Government could police spending cuts with a P-card system
Scepticism around government’s severe cuts to perks and expenditure, and whether these will really work, has been further fuelled by recent instances where members of public office have not adhered to the Finance Minister’s spirit of cost-cutting. With the public’s patience wearing thin, government should consider a procurement card programme to curb expenditure, and reduce fraud and a waste of funds, writes Anita Carolus, Nedbank Corporate Card National Sales Manager, in this month’s SmartProcurement.
“A procurement card has controls such as spend limits and merchant category code blocking,” says Carolus. What this means is that the card can be blocked for casino spend, use at liquor stores or cash withdrawals, to name but a few. The card can also have a spend limit, which will ensure that the cardholder has the necessary funds available – and no more than that.
With these measures in place cardholders will not be able to spend excessively and they will be able to spend the available funds only where they should be spending it.
Procurement cards also have greater visibility of spend, as the programme offers up to third-level data. This is beneficial as greater visibility, regular review and reconciliation of spend on a procurement card guarantees early detection of fraud and misuse.
Furthermore, besides the controls that ensure funds are not wasted and the greater visibility that highlights suspicious spend, a procurement card programme saves processing cost.
Studies have shown that 60% of transactions by volume translate to only 5% of the transactions in monetary value, notes Carolus. These low-value, high-volume purchases require a lot of man-hours to process and the cost to process such transactions is often greater than the actual cost of the item. “These costs can range anywhere between R65 and R135, but can even go up to R700 per transaction.”
Procurement card programmes reduce the steps in the traditional P2P process, which are usually between 15 and 30, to less than 10 steps. As the steps are cut by more than half and less man hours are needed for the streamlined P2P process, a procurement card programme is clearly a great way to save money.
For more information on the benefits offered by a procurement card programme, contact Anita Carolus at AnitaCa@Nedbank.co.za.