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P-Cards Done Right Katie Beatty Community Engagement Manager

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  • P-Cards Done Right Katie Beatty

    Community Engagement Manager

  • About the NAPCP

    We are an association committed to

    advancing YOU and other Commercial Card and Payment professionals worldwide by

    providing continuing educational and peer networking through our conferences, regional forums, webinars, newsletters and

    community engagement.

  • About the NAPCP

    Established in February 2000

    Work with 15,000+ members & subscribers Over 2,000+ pages of industry updates, whitepapers, best practices and much

    more on our Resource Center

  • The Next Hour

    Introduction to Commercial Cards

    The Value Proposition

    Developing a Program Model

    Program Implementation

    Policies and Procedures

    Controls

    Communications and Training

  • The Next Hour

    Partnering with Suppliers

    Ongoing Management

    Common Pitfalls

    Questions & Discussion

  • Introduction to Commercial Cards

    What is a P-Card? T&E, Corporate, ePayables, Event Card, Lodge Card, Prepay,

    Declining, etc.

    Who is Involved? P-Card Program Manager (PM) Cardholders Suppliers Issuers Merchant Acquirers Networks Processors

    What is Level III Data? Why are we ALWAYS talking about it?

  • Introduction to Commercial Cards

  • Introduction to Commercial Cards

  • Introduction to Commercial Cards Flow of Fees

  • The Value Proposition

  • Why Use Cards?

    The traditional procure-to-pay is costly

    A card program simplifies the process

    Traditional P2P Process

    Card P2P Process Difference

    Average Process costs $90.0 $20.00 $70.00 savings

    Average process cost per month (1,789 transactions)

    $161,002 $35,778 $125, 224 savings per month

    Annualized process cost $1.9M $429,338 $1.5M savings per year

    Number of steps More than 30 Fewer than 15 Omission of at least 15 steps

  • Why Use Cards?

    Staff Reallocation and/or Reduction

    Reduction in Procurement Cycle Time

    Spend Data Availability

    Supplier Consolidation/Reduction

    Petty Cash Reduction or Elimination

    Working Capital

    Revenue Share

  • Developing a Program Model

  • Purpose

    Program Goals and Objectives

    Designing the Control Environment

    Risk Analysis

    Key Controls

    Supporting Controls

  • Program Implementation

  • Implementation

    Roles & Responsibilities

    Technology & Reporting

    Account Set-up

    Infrastructure

    Communications

  • The Pilot

    Key Success Factors

    Preparing Suppliers

    Planning for Issue Resolution

    The Pilot Period

    Monitoring and Evaluating the Pilot

    Conducting Satisfaction Surveys

  • Make modifications to model as necessary

    Plan rollout

    Identify goals by business unit

    Communicate organization-wide

    Set up accounts and train participants

    Full Program Rollout

  • Policies & Procedures

  • Elements of a Policies & Procedures Manual Program Policy

    Program Goals & Objectives

    Program Contacts

    How to Open a Card

    Card/Account Security

    Card Usage and Unique Supplier Processes

    Targeted and Restricted Transactions

    Card Controls

    Account Maintenance

    Account Closure

    Reconciliation Process

    Management Review Process

  • Controls

  • Designing the Control Environment

    Complete a risk analysis, such as ORCA method (Objectives, Risks, Controls, Actions)

    Document objectives for program Document the possible risks based on the

    objectives Document the required controls to mitigate

    risks Plan the actions needed to complete the

    control strategy Maintain current risk analysis (e.g., annually)

  • Fraud and Misuse

    Fraud involves the unauthorized use of a Purchasing Card, resulting in an acquisition whereby the end-user organization does not benefit.

    Misuse/abuse (collectively, "misuse") involves unauthorized purchasing activity by employee to whom P-Card is issued.

  • Controls

    Roles and responsibilities: define, evaluate skills of staff, ensure separation of duties

    P-Card policies and procedures: for program participants and program management

    Training: Who, when, and how

    Opening an account: prevent unauthorized set-up, ensure secure card handling, use of a cardholder agreement

    Setting up card controls: must be appropriate, aligning with program policy

  • Controls

    Single purchase/transaction dollar limit

    Daily transaction limit

    Daily dollar limit

    Monthly/cycle limit

    Merchant Category Code (MCC) restrictions MCCs are four-digit codes, maintained by the networks and assigned to card-accepting suppliers, used to identify a suppliers principal trade, profession or line of business.

    Automated Teller Machine (ATM) blocking

  • Controls

    Changing account limits/restrictions: who can make changes, approval process, documentation, monitoring

    Closing an account: notification, card collection and disposal, handling posted transactions after account is closed

    P-Card accounting process: determine appropriate entries, accuracy of process, how entries are tracked

  • Controls

    Transaction documentation: requirements and records retention

    Review, approval, and audit: the process, who is involved, frequency

    Preventing duplicate payments

    Program reporting: types of reports, who generates and reviews, retention

    Auditing: who, what, when and how

    Program technology: access levels/roles and data security

  • Controls

    Role of the card issuer in fraud detection: detection methods, how they communicate fraud, etc.

    Lost/stolen cards: communication chain, process, financial impact

    Liability waiver insurance: type of liability, contract provisions, considerations

  • Communication & Training

  • Know Your Audience

    The audience/recipients of communications will vary:

    All levels of management Departments/business units Site coordinators, if applicable Cardholders Approving officials Functional areas, such as A/P and

    procurement Suppliers

  • Initial Strategy

    Introduce the P-Card program

    Explain P-Cards benefits

    Describe how processes will change

    Promote P-Card use in accordance with policies and procedures

    Use a variety of methods, making educational resources and learning opportunities readily available; for example:

    open house

    meetings with business units/departments

  • Ongoing Strategy

    Use a variety of methods, making educational resources and learning opportunities readily available; for example:

    Intranet to post program P&P, benefits, key metrics (e.g., process savings)

    Keep management appraised of program status

    Consider steering committee or similar

  • Developing a Training Program

    Who will create and deliver the training? Who will review regularly and revise as needed?

    Who needs to be trained?

    What does each audience need to learn?

    When will training occur?

    Will training be mandated for one or more groups?

    What training methods are possible?

  • Training Methods

    Advantages Disadvantages

    Face-to-face Develops relationship

    Allows interaction

    Ensures message delivery

    Scheduling challenges

    Time-consuming for PA

    Inefficient if small group

    Web-based Saves time for PA

    Convenient

    Participant sets pace

    Potential cost

    Lack of connection

    Validation of participation

    Read-only Inexpensive

    Saves time for PA

    No interaction

    Dull

    Validation of participation

  • Evaluating Training Success

    Testing training recipients knowledge

    After training program completion

    Could mandate a certain passing score before card issuance

    Could have recurring tests (refresher training)

    Surveying recipients, questioning the training:

    Effectiveness

    Appeal

    Convenience

  • Partnering with Suppliers

  • Work with your issuer or third-party organization

    Be familiar with: acquiring process

    economics for P-Card acceptance

    Payment Card Industry Data Security Standards (PCI DSS)

    Identify suppliers

    Partner with key suppliers to make P-Card acceptance a win-win situation

    Help educate suppliers

    Suppliers should not simply add P-Card on top of current processes; re-engineering is important

    Building a Supplier Program

  • Merchant agreements vary, depending on supplier/acquirer relationship

    Information gathered during process: tax identification number (TIN), merchant category code (MCC), incorporation status and socio-economic data

    Determination of the level of transaction data that a supplier will provide

    Suppliers agree to follow merchant rules related to card acceptance

    Acquiring Process

  • Merchant discount fee, typically 1.5% to 3.5%, plus potential transaction and/or other fees

    Off-setting benefits:

    Cash flow improved from 30+ to 2-3 days

    Increase in revenue opportunities and customer satisfaction

    Streamlines suppliers transactional cost Cost of invoice generation, check/invoice reconciliation,

    receivables posting, and check deposit fees

    Reduced credit risk and collection activity

    Break-even point varies by supplier

    Supplier Economics

  • Each supplier relationship may be unique

    Gain an understanding of what you buy

    How the orders are placed

    How the goods or services are received

    What supporting documentation is provided and when

    Determine if the invoice can be eliminated and what supporting documentation will replace the invoice

    Define requirements for suppliers accepting P-Card

    Develop a standard process with appropriate suppliers

    Working with your Suppliers

  • Must be PCI-compliant

    Eliminate invoice through the use of a priced packing slip

    Packing slip or other supporting documentation should: Include merchandise description

    Price including sales tax, freight, and total

    Indicate paid via credit card

    The packing slip should not include credit card number

    Card should be charged when order is fulfilled

    Standard Terms and Conditions established by the organization do not change

    Sample Supplier Requirements

  • Ongoing Management

  • Dont implement and forget

    Status quo versus continuous improvement

    Review program regularly to find opportunities for improvements and growth

    Adjust goals as desired

    Keep policies and procedures current

    Make program changes as necessary or desired to meet goals

    Update training program to meet needs

    Revise user and administrator manuals as needed

    Program Management

  • Various kinds of reports are useful for program management, fraud detection, spend analysis, etc. Report examples include:

    Monthly spend and transaction count by card

    Declined transactions

    New accounts and closed accounts

    Account limits and available limit by card

    Disputes

    Spend by supplier

    Reports related to sales tax

    Reporting

  • May be performed by a variety of individuals, each with a specific focus

    Process audits versus transaction audits

    Proper planning yields best results

    May be aided by technology tools

    Frequency may vary depending on what is being audited

    Auditing

  • High-dollar transactions

    Transactions with certain suppliers and/or MCCs

    Certain expense types

    High volume/activity P-Card users

    New cardholders

    Transactions occurring during non-business hours

    Auditing

  • What: Quantified, relative statistics used to rate program performance

    Why: Quantifying the P-Card opportunity using your own organizations statistics is the essence of a compelling business case A solid business case is essential to senior

    management support Metrics are essential to growth

    When: Use on a routine basis to communicate the progress and the value that the program actually delivers

    Metrics Overview

  • Cost savings and efficiencies

    Have P-Cards resulted in a reduction of staff? Or have employees been redirected to value-added activities?

    Can a process savings be calculated?

    Compare steps and associated cost of old/traditional process to P-Card process

    Analyze who does each step, how long each step takes, and the cost of each step

    Arrive at the cost per transaction for each process

    Key Performance Indicators

  • Another way to quantify savings per transaction is to compare the number of transactions processed per full-time equivalent (FTE) for A/P and P-Card

    For A/P productivity, divide the total number of transactions processed in A/P by the number of FTEs in A/P to give you the number of transactions per FTE

    For P-Card productivity, divide the total number of P-Card transactions by the number of P-Card FTEs

    Assign a dollar value to the FTE to get cost per transaction

    KPIs

  • Card penetration:

    What percentage of employees are cardholders? Are any cards inactive (i.e., not used)?

    P-Card ratio:

    What percentage of payments are captured via P-Card? What is the number and percent of invoices eliminated in A/P?

    Monthly stats:

    What is the average number of transactions per card? What is the spend per card? Spend per transaction?

    KPIs

  • Compliance Instances of inappropriate use Declined transactions Timely submission of paperwork Correct paperwork submitted Correct tax modifications

    Program acceptance

    Rate of payment requests received in A/P that could be paid via P-Card

    Survey cardholders and management to gauge satisfaction with program

    Other Important Metrics

  • Ensure soundness of current program before pursuing extensive growth

    After resolving any issues with current program, prepare for expansion

    Process similar to program implementationgain support, use project management, communicate throughout organization, etc.

    Present ideas to management, stakeholders, others and make final decisions

    Growing a Program

  • Evaluate the expansion possibilities to determine what will work best for your organization

    Which of the expansion ideas will your organization pursue?

    Which expansion methods offer the most reward with the least effort?

    Which methods will require more resources and may need to be pursued another time?

    Before discarding an idea, ask Why not? Is the decision based on logic?

    Growing a Program

  • Increase card penetration, if warranted

    Global expansion, if applicable

    Convert more suppliers to card payment

    Review A/P spend data for opportunities

    Target key suppliers

    Partnership between procurement and accounts payable is beneficial

    Growth Opportunities

  • Increase types of purchases

    inventory purchases

    capital equipment

    eProcurement purchases

    services, such as temp labor, consultants, meeting expenses, printing, catering, etc.

    travel

    Utilize card variations (complementary solutions to traditional P-Cards and Ghost Accounts)

    Growth Opportunities

  • Keys to Success

  • Administrator not suited for position

    Lack of infrastructure to support the process, including management support

    Ineffective training

    Unclear policies and procedures

    Lack of communication to suppliers

    Over- or under-controlling the program

    Too many manual processes

    Too many inactive accounts

    Common Pitfalls

  • Senior management support

    Re-engineer current processes

    Recognize many of the changes required are behavioral

    Commission a dedicated resource to manage and promote the program

    Establish a cross-functional team with members from Accounting, Internal Audit, Tax, Treasury and Purchasing

    Keys to Success

  • Clearly define program goals

    Establish a clearly defined process and appropriate procedures; dont make P-Card difficult to use

    Automate as many processes as possible

    Effective and on-going communication throughout various levels of the organization

    Use of reporting tools and metrics

    Keys to Success

  • Establish Commercial Cards are the standard means of conducting business with key suppliers

    Seek ongoing support from your card provider to overcome supplier resistance

    Conduct regular spend analysis to identify additional categories to target for cards

    Integrate Commercial Card systems with other transaction systems (e.g., procurement, accounts payable, and financeG/L)

    Action Items

  • Thank You Katie Beatty

    [email protected] 623-606-6581