Purchasing card programs have been around since the 1980s, but p-cards still represent a minute percentage of total corporate transactions. In fact, according to the Commercial Consumption Expenditure Index put out by card company Visa, purchasing cards account for just 2 percent of B2B spending in the United States. The fact is that paper continues to dominate B2B payments, with checks accounting even for 43 percent of purchases through e-procurement systems, according to the 2003 Purchasing Card Benchmarking Study conducted by Richard Palmer and Mahendra Gupta of RPMG Research.
Not surprisingly, the major card companies and issuers are continuing to roll out new tools and services to help enterprises get the most out of their p-card programs and to encourage broader adoption and use of the cards. Supply & Demand Chain Executive recently spoke with representatives of American Express, MasterCard and Visa, as well as card issuer GE, to find out what 2006 holds in store for their respective p-card offerings, and what we learned may give you cause to take another look at your company's current purchasing card program.
With enterprises looking under every rock to find new ways of achieving savings, the card companies are offering new tools that give organizations increased control over their expenses. Dana Kirchman, vice president, global B-to-B payments at American Express, says that the tools can bring dollars straight to the bottom line. American Express, for example, is launching a Web-based reconciliation platform, dubbed "American Express @ Work CPC Reconciliation," intended to give company executives daily oversight over expenses. "In as little as 24 to 48 hours after the purchase, your purchasing manager or business owner can go online to review and reconcile their transactions right away," says Kirchman.
This type of tool can be particularly useful for giving companies oversight over expenses that previously were paid with cash. One client of American Express, a major motion picture studio, issued cards to production assistants on movie sets rather than following the old practice of handing out wads of cash on a daily basis. By switching to a purchasing card, not only did the company eliminate the security and financial risks associated with cash, the online system gave Purchasing the round-the-clock ability to issue and cancel cards, set time and spending limits, include or exclude certain suppliers, and monitor charges. In addition, with more expenditures captured on the cards, the company eliminated costs of invoice processing and payment for most in-production expenses, and it gained a clearer picture of its total spend, arming it with ammunition to negotiate better deals with suppliers.
In addition, American Express is offering a Spend Analysis Workbench solution, which analyzes a company's accounts payable (AP) data to provide better visibility into the enterprise's indirect spend and to identify opportunities to move portions of that spend onto the company's card program. This benefits the company by increasing the spend running through more efficient and cost-effective payment channels (naturally, American Express benefits from the increased card activity as well). The card company can also provide benchmarking information, giving a customer an idea of how much it's spending on a particular commodity versus its competitors.
GE, a card issuer that works with MasterCard, also is offering new tools to help companies gain increased control over their spend. Specifically, GE provides a service, called Opportunity Analysis, that involves the company's consultants running an analysis of a client's AP file to determine which of the merchants used by the client currently accept MasterCard but are still getting paid by check. "We're getting a snapshot of your vendor base and determining where the opportunity is to go electronic," says Michael O'Malley, marketing manager with GE Corporate Payment Services.