P-Cards: A Big Idea for Small Companies

While some challenges may be different, companies with sales of less than $1 billion have many of the same goals for purchasing card programs as bigger companies. Often, they have fewer resources, but they're still working toward more streamlined processes, improved relationships with suppliers and

At Woodward Governor Co. in Fort Collins, Colo., Richard Landerholm, supplier manager, is responsible for the company's p-card program. Woodward makes energy control systems and components for aircraft and industrial engines and turbines, and had $855 million in sales for 2006.

Landerholm sees card use as a way to streamline internal efficiencies associated with low-dollar MRO and other indirect purchases. Woodward has 240 cardholders who purchase about $6 million annually using the payment tool.

Another benefit is quantity and quality of spend data. "Pulling data from suppliers, I can see exactly what we spend and where we can improve," says Landerholm, who stipulates in agreements with several suppliers that they accept only p-cards as payment from requisitioners and that they provide level 3 line item detail on spending. The data, he says, helps his position when negotiating with suppliers. Another plus: Suppliers like quick payment. With p-cards, they're paid within 24 or 48 hours rather than the customary 30 or 60 days.

American Express, MasterCard, Visa and issuing financial institutions recognize challenges of purchasers at mid-size companies and have developed p-cards and other payment tools for them.

MasterCard

For companies with annual sales of less than $1 billion, MasterCard Worldwide in Purchase, N.Y., offers its MasterCard Corporate Multi Card to pay for travel, fleet and other purchases, typically small-dollar maintenance, repair and operations (MRO) items. MasterCard's Internet reporting tool called Smart Data OnLine provides consolidated reporting of purchases made by cardholders.

Use of the card with the Smart Data product automates the procure-to-pay process, helps with spend controls (for example, by limiting requisitioners to suppliers) and data capture and reporting.

New research by MasterCard of 500 companies with sales of $10 million to $1 billion shows many have small programs they began years ago. "They may not be completely deployed because the company doesn't have resources assigned to it," says Bruno Perreault, group head, small and mid-sized enterprises at MasterCard.

Mid-size companies tend to be more centralized, with the owner or business principals often making the decisions—and they like to control spending, he says. Yet, at the same time, management tends to be more flexible than at bigger organizations.

Mid-size companies look for data to track expenses and streamline processes. "They tend to use the cards to keep things simple rather than as a way to better manage suppliers," he adds.

Still, because of the work of card companies at enabling suppliers to accept their products as payment from big companies, cardholders in the mid-market can use the tools and receive enhanced transaction data necessary for reconciliation and expense management.

American Express

Monica Stavoe, vice president of business development at American Express in New York, uses a spectrum to describe the company's products and services available to mid-size companies.

"Mid-size companies want more practical, quick-to-implement tools," she says. "Larger companies have more complex environments and data capture requirements. So, we find it's not company size that dictates the payment tool, but complexity of need—often driven by accounting and regulatory requirements."

One challenge facing mid-size companies is change management. That is, moving from paper-based processes to using plastic as payment. An incentive: Suppliers like being paid faster, says Dorothy Mills, director of global implementations at American Express.

Mid-size companies tend to use the American Express corporate card product to pay for travel services such as airline tickets and hotel rooms and MRO items. Reporting provides data that lists these expenses as well as the suppliers from which cardholders made their purchases. "Use of the card gives the CEO or company owner spend transparency," says Mills.

Once mid-size companies using the card see their spending and begin to understand it, they may want to take it up another level, says Stavoe. That can mean use of supplier or ghost cards. How it works: The card company assigns one card number to one supplier. When employees make purchases through the supplier, the supplier uses the card number to pay for the purchases.

"Once they start pulling transactions out of accounts payable, we see users in the mid-market becoming very aggressive about putting lease and rental payments and services such as recruitment on the card," she says. "They can move quicker, and say, hey, this makes sense."

Stavoe and Mills say benefits fall into three categories: control, compliance and visibility.

Other products available to mid-size companies from American Express include its Savings at Work program.

U.S. Bank

U.S. Bank in Minneapolis uses a narrower definition for mid-size company. For it, mid-size means a targeted annual spend of $1 million to $2 million, which Robert T. Abele, president of U.S. Bank Corporate Payment Systems, says translates to about $500 million in annual sales. U.S. Bank issues Visa-branded purchasing card products.

"These companies are looking for automation," he says. "Like any business, they're operating in an environment where, especially if they are growing, they have margin pressures. Pricing their products and the need to become efficient is the challenge."

Abele says management is more centralized at smaller companies; they want products and services that are simple to use or a bit more turnkey. "They tell us, don't come at me with an army of solutions or an army of people. Make my life easier."

He suggests the U.S. Bank Visa commercial card to pay for purchases, travel and fleet. For card set-up, maintenance and reporting, mid-market companies use basic functionality of the company's Access Online management and reporting tool.

"It's about getting a single consolidated statement that can be looked at quickly to ensure there's integrity to the buy and that it all makes sense," he says.

For the mid market, U.S. Bank also offers Access Purchase, an e-procurement system from Elcom in Norwood, Mass. It has partnered with Concur in Seattle, Wash., to provide automated expense reporting for reconciling travel and entertainment expenses.