Payments Make the Switch to Plastic

P-cards can drive savings to your company's bottom line. So what's holding you up?


By Jim Pratt

These days, in the fight to survive — much less thrive — in this economy, companies are continuing to look for ways to drive incremental savings to their bottom line. If this sounds familiar — and your business is one among many looking to streamline internal processes, boost efficiency and reduce costs — I suggest you look no further than your own procurement and payment method.

When it comes to purchases, we all pay by the same rules. But what if one method of payment could actually save us a bit of time and money in the process, too? More and more companies are looking to "go electronic," automate payments to vendors and smooth out and reduce costs from previous payment inefficiencies. These companies are opting to provide their employees with purchasing cards, or p-cards, and to convert their payment process into an entirely electronic transaction, known as "e-payables."

And the trend is catching on, as businesses small and large are beginning to put aside the checks, pull out the plastic and slide up to a computer to do business. According to a recent Ernst & Young cash management survey, business-to-business (B2B) electronic payments now compromise 40+ percent of cash management revenue and are growing at double-digit rates.

Electronic versus Non-electronic Payments

Writing a check has always been the traditional method of payment for most businesses. To this day, 65-75 percent of business payments are still made by check. Yet the drawbacks are overwhelming.

Ask yourself, what is the cost to my business of having to wait for a check to get paid? Many companies are forced to take out lines of credit as they wait for their clients or partners to submit payments, which oftentimes are lost in the mail or cannot be cashed because the wrong amount or a misspelled name was written on the check, which sometimes do not show up at all. On the other hand, many businesses struggle to keep up with too many invoices and checks, all written by the same company for multiple, separate purchases. And then there are the more menial annoyances of having to get to the bank before it closes, or being forced to follow up when your check is lost or never shows.

The point of p-cards and e-payable programs is to take unnecessary costs and time like this away from company processes. Any time a business uses a physical piece of plastic, it is demonstrably quicker and cheaper than a check.

Basic Elements of the P-card

P-cards require little work on your part. Business owners can set purchasing restrictions on each card that are relative to the employee who is using it; meaning you can determine how many times an employee's card can be swiped in a given day, how much they can spend and at what locations.

Every time an employee makes a purchase, a transaction detail is filed online in a database you can manage via an online account. This real-time information provides you with the ability to monitor company spending closely and proactively, and react quickly if an unusual purchase pops up.

Coupled together with an e-payables program that allows you to pay for purchases over an electronic network, p-cards can help you not only maintain strict control over finances but also reduce fraud, shorten payments times and increase overall customer satisfaction as compared to traditional check processing.

The Emergence of E-payables

Originally positioned to circumvent the purchase order process, p-cards in the past were used mostly for the purchase of small-ticket items only. At the time, corporations still preferred the integrated reporting and controls of the traditional procurement process for large-ticket requisitions.

Now, with e-payables, businesses are beginning to rely on the cost-effective purchase and procurement process of p-cards for both their small and large expenses. The e-payables process is simple:

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