Cut Costs and Increase Control

Mary Sagerman
June 3, 2009 | COMMENTS

Purchasing cards can be a welcomed tonic in tough times. From 2005 to 2007, annual purchasing card spending in North America grew from $110 billion to $137 billion, as reported in the “ 2007 Purchasing Card Benchmark Survey Results” by RPMG Research Company. Continued growth, at a rate of about 12 percent per year, is expected between 2007 and 2012.

Streamline Your Workload

Businesses are finding there is no better time than right now to streamline their accounting processes by eliminating invoice processing and reducing checks. A purchasing card program is a quick and easy efficiency opportunity—and the optimum program provides you with resell opportunity to your business members. With a purchasing card program, you can:

• Automate your transaction-reconciliation workflow; upload all data to financial systems with one click.
• Optimize cash flow; increase float time on funds.
• Automate purchasing controls via online approval workflow with dynamic, real-time spending limits.
• Improve management visibility into spend activity for better forecasting, budgeting, and planning.
• Earn optimum rebates on payments to your existing vendors, based on spending.
• Deepen relationships with sponsors, business members, and SEGs.

Technology is the key to “optimizing” a purchasing card program and streamlining your workload. The technology must manage your payment and reconciliation processes for you, which will significantly reduce the time and money spent on processing invoices and responding to inquiries. It may be made up of multiple programs including travel, entertainment, and out-of-pocket expense management in an all-in-one program.

A Little History

The marketing of purchasing cards by financial institutions began in the early 1990s as they sought to find a way out of the storm of paperwork associated with the traditional goods acquisition and payment process. The purchasing card market's growth in the past 18 years has been consistent and strong. The patterns of purchasing card use and benefits vary widely by card-using organizations and are becoming increasingly diverse as new card technologies emerge in the market.

Get the Best

Credit unions should take advantage of a purchasing card product that marries a network branded card to technology that holds the key to the necessary bells and whistles—which will ultimately deliver an unprecedented level of control and workflow automation. The program should be malleable in that it can be tailored for your purchasing policies and business rules. Be sure to seek a web-based commercial card program management solution for procurement and travel transactions that includes multiple programs in “one.”

As reported in the “ 2007 Purchasing Card Benchmark Survey Results”:

• Purchasing card use is generating overall transaction cost savings of more than $34 billion per year in North America ; a cost savings of $69 per transaction when compared to the traditional purchase order-driven acquisition process.
• Sixty-eight percent of organizations report real reductions in the manpower required to conduct the purchasing and accounts payable activities.
• Twenty-two percent of respondents reported that their organization had used purchasing card spending data to obtain a higher discount for goods or services from a vendor.

If you do not have a purchasing card program, or you have one but it is not complemented by the finest technology, you are not reaping the efficiencies and control your credit union deserves. In addition, if you are looking to enhance your business product line to better compete with banks, consider reselling a purchasing card program to your business members, sponsors, and SEGs. Not only will you deepen relationships with your existing members and even gain new members, but you will also dramatically increase your rebate-earnings potential.

One last point to consider: Be sure the technology is web-based so there is no IT hardware or software to implement or maintain, or any reoccurring expense aside from the implementation cost.

Mary Sagerman is product manager of payment systems for WesCorp. This article was reprinted with permission from Credit Union Digest, the publication of the California and Nevada Credit Union Leagues.