P-Cards Done Right. Katie Beatty Community Engagement Manager

Transcription

1 P-Cards Done Right Katie Beatty Community Engagement Manager

2 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.

3 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

4 The Next Hour Introduction to Commercial Cards The Value Proposition Developing a Program Model Program Implementation Policies and Procedures Controls Communications and Training

5 The Next Hour Partnering with Suppliers Ongoing Management Common Pitfalls Questions & Discussion

6 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?

7 Introduction to Commercial Cards

8 Introduction to Commercial Cards

9 Introduction to Commercial Cards Flow of Fees

10 The Value Proposition

11 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

12 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

13 Developing a Program Model

14 Purpose Program Goals and Objectives Designing the Control Environment Risk Analysis Key Controls Supporting Controls

15 Program Implementation

16 Implementation Roles & Responsibilities Technology & Reporting Account Set-up Infrastructure Communications

17 The Pilot Key Success Factors Preparing Suppliers Planning for Issue Resolution The Pilot Period Monitoring and Evaluating the Pilot Conducting Satisfaction Surveys

18 Full Program Rollout Make modifications to model as necessary Plan rollout Identify goals by business unit Communicate organization-wide Set up accounts and train participants

19 Policies & Procedures

20 Elements of a Policies & Procedures Program Policy Manual 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

21 Controls

22 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)

23 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.

24 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

25 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 supplier s principal trade, profession or line of business. Automated Teller Machine (ATM) blocking

26 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

27 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

28 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

29 Communication & Training

30 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

31 Initial Strategy Introduce the P-Card program Explain P-Card s 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

32 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

33 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?

34 Training Methods Advantages Disadvantages Face-to-face Web-based Read-only Develops relationship Allows interaction Ensures message delivery Saves time for PA Convenient Participant sets pace Inexpensive Saves time for PA Scheduling challenges Time-consuming for PA Inefficient if small group Potential cost Lack of connection Validation of participation No interaction Dull Validation of participation

35 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

36 Partnering with Suppliers

37 Building a Supplier Program 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 winwin situation Help educate suppliers Suppliers should not simply add P-Card on top of current processes; re-engineering is important

38 Acquiring Process 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

39 Supplier Economics 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 supplier s 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

40 Working with your Suppliers 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

41 Sample Supplier Requirements 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

42 Ongoing Management

43 Program Management Don t 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

44 Reporting 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

45 Auditing 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

46 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

47 Metrics Overview What: Quantified, relative statistics used to rate program performance Why: Quantifying the P-Card opportunity using your own organization s 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

48 Key Performance Indicators 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

49 KPI s Another way to quantify savings per transaction is to compare the number of transactions processed per fulltime 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

50 KPI s 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?

51 Other Important Metrics 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

52 Growing a Program Ensure soundness of current program before pursuing extensive growth After resolving any issues with current program, prepare for expansion Process similar to program implementation gain support, use project management, communicate throughout organization, etc. Present ideas to management, stakeholders, others and make final decisions

53 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?

54 Growth Opportunities 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

55 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)

56 Keys to Success

57 Common Pitfalls 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

58 Keys to Success 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

59 Keys to Success Clearly define program goals Establish a clearly defined process and appropriate procedures; don t 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

60 Action Items 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 finance G/L)

61 Thank You Katie Beatty