The use of purchasing cards (P-cards) has been growing steadily since their introduction in the 1990s. P-card spending in North America increased by almost 22 percent from 2009 to 2011, when it reached $196 billion, according to RPMG Research Corporation’s 2012 Purchasing Card Benchmark Survey Results. That growth is being driven by P-cards’ ability to leverage automation and technology to streamline the purchasing process, helping business owners increase efficiency, save money, and gain insight into their spending patterns. However, the scope of P-cards’ potential advantages is tied to scale, so early-stage growth companies should conduct a careful analysis before launching a program.


P-cards are part of the commercial card product category, which also includes corporate travel and entertainment (T&E) cards, small business cards, and similar products. Commercial cards can be credit, debit, or prepaid cards. A P-card allows organizations to take advantage of the existing credit card infrastructure to make electronic payments for a variety of business expenses, goods, and services, according to the National Association of Purchasing Card Professionals (NAPCP).


According to a recent report from PayStream Advisors, the three most important benefits cited by organizations using P-cards are increased convenience for employees (72 percent), rebates and incentives from P-card issuers (67 percent), and lower processing costs (56 percent). The key drivers behind increased adoption of P-card programs are a desire to reduce procure-to-pay transaction costs, a push to eliminate paper, and a desire for better cash management.


A traditional procure-to-pay process usually involves a requisition, purchase order, invoice, and check payment, and it is the same regardless of the dollar amount of the purchase; the process cost of a $25 purchase is the same as for that of a $10,000 purchase. Estimates of individual transaction costs using the traditional procure-to-pay process range from $50 to $200, according to the NAPCP, meaning the process cost can easily exceed the price of the item or service itself in the case of smaller purchases. When the payment method is switched from the traditional process to a P-card process, efficiency savings range from 55 percent to 80 percent of the traditional process cost, the group reports, with P-card usage saving $63 per transaction, on average.


“P-card issuers tend to target their marketing towards existing businesses with substantial levels of annual revenue and a solid, verifiable financial track record,” explains Greg Hammermaster, president of Sage Payment Solutions. “The underwriting process can be fairly arduous, and online P-card management systems tend to be more focused on the mid-size and larger markets.”


Before embarking on a P-card program, you should conduct a thorough analysis to determine if it is right for your business, Hammermaster advises. Factors to consider include:

  • the cost savings you expect the program to provide
  • how widely the card will be accepted by vendors and suppliers
  • what kind of technology support will be required (accounting, information management, etc.)
  • your company’s current state of creditworthiness
  • the structure and controls you will have to put in place
  • risk management (protecting against abuse, misuse, and liability)
  • and what kind of support you will have to provide (implementation, training, cardholder support, etc.).


In some cases, developing businesses may be better served by alternatives to P-cards, some of which can provide many of the same advantages. “Business prepaid cards, for example, offer the same level of controls, such as blocking merchant categories and setting spending limits,” Hammermaster notes. Unlike P-cards, prepaid business cards do not require credit checks or underwriting, which can be important for business owners looking to keep their personal assets separate from their business liability. Some prepaid business card programs include other useful features, such as mobile apps that let cardholders view their balances and transaction history and request additional funds. “That lets the business owner or program administrator fund the cards instantly on an as-needed basis,” he says.


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