The Purchasing Card Expands Its Reach

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Purchasing cards, now a standard payment tool for corporations and public sector organizations, are expanding on many fronts. According to Payment's New Land of Opportunity, a report by J.P. Morgan, companies are adding new categories of spend, enrolling more suppliers, broadening internal distribution with their employees and globalizing their programs. As a result, Purchasing Card spend in North America is predicted to reach $218 billion by 2012, nearly double its 2005 volume of $110 billion¹.

Expanding the Scope of Use
Originally, many companies designated the Purchasing Card for Maintenance, Repair and Operations areas, such as office supplies, electronic equipment and maintenance. Now, they are expanding its focus to include services, moving expenditures, advertising agencies and temporary labor agencies. With this expanded scope come increased benefits, including:

Improved compliance with corporate policies and procedures,
Rebates,
Increased float and/or early-pay discounts,
Robust, detailed reporting, which fuels more favorable supplier discounts,
Support for corporate efforts to reduce the number of suppliers and tighten relationships with preferred vendors, and
Payment that is integrated with e-procurement systems.

The savings and efficiency improvements have been significant: Companies that used Purchasing Cards instead of checks reported process savings of $69 per transaction (compared to the traditional purchase order process) and a 68 percent reduction in procurement cycle time².

For instance, a world-famous cosmetics brand grew its Purchasing Card program to $50 million within a year of its launch. In addition to traditional spend categories, the business uses the Purchasing Card to pay for indirect costs, such as modeling agencies, in-store security services and retail employee uniforms. As a result, more than 1,500 of the company's top vendors now accept Purchasing Card payment. Similarly, a major U.S.-university shifted an estimated 95 percent of its total procurement spend to its Purchasing Card program – and reduced its purchase order requisitions by 80 percent within three years.

Taking the P-Card Around the World
Another new frontier for Purchasing Cards is globalization. According to MasterCard, although only 27 percent of companies have multinational programs, companies that have reaped benefits of greater Purchasing Card spend in the United States are expanding usage internationally³. As more finance organizations adopt the shared services model, many issues around globalization, such as multiple currencies, VAT tax reclaim, technology integration and regulation, are being successfully addressed.

Case in point: a multinational hotel company that is rolling out its Purchasing Card program one country at a time linked its expansion plan to its shared services growth and the adoption of a global finance platform. To ensure buy-in, the company provides one-on-one training to hotel general managers when introducing the program. The card has proven its value through significant rebates, posted to individual hotel properties, which helps reinforce its financial benefit. The company's Purchasing Card program has expanded to more than 80 hotels in the United Kingdom, with its German and Caribbean-based programs also well under way.

Improving Control and Streamlining Processing
The Purchasing Card continues to prove itself to be an effective tool, and has emerged as the best tool for indirect spend. Its acceptance with suppliers also continues to grow. Companies committed to reducing paper processing realize that that the Purchasing Card can help them meet that goal, as well as helping to better control spend. To find out how your company can benefit from Purchasing Cards, download Payment's New Land of Opportunity here or contact your J.P. Morgan representative.

¹ RPMG Research Corporation, "2007 Purchasing Card Benchmark Survey."
² RPMG Research Corporation, "2007 Purchasing Card Benchmark Survey."
³ Purchasing Magazine, December 2009.