Traditionally, a company establishes credit with suppliers. Then, when it needs something, it sends employees out with a purchase order, asks the company for an invoice, and, when it comes, matches the invoice with receipts and cuts a check.
A corporate purchasing card, used like a debit card, simplifies the process. Instead of getting receipts and cutting a check, the accounting person simply gets a statement of charges, which have already been paid.
However, there are defined factors tied to the success of p-card programs, according to a study by Richard Palmer, Eastern Illinois University; Mahendra Gupta, Washington University; and Antonio Davila, Stanford University.
The study says p-cards can be a better, faster and more cost-efficient way of acquiring goods. And when programs have top management support, they are more likely to be successful.
Jean Hilliard, senior vice president and regional sales manager of Bank One's Treasury Management, agrees.
"Senior management sponsorship is No. 1 in the list," Hilliard says. "There needs to be a champion fully behind the program when it takes effect."
Hilliard says programs are also more successful when someone is in charge.
"Assigning ownership is important," she says. "That person doesn't have to manage the program full time, but there needs to be an assigned administrator."
Keeping all departments affected by the program in the loop also makes a difference.
"More than just the accounting or general ledger department should be involved," Hilliard says. "All those using the program or impacted by it should have an understanding of how it works and its benefits."
Howard Fickel, CFO of Columbus-based Corna Kokosing Construction, says his company's p-card program has been a success.
"The cost of administration takes less time," says Fickel. "And if you use the reports effectively, you do gain efficiency as well."
Fickel says Corna's program, through Bank One, provides better management and control of purchasing.
"In the past, I had requests to open accounts at retail stores all over the place," Fickel says. "It was totally unmanageable. People were purchasing items and I didn't know which project to charge them to."
Now he can control where employees charge and can see where the company is spending its money.
"Reports list purchases by employee, vendors and vendor type," he says. "I can see if we need to set up a separate credit arrangement with a particular company."
Hilliard says p-card programs are successful when expectations are clearly communicated.
"Changing the way you do things is always a challenge, but if expectations are laid out and the program is watched and improved, it can work." How to reach: Bank One Treasury Management, 248-5947