If you work in the procurement industry, chances are you’re familiar with Purchasing/Procurement Cards (P-Cards) and how they’re used. Essentially, a P-Card is a commercial charge card that’s very similar to a consumer credit card; however, it is issued and paid by an organization and used specifically for business expenses. There are many benefits to utilizing P-Cards, which offer convenience and simplify the purchasing process. These cards can be used to consolidate fragmented spend to a list of strategic suppliers and to take advantage of rebate programs, providing individuals with better pricing and increasing overall savings.
Because it accounts for such a large amount of company spending, many organizations are seeking to reduce indirect spend to cut down on procurement costs. However, to do this effectively, those in supply chain need increased visibility and better control of P-Card programs. By transitioning P-Card spend to an indirect procurement platform, companies can generate new opportunities for cost savings and take control of their indirect spending. There are many benefits to making this transition. For example, these cards can often be riddled with maverick spend that is therefore considered off-contract. P-Card spend also does not provide line level detail, which limits the ability to run analytics on usage.
If you’re looking to transition your organization’s P-Card spend to an indirect procurement platform, there are a few steps you can take to get started.
Analyze current spending
Before making the transition, you should review your organization’s current P-Card spend data and determine where spend is going. You will want to identify who the top suppliers are and which are the most commonly ordered P-Card items. By analyzing your current spending and identifying patterns, you can ensure your organization’s most commonly ordered P-Card items are in your procure-to-pay (P2P) system’s hosted catalogs or web forms. Some other things to make note of during your audit of the current system are average monthly spend, average number of transactions and earned rebates.
Implement new policies
You should begin rolling out new policies for P-Card management. Redesign current policies so that they promote your preferred P-Card usage and reduce the maximum spend for individual users. You can also implement a “No PO, No Pay” invoice policy that enforces the using of purchase orders to document spending. Keep in mind that at many organizations, employees are acclimated to simply using their P-Cards without much policing of the program; therefore, appropriately managing these changes and addressing any resistance to adoption will be very important in the early stages of the process. Create a communications plan that outlines how you will communicate these changes to the end users.
Leverage real-time visibility
By leveraging real-time data on products and pricing, you can take control of your organization’s indirect spend. With much greater spend visibility at your disposal, you can make more strategic sourcing decisions, closely monitor future purchasing activities, identify potential compliance-related issues and eliminate unnecessary maverick spend. Access to this real-time data will also allow you to track progress against your KPIs and tap into several new opportunities to save money on indirect spend. These actionable insights can help you optimize savings across all categories of spend.
While transitioning P-Card spend to an indirect procurement platform certainly won't be without challenges, it’s worth learning to navigate those challenges to take advantage of the long-term benefits. Gaining access to real-time data will reveal untapped savings opportunities as well as potential risks, ultimately leading to a reduction in the company’s indirect spending.
For help reducing your organization’s indirect spend and transitioning your P-Card spend to a new system, contact RiseNow to schedule a free supply chain consultation.
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