The usual selling point in favor of procurement cards is the considerable reduction in the number of purchase order and payment transactions to be processed. Two additional points are made by professors Mahendra Gupta (Washington University) and Richard Palmer (Eastern Illinois State), who recently issued a Purchasing Card Benchmark Survey.
They point out that the use of a corporate-wide procurement card system reduces the number of suppliers in the accounts payable master file by an average of 31%. Think of what that means for reducing the number of W-9 forms, address update transactions, and vendor files! Though hard to quantify in terms of dollar savings, this represents a significant reduction in accounts payable labor. It could also have implications for determining how much further a procurement card program could be rolled out, simply by measuring the level of incremental reductions in the master file that could potentially be achieved.
Another finding is that procurement cards result in a 68% reduction in the procurement cycle time (presumably through the elimination of purchase requisitions and purchase orders). This has implications throughout the company, since faster procurement can mean faster project turnaround time in the manufacturing and engineering departments. This can be a crucial improvement when a company adopts the strategy of providing high-speed service that is presumably linked to higher margins.
Thus, procurement cards can reduce systems maintenance work in the payables department, while also improving the completion time for customer orders. Both factors are worth considering.
The Gupta and Palmer survey also covers the use of “ghost” accounts, card program optimization techniques, and card program performance. Their survey can be purchased on-line at www.rpmgresearch.com.