The current case for purchasing cards – Part 1
At a recent breakfast session hosted by IPSA (Institute of Procurement and Supply South Africa) Julian Curtiss, Manager of Commercial Marketing, Corporate Payment Solutions at ABSA Bank, said that Procurement Cards are now almost universally accepted as a procurement to pay solution for both the private and public sectors of economies across the globe.
He told Smart Procurement that an in-depth recent research report released by influential Aberdeen Group confirms this view and that its conclusions are highly relevant even in the South African context.
"This documents makes for essential reading for CFO's, CPO's and procurement professionals", he told Smart Procurement"
The Aberdeen research shows that "best practice programs address new spend categories and supplier types, and embrace technology for reasons beyond administration convenience.
Success factors common to succesful implementations include:
- Purchasing cards are used as electronic payment for small dollar value transactions (In South Africa this often means transactions below R5000)
- Purchasing Cards address master agreements and contract pricing, purchase orders, and project or recurring services purchases
- Purchasing cards are integrated into mainstream business activities
- Purchasing card data is collected and used for strategic sourcing and contract compliance
Recommendations for Action
To achieve higher than average growth, (Ed note: In purchasing card transactions being processed through the business) purchasing card programs should expand the program in the following areas
- address master agreement and contract pricing requirements
- create strategic sourcing strategies and selection activities<!
- examine specific categories, supplier relationships, or business regions to determine which purchase orders lend themselves to payment via purchasing cards
- extend the use of the card to service categories such as advertising, marketing, print, maintenance, temporary services and consulting
- evaluate and proactively collect electronic payment remittance information on suppliers providing non-traditional, large project, or recurring services requirements.
The Purchasing Card value proposition is aptly summarised in the report:
“(While)most business- to- business payments are still paper based, the purchasing card offers an electronic solution that leverages the convenience, efficiency and stability of card networks which we ( nearly all of us!) use on a daily basis”.
Copyright – Aberdeen Group " The Purchasing Card Benchmark Report- Executive Summary."
In our next article in this series Curtiss will eleborate on the qualitative and quantitative benefits of the card that can be used to develop a business case.
End – Staff Writer