What are P-Cards?
A Purchasing Card (P‑Card) is a type of commercial credit card that allows organizations to take advantage of the existing credit card infrastructure to make payments for a variety of business expenses. P-Card is one of many payment methods that an organization typically uses; other payment methods include checks, automated clearing house (ACH), wire transfers, other card types, etc. Organizations that use P-Cards come from the Corporate, Education and Government sectors and are often called "end-users.”
The term "P‑Card” pertains to both plastic credit cards and non-plastic account numbers. P-Cards are also known as Procurement Cards, Payment Cards, ProCards or similar terms. Other types of Commercial Cards include:
- Corporate Card – commonly used by organizations for employee travel and entertainment (T&E) expenses; also referred to as a Travel Card
- One Card – a single charge card that combines procurement with T&E and, in some cases, fleet and phone charges
- Fleet Card – a card product used by organizations to pay for fuel, maintenance, repair and related expenses on company vehicles
- Business Card – a credit card targeted for smaller businesses (in lieu of a P-Card), commonly used for a variety of expense types (e.g., goods, services, travel, etc.)
Complementary Solutions
In addition to the "card” products defined above, an organization may take advantage of complementary solutions, such as:
- Debit Cards – declining balance or controlled value products for which transaction amounts are deducted from the pre-loaded card value; typically fits special niche of short-term and/or "isolated” expenses, such as employee relocation, meetings/events, travel per diem, etc.
- Automated Payables – a combination of electronic invoicing plus payment automation; these solutions are also known as electronic payables, push payments, straight through payments, buyer initiated payments and electronic invoice presentment and payment (EIPP)
An automated payables solution may or may not fall within the realm of the card industry, as some function outside of the card infrastructure. However, solutions offered by various card providers do utilize the card networks without any card issuance per se. These solutions generally involve a supplier invoice and end-user approval process, followed by a "behind-the-scenes” payment to the supplier through the card network. Click here to access more information about complementary solutions (e.g., automated payables).
Why Use P-Cards?
The traditional procure-to-pay process is costly
The transactional, or process cost, of using a traditional procure-to-pay process—often involving a requisition, purchase order, invoice and check payment—is the same regardless of the dollar amount of the purchase. In other words, the process cost of a $25 purchase is the same as a $10,000 purchase. Often, the process cost exceeds the value of the item being acquired (e.g., the cost to acquire a $25 wrench may exceed $100). Estimates of the process cost of the traditional process range from $50 to $200.*
A P-Card program simplifies the process
Most organizations recognize that a large number of check payments are made for low-value items to a large number of suppliers—a costly, inefficient process. When the payment method is switched from the traditional process to a Purchasing Card, efficiency savings range from 55% to 80% of the traditional process cost.
Overall, P-Cards provide a means for streamlining the procure-to-pay process, allowing organizations to procure goods and services in a timely manner, reduce transaction costs, track expenses, take advantage of supplier discounts, reduce or redirect staff in the purchasing and/or accounts payable departments, reduce or eliminate petty cash, and more. Originally, P-Cards were targeted for these low-value transactions, but their use has expanded as the industry has grown.
Become an NAPCP subscriber today to gain access to the Career Center, participate in polls and surveys, receive P-Card news and event notifications, and gain access to some P-Card resources.
Next page (P-Card Process and Key Players)
*As reported in the 2007 Purchasing Card Benchmark Report by RPMG Research Corporation
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