Corporate Cards and P-Cards: Get Better Insight into Employee Spend
As your organization continues to evolve managing employee spend, explore the benefits of using corporate cards and P-Cards to help facilitate visibility and control when employee spend areas are unclear. A unified reporting and reconciliation processes of corporate cards and P-cards streamlines work for your audit and treasury colleagues.
Why is spend visibility important?
Timing is everything when it comes to effectively managing spend. Many organizations have done away with pre-approvals for employee spend as it can delay associated approvals and lead to additional costs. Instead, many organizations have now incorporated organizational and departmental policies that guide employee spending behavior. The tradeoff here is that the employee decides when to buy, for how much, and it results in less visibility for the business.
Although there are many benefits that departments can leverage from gaining advanced visibility on payments due, the accounts payable (AP) department is the most obvious as they are responsible for making payments, ensuring that the firm takes advantage of early payment discounts, and avoids late-charges. But when employees use their own cash or credit card to pay for home-office expenses, meals, entertaining clients, or attending a local conference, AP does not know how much is due. Furthermore, they won’t know which department’s budget will be charged until the expense report is created and approved and/or the invoice is received for payment.
However, visibility extends beyond just benefiting AP. The department heads that are eventually cross charged for the expenses – such as engineering, field services, marketing, and sales – also have an interest in knowing how much their employees are spending. Each department has an expense budget they must adhere to from month to
month, and without early notice of expenses hitting their budgets, limits may be exceeded, resulting in a difficult explanation to the treasurer or controller.
- Advanced visibility helps control spending: By having advance visibility on charges coming their way, all department heads can ask their employees to withhold spending until the next cycle or spend within the current budget if doing so will enable the department to stay within budget from one cycle to the next.
- Distributing employee cards speeds up financial processes: Firms that provide employees with corporate cards, travel cards, or process payments with P-Cards have the benefit of receiving feeds from the financial institution within days of when the charge is made. This enables your finance and AP teams to gain visibility on amounts-due and payment-due dates usually days or weeks before the expense report or invoice is processed and approved for payment.
The difference between corporate cards and p-cards
Corporate cards are cards issued by a bank or financial institution to employees that the firm wants to grant access to corporate funds. Each card is associated with an employee name and/or number, which helps track any disbursement made by that employee to any vendor. This association helps not only the accounts payable department but also the audit department – when looking for patterns of employee spend for procurement synergies or checking for potential fraud.
Purchasing cards, also known as P-Cards, are account numbers a financial institution – referred to as issuer or provider – issues to an organization for the purpose of making purchases by its employees. Suppliers are set up to accept and process payments via P-Cards through the existing credit card system. Information about the purchase, captured by the vendor’s point of sale (POS) system, may include the vendor’s name and transaction amount, as well as information like customer-defined codes and line-item details. The organization receives feeds from the financial institution with notifications of charges as they are incurred, and a billing statement once per month. Charges are allocated to the appropriate department and expense-type based on the employee making the purchase, the supplier code, etc. In addition, a benefit of P-Cards is the controls that the organization can implement for each P-Card, for example: purchase thresholds, monthly limits, and merchant category codes.
P-cards and corporate cards as separate spending channels
Charges made through corporate cards are typically matched to expense reports submitted by the employee or invoices processed, whereas purchases made through P-Cards have a higher degree of substantiation. This creates the added benefit of increased control on spend before it happens as well as a streamlined purchase reconciliation afterwards. Here’s how it works:
- First, P-Card purchases are matched with invoices and the P-Card statements.
- Then, the employee making the purchase must verify that the charges are correct, and the goods were received.
- Finally, the organization’s card-program administrator must validate the transaction and load it into the accounting ledger for payment.
Because expense report submission, review, and approval processes are different for purchases made through corporate cards versus purchases made through P-Cards, it’s common for organizations to train employees on both processes; and to account for P-Card spend and corporate-card spend as two distinct spend channels – even if they are both a part of what we consider employee spend.
Benefits of combining and automating card spend channels
Since employee spend occurs through both corporate card and P-Card channels, organizations that combine the corporate card and P-Card streams onto a single platform have much to gain. For example, by providing a similar, streamlined user experience for submission, validation, and approval of charges, the more likely purchases and expenses will be reported and submitted for approval and then reflected in the accounting ledgers driving to payments and reporting.
Automating these tasks with the help of artificial intelligence (AI) and machine learning (ML) can help minimize a large part of the work involved, resulting in increased productivity and more time spent on meaningful work, which enhances employee satisfaction. These advanced technologies can audit for human error, stay on the lookout for duplicate payments, and facilitate approvals for employee-defined amounts of charges as they flow through the same system. As a result, the treasury department benefits from more predictable cash management and quicker approvals for low spend, high volume card charges.
Putting it all together: Card payment key takeaways
- When it comes to employee spend, there are several different payment channels: cash, corporate cards, P-Cards, ACH, checks, and more.
- Payment to vendors, reimbursement to employees, and reporting to department managers across the business are driven by how soon the employee creates and submits an expense report or substantiates, verifies, or reconciles charges that come through via card statements.
- The sooner the charges are reconciled, approved, and recorded in the accounting ledgers, the more visibility AP has on payments due and department heads have on actual expenses versus available budget.
- Integrating vendor lists across these channels means a more accurate view of volume spent by a vendor, resulting in additional opportunities for the procurement department to negotiate favorable pricing.
- Combining corporate-card and P-Card spend into a single platform helps the internal audit department check the accuracy of recordkeeping and accounting and helps the treasury department with enhanced visibility on cash needs.
Spend intelligence is an essential component of how organizations can better respond to their customer needs, engage talent in new ways, create disruptive business models, and more. For more information on how integrating corporate cards and P-Cards can benefit your organization, visit us here, or contact your SAP Concur account representative.