What is a corporate purchasing card or ‘P-card’?
A corporate purchasing card, also known as a procurement card or P-card, is a type of card that some businesses give employees to make company purchases. P-cards can be an efficient way for employees to make business purchases, usually of a smaller nature, without the formal, more extensive approval process.
Read on to learn about how P-cards could improve your business’s procurement process, as well as other considerations.
What you’ll learn:
- Purchasing cards can streamline the procurement process by allowing employees to bypass a potentially lengthy approval process.
- P-cards differ from corporate credit cards because the P-cards don’t require employees to complete an expense report.
- Businesses that use P-cards can enjoy benefits like real-time purchase tracking and potential cost savings.
- Creating policies around P-card usage, proper training and monitoring purchases are key to help avoid possible employee misuse.
How do P-cards work?
Here’s a look at how purchasing cards work:
- Companies can give certain employees purchasing cards that are connected to a business bank or credit account.
- Employees can make in-person or online purchases with the P-card without having to submit a request and wait for approval. Common purchase types are office supplies, training courses, subscriptions and other small, frequent purchases.
- Instead of using expense reports, P-cards will provide monthly statements that can be mapped back to receipts and invoices for recordkeeping.
- P-card balances are paid off each billing cycle and can offer cost savings by removing the need to make multiple payments with checks or other payment forms in high volumes.
Businesses can put policies in place to determine spending limits, types of purchases and specific vendors they can be used with. A strong P-card policy can help prevent misuse and better manage business expenses.
Purchasing card vs. corporate credit card vs. business credit card
There are a few key differences between purchasing cards, corporate credit cards and business credit cards to consider when choosing an option for your business:
|
P-card |
Corporate credit card | Business credit card | |
|
Purchase types |
Usually used for small, routine purchases (e.g., goods and services) |
Usually used for larger, less frequent purchases (e.g., travel) |
Usually used for a variety of purchases, depending on the credit limit |
|
Ability to carry a balance |
Must be paid in full at the end of each billing cycle |
Typically allows balance to be carried over |
Some must be paid in full each month, while others carry a balance |
| Tracking of purchases |
Typically have more restrictions like spending limits and pre-approved vendors |
Typically have fewer restrictions on purchase types and spending limits |
Typically have fewer restrictions |
| Expense tracking |
Instead of using expense reports, monthly statements are issued |
Employees must submit itemized expense reports for approval |
May provide access to an online dashboard to manage cards and spending limits |
| Key benefit |
Can speed up the procurement process |
More control over employee spending |
Potential to earn rewards like miles and cash back |
Each card type offers its own merits, so consider which option best suits your business’s spending and financial habits.
Is a purchasing card right for your business?
There are both potential advantages and disadvantages to consider with P-cards. While they can help speed up the procurement process, they may hinder the types of purchases your employees need to make.
Potential P-card advantages
Potential advantages of purchasing cards include:
- Quicker and more efficient procurement process.
- More control over company spending with the ability to set spending limits and establish a list of approved merchants or vendors.
- Cost and time savings with digital P-card systems.
- Employees don’t need to submit requests and wait for approvals and reimbursement.
- Eliminates the need for expense reports.
Potential P-card disadvantages
Potential disadvantages of purchasing cards include:
- Sharing card information may lead to delays as employees wait to use the card information.
- May offer less visibility into spending as transactions can take longer to appear on the P-cards dashboard.
- Out-of-policy spending could be discovered after it happens, leading to a financial loss.
- Depending on the type of P-card system, companies may need to reconcile purchases, which could add on time and resourcing costs.
P-card best practices
If you’ve determined that using purchasing cards makes sense for your business, here are a few best practices to keep in mind when implementing your P-card program.
- Establish clear policies and guidelines: Create a policy and guidelines around P-card usage that documents factors like spending limits, approval processes and reporting requirements.
- Monitor and audit transactions regularly: Check employee transactions often to ensure they’re complying with policies. Plus, regularly monitoring balances can help detect potential misuse of the card and the account.
- Continually improve processes: Provide ongoing training so employees stay updated with the P-card program, policies and procedures. And make sure to review the policy regularly throughout the year. This way, you can implement new procedures as needed to ensure the P-card program remains efficient and effective for your organization.
Key takeaways: P-cards
P-cards offer unique benefits that can help speed up the procurement process for companies that have employees making small, routine purchases. However, they also come with their own considerations. For example, if you’re looking for a credit card to use for travel expenses, a business travel credit card could be a better option.
Consider your business needs and compare Capital One business cards to find the benefits that best speak to your company’s spending.
