P-Card program's success requires careful planning
ACE Electric began using the Wright Express MasterCard purchasing program as a way to handle small-dollar transactions and ultimately help to increase productivity.
By William Atkinson -- Purchasing, 8/13/2009 2:00:00 AM
For the most part, purchasing card programs can effectively streamline the procurement process for low-cost products and services. However, with that streamlining comes some risk—the risk of increased unauthorized purchases, which might go unnoticed without effective controls in place.
One company that kept such risks in mind when creating its p-card program is ACE Electric in Valdosta, Ga., one of the largest commercial electrical contractors in the Southeast. Martina Lawrence-Martin, procurement manager, says prior to 2005, "We had a paperwork nightmare on our hands, as well as an ineffective purchasing process." The existing system used purchase orders and open accounts for all purchases. The field employees would put their purchases on open accounts with various suppliers and service providers. Adding to the problems was that, most of the time, these purchases were made without recording job numbers. This left the company having to use excessive manpower to track the purchases.
Larger spending limits would be driven by purchase order numbers. "In a field where there are multiple jobs, driving multiple purchases, this became an internal nightmare," adds Lawrence-Martin. The process was also costly. The company calculated that to create one purchase order from start to finish cost the company approximately $200.
In 2005, ACE Electric began using the Wright Express MasterCard purchasing program as a way to handle small-dollar transactions and ultimately help to increase productivity. Results and benefits were almost immediate. "For one thing, a job is never held up by the need for a purchase order," she states. "This gives employees the freedom to get the supplies they need to get jobs done faster." Overall, the p-card program has helped to increase efficiency and streamline the procurement process, such as the reduction in the issuing of purchase orders, paper invoices, and processing time. In addition, fewer checks need to be issued for payment.
And another benefit: The program provides the company with 25 to 30 days of cashflow to hold onto. "For us, this financial leverage is key to cashflow management," states Lawrence-Martin.
These benefits are not simply the result of just dropping a program into place, though. They are the result of a good program that was introduced properly with comprehensive guidelines, requirements, and monitoring strategies. "Some of the most important keys to success have been communicating the details of the program and its requirements, as well enforcing the requirements and holding individuals accountable for their purchases," she explains.
First, the company carefully selected the people who would receive cards. These are members of management, branch managers, department managers, project managers, and superintendents. In addition, purchases are limited to $200. Purchases are also limited to certain categories of products and services. These include purchases at home improvement stores and electrical suppliers, as well as for fuel, food, travel, and lodging.
ACE Electric also engaged in supplier training to get suppliers on board with the program, and then to make sure all of the pertinent job information would be reflected on all invoices.
Users are required to turn in expense reports weekly, and these must be signed by the using employee and the branch manager. The expense report must contain the job name, job number, base codes, date of purchase, amounts, and the original receipts.
To further ensure effective and timely monitoring, the system generates a daily expense report of all the previous day's transactions. "The controller and I both review these reports each day," Lawrence-Martin says. They can review these purchases online each day, and then address any transactions that need more clarification for the purchase or service that was made, before the weekly expense report is turned in.
The system also gives the program administrators the ability to create daily and monthly limits on each card. In addition, the real-time data provides the ability to monitor the spend on any particular job. "With all of this information on a regular basis, we have found that it may make sense to adjust the daily and monthly spend limits from time to time," she states.
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