Purchasing and Negotiation Training

The value, power, savings, and efficiency created through a well crafted procurement card (P-Card) program are still poorly understood three decades after their debut.  Let’s better understand all that the P-Card does.

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

What are P-Cards? 

P-Cards are a form of company credit card but are assigned to individuals.  Staff employees can buy goods and services by-passing the tactical procedure using requisitions and purchase orders. Authorized employees are enabled to buy what they need, within budget approvals, and use the P-Card to streamline the Procure-to-Pay (P2P) process.

Many controls can be programmed into the P-Card such as the amount of single purchase, the amount of purchases per month, and where the P-Card can be used.  For instance, administrative assistants can use the card at Office Depot but not Home Depot while the facilities technician can use the card at Home Depot but not Office depot.  The card can also restrict the universe of suppliers. For instance, if the corporate policy is to use “partner” suppliers with pre-negotiated service level agreements, the card will authorize transactions only with prescribed suppliers.

Who likes the P-Card? 

Good question.  Let’s look at the parties who benefit by the process.

1. The “requisitioners” by-passed the traditional purchasing entirely and get what they need.  No delays are consumed in the paper chase.  Incidentally, if you are one of those in the purchasing department who must return the wrong stuff bought by your requisitioners, you’ll be amazed how few “wrong” purchases are made by the card users who are responsible for their own time consuming return. We used to call this empowerment in the old days of soft skills buzz words.
2. The buyer is relieved of the tactical drudgery of shopping and placing orders for routine purchases.  The P-card system works best when purchasing pros centrally negotiate deals with suppliers that give the organization the best quality, service, delivery and price (the lowest Total Cost of Ownership).  An ideal application of the P-Card is for high volume low dollar purchases such as office or maintenance supplies.  After the deal is struck, the individual end users order and receive on a decentralized basis.
3. The suppliers are happy because they get paid in 48 to 72 hours.  This improves cash flow and reduces costs.
4. The supplier and customer companies each save the embedded transaction costs which average $150 for both buyer and seller.  Most credit card companies provide volume based rebates that are an issue for another blog post.

Types of P-Cards               P-Cards have become so popular that they have spawned a whole family of related cards.

• Travel P-Cards         Primarily used for employee travel and entertainment related expenses 
• Ghost P-Cards        the name derives from the fact that there is no card but merely an account number.  These are issued to a specific supplier or supplier type to process all the organization’s transactions.  Examples are monthly recurring charges such as utilities, insurance, employee benefits, rent, etc.
• Fleet P-Cards           this is merely a subset of the larger P-Card but dedicated to automobile expenses such as rental, lease, fuel, maintenance, and related vehicle expenses
• Pre-paid and single use P-Cards           cards preloaded with a spend limit and/or used for one-off high value purchases or some specific project spend.  These cards can sometimes be re-loaded.
• Pay Roll P-Cards or P/R-Cards  these are typically used for temporary help who sometimes may not have checking accounts.  These are used by the employees as a cross between debit and credit cards.

online training in purchasing, negotiation, and sales

Challenges to P-Cards for buyer and seller

While there are numerous benefits to P-Card programs, not all organizations are fully informed.  Some of the challenges and how to overcome them are:

• Accounting control                         many executives recoil at the idea of P-Cards.  This is a matter of education.  Some of my otherwise sophisticated clients resisted the advice to adopt a program until they were educated and persuaded of the many accounting controls built into and perfected in P-Card programs.  It is actually much easier to spot fraud and misuse in the digital world.
• System integration                        The early days of integrating the P-Card data manually are gone.  Manual integration into ERP systems creates more administration, cost and error. Ask the card issuer about how the card charges are applied in the general ledger for accurate accounting and budget control.
• Cardholder administration           P-Card programs generally require a person to oversee the issuing of new cards, terminate cards, monitor activity and communicate with the issuer.   This person, the Card Administrator, typically assigns dollar limits and restricts suppliers in concert with purchasing, finance, and management inputs.
• Supplier resistance                       Suppliers pay a user to become a credit card acceptor and as a result not all suppliers participate in P-Card programs.  This obstacle can usually be eliminated with a little education, particularly as to quick payments.