Strategic Guide to e-Procurement
Payment Methods and Tools
The payment process can be automated on its own in conjunction with a transactional e–procurement method. As part of the 2000 Commonwealth e-Procurement— Implementation Strategy, agencies were required to implement Electronic Funds Transfer (EFT). Substantial improvements in payment processes were made due to this strategy.
However, there are still opportunities to improve the payment process through the
use of purchasing cards, expense management systems, electronic funds transfer, evaluated receipt settlement, recipient created tax invoices, recurring payment and electronic invoices.
Purchasing Cards (P–Cards)
P–cards are used to facilitate the purchasing process and must be paid in full each month
A purchasing card, or P–card, is a credit or charge card used to facilitate the purchasing process for goods and services. A P-card negates the need to establish a purchase order, and automatically pays the supplier without the requirement for an invoice. The difference between a P–card and a credit card is that a P–card account must be paid in full by the due date, usually monthly, whereas a credit card only requires a minimum monthly payment.P-card programs can be segmented into the following:
- General P-cards – used for all purchasing activity by authorised P-card users. These cards can be used instead of raising a purchase order.
- Travel and Expense (T&E) Cards – used for travel and entertainment purposes only. They provide a convenient method for staff to pay for their travel and entertainment expenses, and greatly reduce the number of T&E related invoices received by agencies. T&E card reporting can be used to monitor spend in this area.
- Fleet Card – used for fuel purchases and restricted spend categories such as repairs and other items available from service stations. The fleet card helps to consolidate spend and increase contract compliance with the preferred supplier.
- One Card – essentially a standard P-Card that is authorised for use for travel and expense, fleet and general purchasing expenses using a single card.
P–cards can be used for purchasing goods and services or for specialty programs including: travel and expense, fleet or a combined program under a one card program.
P-card programs are used to facilitate the procurement to payment process. P–cards can also assist with Fringe Benefit Tax (FBT) administration. A program administrator is usually assigned to approve and manage the process of distributing the cards and statements on an ongoing basis.Implementation of a P–card program requires:
- appointment of a single point of accountability (SPA) for managing the project and acting as a central point of coordination with users
- identification of P-card users and card type required – for example frequent travellers may require T&E cards, while purchasing staff may use general P–cards for general low value purchases
- spend limits per transaction, which can be set on a per user basis
- spend limits per month, which can be set on a per user basis
- audit process for monitoring compliance with P–card policy
- a decision whether to restrict the merchants that can be used for P–card purchases – many cards offer the ability to block certain categories or merchants such as liquor stores, general retailers etc if necessary.
An Expense Management System (EMS) is used to manage data and transactions that occur through P–cards.
P–card suppliers have become more proactive in managing spend visibility and governance issues by adding additional services to the operation of the P–card. Spend transactions can be limited to selected merchant codes. Spend visibility can be improved by the P–card supplier providing periodically a data file with line item level detail which is then loaded into the FMIS/EMS system.Categories suitable for P–cards
P–cards can be used for any type of purchase where the supplier accepts P–card payments. P–cards are well suited for small, low-value purchases, reducing the number of purchase order invoices associated with these purchases
Enhanced P–card tools and functionality provide the opportunity to use P–cards in higher-spend areas
The benefits of P–cards include:
- elimination or reduction of paperwork
- increased spend visibility particularly when combined with an EMS system
- enables the agency to reduce the number of suppliers processed using FMIS/ERP systems
- reinforces purchasing best practices
- EMS systems combined with P–cards can be a source of internal spend information
- streamlined accounts payable processes
- faster payment of suppliers
- supply base consolidation.
Challenges of implementing and using P–cards can include:
- not all suppliers may be willing or able to accept P–card payments
- failure to integrate P-card data into FMIS/ERP systems can result in a loss of data compared to raising a PO and/or receiving an invoice
- governance may be perceived as an issue due to the “after the fact” approval method used with P–cards
- spend visibility can be more limited than through an ERP/FMIS system depending on the categorisation of data used.
Summary of Checkpoints
P-Card
- a Establish if a P–card program is already in place
- a Understand which suppliers are willing to accept P-cards
- a Appoint a P–card administrator with responsibility for the project
- a Determine which types of P-cards are necessary for target usage profiles
- a Set per purchase and monthly spend limits per user
- a Document P–card policies and procedures
- a Train users on proper usage of P–cards
- a Monitor and audit P–card program on an ongoing basis
- a Consult with suppliers to:
- a determine if they can accept a P–card and for what categories or products
- a understand what types (AMEX, Diners, Visa) can be accepted
- a identify any changes to payment terms
Contact for information on this page: ICT Procurement