The Benefits of Using Purchasing Cards in Accounts Payable

Thinking about starting or expanding the use of purchasing cards in your organization? Consider the benefits of using purchasing cards. For example, with P-cards, you can reduce the time and cost of paying for a variety of business purchases, and you can also significantly streamline the procurement process by reducing purchase orders and paper checks. Plus, P-cards are widely accepted among vendors, many of whom will store your P-card information on file as an added convenience.

In addition, vendors can process P-card payments using the same POS terminal or online merchant terminal used to process other types of payment cards. For example, let’s say you owe your office products vendor $2,040.65 for an order. You can fund the office products vendor’s P-card for the exact amount of the invoice and send a remittance advice to the vendor, authorizing them to process the payment. The vendor can then process the payment as outlined in the remittance advice.

P-cards offer both buyers and suppliers many benefits.

Benefits for Buyers

• Establishing P-card accounts for each supplier enables better expense tracking.
• Issuing P-cards can help reduce fraud and unauthorized spending by setting credit limits on each card account tailored to the expected payment use of that account. Each time an invoice is approved, the P-card assigned to the vendor can have its credit limit increased from $0 to match the amount of the authorized payment. This prevents “at will” charging of the account by the vendor.
• Designating the Merchant Category Codes (MCCs) on vendor-specific P-card accounts also helps prevent unauthorized payments.

Reporting on payments to vendors becomes as easy as looking at the historical transactions on specific P-card accounts.

Benefits for Suppliers

• Purchasing cards can be processed through the same POS or online merchant terminals used to process other payment cards. This makes them easy and cost-effective to accept.
• Storing one P-card account number for an organization simplifies and speeds the payment process by having one account number on file rather than managing several different credit accounts from different departments or employees within the same purchasing company.
• Accepting P-cards ensures guaranteed payment (when processed correctly). If the P-card account number is kept on file, vendors can process the payment as soon as they are authorized to do so. No more waiting for the check in the mail — faster payments mean improved cash flow.
• Expanding the use of P-cards in your accounts payable process can result in significant cost and time savings for your business. Plus, developing a trusted relationship with your vendors — especially in a way that helps improve their cash flow — is a win-win for everyone.