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Lessons Learned in Developing and Implementing a Purchasing Card Policy

Introduction

An effective policy can be a critical success factor for any Purchasing Card (PCard) program.  While the investment in time and resources to create a new policy (or update an existing one) can be significant, this effort can result in streamlined program administration, better controls, higher overall levels of cardholder satisfaction, and increased card usage.

Company Experience

Recently, a Fortune 500 company with over $12 billion in sales and 50,000 employees, was featured on a Peeriosity PeercastTM in which they shared their recent experiences in rolling out a new Purchasing Card policy.  This company has a centralized global program with cards in North America, Asia, and EMEA and they utilize Citibank MasterCard and Visa.  They have over $200M USD in annual spending on the PCard, with 4,000 cardholders.  Their PCard program started in 1995 in the United States, and then expanded to Canada in 2010, EMEA in 2014, and Asia in 2016.

As the company began the development of their PCard policy, one of their first steps was to solicit input from their key stakeholders.  This included the VP of Purchasing, Internal Audit, Compliance, the Corporate Controller, Divisional Controllers, and Country Controllers.  Some of the key steps that they followed included:

  1. Define what is a Purchasing Card
  2. Define a limit structure
  3. Set restrictions and block MCC categories
  4. Define responsibilities of all those involved, including the cardholder, approver, Purchasing Manager, and Controller
  5. Define the types of purchases that can be made with a PCard and how it complements the existing Procurement and AP processes
  6. Clearly define what is to be charged on a PCard vs. a Travel Card
  7. Identify allowable policy exceptions

The company then went into greater detail for each of these key steps, which is included in the Peercast Results section for this session.

Some of the lessons learned from this successful initiative include the following:

  • Don’t set the single purchase and monthly limits too low or account maintenance efforts will increase and you will push transactions to other purchases methods that are best completed using a PCard
  • Restricting too many MCC categories will result in an administrative nightmare for PCard administrators
  • Refuse to believe the comment from your locations that “our vendors do not accept cards”

iPollingTM Results Review

A poll developed recently utilizing Peeriosity’s iPollingTM technology provides some additional insight related to Purchasing Card policies at major companies across the globe.  The first poll question looked at the frequency the Purchasing Card policy is reviewed for changes and updates.  Interestingly, for the majority of companies (60%) no regular time frame is followed for this practice.  In addition, 20% of the companies perform an annual review, while 15% do so every two years.

The second poll question then focused on what method is most commonly utilized at the surveyed companies to train employees on the use of the PCard.  For more than half of the companies (52%), cardholders are expected to read the policies and guidelines independently.  The utilization of an online tutorial was also a popular response, with 33% of the companies using that type of training mechanism. 

Some of the comments made by Peeriosity member related to this poll include the following:

Computers & Electronics Member: The PCard policy is part of the larger Indirect Procurement policy and is therefore owned by Indirect Procurement. Also, the number of PCard holders is limited to only 600 employees in North America, who are well-trained (typically project managers or admins), are familiar with the policy and know where to find it in case there are updates.

Energy & Utilities Member: We seem to be constantly reviewing our Purchasing Card policy as priorities change. Several years ago, we reduced the use of it greatly due to uncontrolled spending. More recently, we are trying to increase its use due to the cost of payment processing.

Consumer Products & Services Member: We don’t have a standalone P-Card policy, but rather it’s embedded in our Indirect Purchasing Policy (which is reviewed/revised every 3 years).

Service Industry Member: We use a combination of on-line training and the expectation that employees are notified of and read the policy updates.

Computers & Electronics Member: We have multiple training methods for our policies.

Consumer Products & Services Industry: We update the policy as needed, which may be one time per annum or multiple times per annum, as we identify changes that are required to ensure the policy accurately reflects compliance requirements with the program. Our primary and always available training method is an online tutorial and required certification quiz. In addition, we readily provide online policy and guideline access that cardholders can review, as needed. Finally, we conduct special training sessions, as deemed necessary and appropriate, per special situations or requests.

Closing Summary

Developing a comprehensive Purchasing Card policy can be a significant effort, but will often result in improved administration, a more effective control structure, and increased card usage.  In addition to simplifying the purchasing process for users, a big benefit is cost avoidance, since purchasing card transactions are significantly less expensive than other purchasing methods. When this is followed by a successful policy roll-out to cardholders, combined with a well-designed process to train new cardholders, the level of policy violations and exceptions should be significantly reduced. 

How effective is your company’s current Purchasing Card policy?  Is it time to consider a comprehensive review of the policy and an update, if necessary?

Who are your peers and how are you collaborating with them?

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“PeercastsTM” are private, professionally facilitated webcasts that feature leading member company experiences on specific topics as a catalyst for broader discussion.  Access is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from attending or accessing discussion content.  Members can see who is registered to attend in advance, with discussion recordings, supporting polls, and presentation materials online and available whenever convenient for the member.  Using Peeriosity’s integrated email system, Peer MailTM, attendees can easily communicate at any time with other attending peers by selecting them from the list of registered attendees. 

“iPollingTM” is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from participating or accessing content. Members have full visibility to all respondents and their comments. Using Peeriosity’s integrated email system, Peer MailTM, members can easily communicate at any time with others who participated in iPollingTM.

Peeriosity members are invited to log into www.peeriosity.com to join the discussion and connect with Peers.   Membership is for practitioners only, with no consultants or vendors permitted.  To learn more about Peeriosity, click here.



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