Purchasing cards are a very simple way for an organisation to procure goods or services and they can certainly help to streamline an organisations payment system, even though it may seem like spending has been decentralised and taken away from the procurement section.
How Do Purchasing Cards Work?
Purchasing cards are used in the same way as credit or debit cards because they are set with a limit and the person using the card can only go up to a certain limit, but the transaction is immediate.
This means that the person paying for the item does not have to raise a purchase order, nor do they have to ask the supplier to raise an invoice and then wait until forever for the invoice to be paid. Instead the whole process of buying something can be done in a matter of a few minutes!
No Paperwork
One of the beauties of the purchasing card system is simply the fact that the payment is to the supplier is shortened (typically to 3-4 working days) whilst the payment from the buyer is set to a monthly schedule. Improved cash flow is of enormous benefit to the supplier whilst for the purchaser the administrative overhead is reduced on activities such as completing purchase orders which in some cases are no longer required.
Historically many agencies and organisations have been slightly nervous about the use of purchasing cards, simply because they fear that spending will get out of control. But in fact the limits that are set for the card alleviate this being a problem and the fact that each transaction is clearly marked on the statements for each card means that there is a clear audit trail that shows exactly when an item was purchased, how much it was for and who authorised the payment.
Handling purchase orders and paying invoices is actually a lengthy process that can sometimes become bureaucratic in the extreme. The use of purchasing cards means that the process is shortened and therefore saves time, because the admin time required is so much less. Saving time saves money and therefore the payment process is not only streamlined, but is also ruthlessly efficient.
One of the most common gripes that suppliers have is that no one pays their bills on time. In fact a few organisations seem to adopt a stance that they will wait 6 months before payment; if the company they owe money to is still there, they pay. If they have gone bankrupt, then they save some money…… although only a few adopt this approach, others seem to drag their feet and do not pay for three months or so, especially large bureaucratic organisations.
This can almost revolutionise the relationship that you have with your suppliers because they will be paid as soon as something is bought and they don’t even have to raise an invoice. It is like a dream come true for many suppliers!
So the benefits that purchasing cards in terms of streamlining payments cannot be over emphasised. Purchasing cards will almost certainly become the way that business is carried out in the future, since they make perfect sense, instead of having to rely on lengthy delays whilst a purchase order is raised, then goods are delivered and checked against a delivery note, then the invoice is sent in and the invoice and the delivery note have to be matched up (if one has not been lost!). Even describing this kind of system does seem slightly archaic in this day and age and the age of the purchasing card is definitely upon us, which is good news in terms of saving time and streamlining payments, but also good news for suppliers who will get paid on time, every time!
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