Folks, A few high-level comments on p-cards to help structure this discussion a bit.
First, p-cards address the needs of purchasing departments, and have been billed as a means of decentralizing purchasing decisions and eliminating the expensive purchase order process for buying supplies, parts, repair services, and other relatively low-cost items. The frequently cited example is purchase of office supplies, but most things that can be ordered out of a catalog probably qualify. In the situations I am familiar with, the central purchasing department enters into a contract with a p-card vendor (e.g., AmEx, Visa, MasterCard) to have p-cards issued to staff throughout the organization. Then, instead of filling out purchase order requisitions for catalog items, staff will instead place their order directly with the supplier using the p-card exactly like a credit card would be used. This not only eliminates the PO requisitions, it also eliminates the purchase orders and the associated labor to fill them out and issue them to the suppliers. In addition to saving substantial cost, p-card usage can cut down on delay (and much of the internal irritation with purchasing departments). Given that typical industry cost figures for issuing purchase orders range from $50 all the way to a couple of hundred dollars, it would appear that the p-card solution can be quite cost effective, even factoring in the credit card processing fees, which are typically much higher than for other payment instruments. As long as the value of the orders is below a few thousand dollars, then these fees are favorable to the internal costs associated with purchase orders. However, reality can be different from theory. Giving lots of people throughout a company the ability to go off and order what ever they want from catalogs does lead to a few "expense control problems." So, the p-card providers generally offer purchasing departments the option to establish various controls or rules that will be enforced on the p-card buyers by the p-card processor. For example, a secretary might be restricted to only buying from an office supply catalog, while an engineer might be restricted to purchases from only specific parts catalogs. Other rules might place dollar restrictions on purchases, or restrict the categories of items that can be purchased from a supplier. Some of the notes to this list have implied that p-card services offer the ability to restrict purchases to specific items out of a catalog, perhaps by filtering against SKU numbers. However, my impression is that these sorts of controls are typically implemented by the supplier as part of their master contract with the purchasing department. Given the sheer variety of catalog items out there, it is generally easier for suppliers to implement these sorts of controls rather than p-card processors. As a more recent service to purchasing departments, p-card providers have developed rich reporting services that allow both A/P and purchasing departments to analyze expenses in aggregate, but also to break expenditures down so that they can be assigned to various internal business units or accounting codes. Similarly, these reports can be used to analyze how many purchases of specific items (probably indexing off of SKUs) were made. This allows purchasing to determine if appropriate purchases are being made, and to refine their contracts and purchasing restrictions with the suppliers. For example, the reports supplied by p-card vendors can be used to see if a lot of staff are purchasing an expensive SKU, when a less expensive SKU could be substituted. Similarly, purchasing can look for patterns of abuse, such as the staff member who buys far more supplies than could reasonably be used. As a further refinement of these services, p-card vendors have begun to offer enhanced integration with A/P, perhaps through use of EDI invoices and statements. This can help further automate the processing of purchasing information all the way through to the general ledger. It is my understanding that many ERP systems take advantage of this automated data exchange between the buying organization and the p-card service provider. This might allow a department manager to use the ERP system to analyze department expenditures, but where the data came from the p-card provider. I recognize that the above description glosses over a lot of details. I hope I have not misrepresented how things actually work. One additional point worth noting is that the p-card business is competitive, and different p-card service providers offer different capabilities and services. Finally, it should also be clear that p-cards address only a subset of the transactions that take place between businesses. To David Goldberg's point, there are a lot of B2B purchases that still require purchase orders, shipping notices, and invoices--whether electronic or paper. In many of these cases, other payment options are either preferred, or necessary, and the ability to carry rich information with the payment may be essential. Regards... -- ...Chuck Wade CommerceNet "Setting the business agenda for global electronic commerce" +1 508 625-1137 Office Phone/Voice Mail +1 309 422-9871 Fax Service http://www.Commerce.Net/initiatives/sipayment/ Russ Jones wrote: > > Anders, > > >To be honest, being a European I don't have all the information > >concerning P-cards as they have failed here. But AFAIK there > >is a profile register held by the card issuer. I.e. this is the > >centralized part of this system which I don't like. > > Don't feel like you are out of the loop. I believe most people in the U.S. > don't have a lot of information on purchase cards either. > > Independent of P-cards, it seems to me that the issuing bank already has a > centralized system that has a number of parameters they use to authorize or > deny transactions. My sense is that P-cards are just a slight tweak > technically (a few extra fields that are checked to possibly deny > transactions) to what the card issuing bank is already doing. The beauty of > this, to the banks anyway, is that it can be packaged as a new product. > > Now that I think about it, kid cards such as Visa Buxx, are pretty much the > same thing as well. Another way to take the same underlying system > (checking transaction attributes against account limits) and repurpose it > as another product for another market. > > I would welcome input from anyone on this list that could point to good, > online resources that describe how purchase cards work. > > - Russ
