newsletters, talk with stakeholders, etc. Overall, the program provides an efficient and controlled solution to what was an ongoing problem in the past. For more details about the Intermountain SET Card program, including how they combat occasional acceptance issues due to no individual name on card, please visit the related webpage.

Capital Projects/Federal Grants

Declining Balance Cards can equally succeed in the public sector. JoAleen Ainslie, CPCP, is an advocate, recalling her previous job experience with a public school district. The cards worked well for multiple federal grants and a capital project related to the building of a new elementary school. She shares, “To me, Declining Balance Cards are a wonderful financial payment vehicle with built-in control mechanisms. The cards prevented anyone from going over budget and created all kinds of pertinent reporting data to track required documentation for retrieval prior to the grant expiration dates/clean up periods. Because of the ability to assign dedicated accounting elements, I could generate reports on demand, without waiting for a cost accounting reconciliation. We also utilized MCC controls to prevent the cards from being used for items not allowed in grant parameters.”

Given the various possibilities, Declining Balance Cards can enhance your payment toolkit. Have you explored how they could help your organization?

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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Felony charges and fraud-fighting tactics.

June 10, 2015 Lynn Larson

Since writing in February about Purchasing Card misuse by the Minneapolis Public Schools, I have seen two similar articles about other public school districts. There is a mix of questionable business purchases via P-Card and blatant personal purchases. However, the two stories are quite different, as described below. One involves felony charges and the other discloses a unique policy for missing receipts.

1. Felony Charges for Ex-Principal

As reported by the Star Tribune, a former principal for a suburban Twin Cities high school has been charged with three felony counts of theft by swindle, stemming from inappropriate P-Card use spanning more than a year. Purchases include flowers for his father’s funeral, gift cards and electronics. In addition, he purchased iPads for which “the location of the purchased equipment is unknown.” Released information includes copies of receipts, invoices and card statements. It appears to me that no one was monitoring his purchasing activity.

Be vigilant about finding the policy violators and invoking the related consequences. — Be vigilant about finding the policy violators and invoking the related consequences.

The lessons to take from this story are:

Monitor all cardholders.
Mandate documentation (e.g., itemized receipts).
Ensure purchases comply with policies.
Swiftly address fraud, misuse and abuse.

I cannot understand why any organization would be lax about these fundamental controls. This story is not about the problems with P-Cards, even though this is the message that some readers might receive. Rather, it is a story about the ignorance and/or laziness of the school district. To top the matter off, this man resigned at the end of last year, but the district had not taken any disciplinary action against him prior to that.

2. District Takes Hard Stance

Saint Paul Public Schools (SPPS) is trying to avoid the hot water Minneapolis was in. While they, too, have had inappropriate P-Card purchases, SPPS has cracked down.

Missing Receipts

Like other organizations, SPPS requires itemized receipts for every purchase, but there is no “missing receipt” form for cardholders to use as a backup. They suspend the card and instruct cardholders to write a personal check for purchases lacking the required documentation. And, yes, they have enforced this. One director-level employee who said he did not know about the receipt policy repaid the district $130 for missing travel-related receipts.

It is unclear how SPPS employees are trained prior to card issuance. However, by requiring employees to sign an internal card agreement to confirm their knowledge of policies, an “I didn’t know” claim does not hold.

Questionable Business Purchases

SPPS also investigates questionable purchases (e.g., expensive yoga pants for a gymnastics team and more than $800 for dozens of potted poinsettias). They ask cardholders for justification and the business purpose, and their policy directs them to be as frugal as possible. I appreciate the intent of such policy language, but, unless there are specifics to define frugal, everyone can interpret differently. Certainly, for public sector organizations, training for cardholders and managers becomes even more critical. In the private sector, an organization might be more lenient in allowing departments to decide how to spend their budgets.

Monitoring activity and consistent policy enforcement set the right tone. Employees know they are watched.

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Has Level III data evolved or dissolved?

June 2, 2015 Lynn Larson

Level III data in conjunction with Commercial Card transactions is still not as widespread as buyers would like. Most suppliers, excluding the largest ones, are not even familiar with the term Level III. However, when a supplier does provide it, you expect the transactions to show details about each product and/or service purchased. Instead, you might see the data as one line item only, specifying an invoice number, quantity of one, and item amount that matches the grand total. Why? It can depend on various factors.

Lack of Integration and B2B Expertise

Diane Merrigan, Director of Enterprise Solutions, CardConnect®, agrees that one generic line of Level III data is not uncommon. She says, “The trick is the integration, if it happens at all on the supplier’s side. The supplier’s ERP/invoicing system must be integrated with card payment processing for the Level III data population to be automated. Without this, suppliers have to enter the data manually. If a purchase is comprised of, say, 50 items, few—if any—suppliers will manually input line-item detail for all 50. They will take a shortcut of entering one generic line.”

She also points out that a supplier’s credit card processor is likely not a business-to-business (B2B) specialist, so they do not understand what happens on the customer’s side and why the customer wants the data. The supplier is trained to input any data just to get a better rate [for card acceptance].

I also contacted a network professional for further insight about Level III data quality. He commented that the card networks are starting to incorporate some edits on data as it is submitted for settlement. He conceded that, while still not foolproof, it is getting better.

Differences in Commercial Card Products

I obtained a third perspective from another B2B payments expert in the acquiring business. He reminded me how Level III data was originally designed and intended for traditional Commercial Card products for which a transaction represents a particular purchase or invoice payment. He noted the advent of electronic payables solutions, like one-time use Virtual Cards, was a game changer. A single transaction often covers multiple invoices, creating a dilemma for suppliers since this scenario does not align with the design of Level III data. Fortunately, for buyers, the nature of electronic payables typically makes Level III transaction data unnecessary because they can capture purchase and invoice details in their ERP system.

Level III data can roll different ways. You do not always know what you’ll get.

Approaching Offending Suppliers

Whatever the reason, irrelevant Level III data with “regular” Commercial Card transactions can be frustrating. Buyers might be hesitant to raise the issue with suppliers, afraid that the supplier will stop accepting card payments altogether. Diane Merrigan observes, “The conversation is not an offensive one and suppliers should not take it as such. Buyers may have to explain how the information that the supplier inputs on their end transmits to them, as the buyer, so they can review and reconcile the purchase. When a supplier passes the enhanced data, it is like transmitting an electronic invoice at the time of the transaction.”

The other acquiring professional with whom I spoke recommends, “For traditional Commercial Card products, buyers have the right to ask for the correct data. If suppliers do not pass it, the end-user organization can raise the issue with their card provider.” This is certainly worth a shot, but it might not resolve the problem because the card provider and network are not responsible for data quality. There are no quick solutions.

What if you cannot convince a supplier to improve their Level III data by providing real line-item detail? Diane Merrigan suggests, “If the buyer is only receiving one line item, then make it count. Buyers should guide the supplier to input the best possible data into that one line to help with reconciliation or other activity on their end.”

Observations

In your experience, has Level III data progressed over the years, whether in frequency or quality? This has been a topic of discussion ever since I started in the card industry. I know end-users want enhanced data, but some do not use it even if they have it. One program manager told me they would incorporate a consistent process to use the data different ways if more suppliers provided it, but, for now, the limited availability does not justify extensive use. It will be interesting to watch whether Level III data becomes more or less important to organizations, especially as the usage of electronic payables solutions continues to grow.