What is purchasing card (P-card) and how do they work?
Companies are becoming more efficient with the advancement of technology. To eliminate issues relating to spending, P-cards are introduced. It stands for Purchasing cards.
A purchasing card is quite beneficial for a business as it helps in the efficient management of business spending.
Purchasing cards offer the advantage of initiating electronic business payments for the purpose of purchasing goods & services. The purpose and meaning of p-cards should be clearly understood before acquiring them.
Purchasing cards are quite important when your employees need to make electronic payments on behalf of the company. Employees can directly pay using a corporate purchasing card for business expenses.
P-cards can make vendor payments with security and efficiency. It also helps in processing utility bills for small-scale businesses. This card is generally acquired by the government or corporate sectors.
The purchasing card is issued to a business entity. A person to whom the card is allocated by an employer is known as the cardholder. A p-card meaning should be clearly understood.
Purchasing card for business is not merely a plastic card issued to companies. Purchasing cards can also convert into account numbers.
Employees must have used business credit cards or debit cards. A corporate purchasing card is used in a similar manner. P-cards are issued with a card number, CVC code, and an expiry date. They can be used either online or in-store.
It is essential to know that purchasing cards are completely similar to the merchants who accept payments initiated by the cardholder. P-card is valid because it contains the name of the organization to whom the card is issued.
The payment processing system of purchasing cards is similar to credit cards. Corporate purchasing cards bring relief to businesses because it assists in managing business spending in a systematic way.
Let us understand what is purchasing card used for with an example-
Suppose that an employee requires new software to work on a business project. An employee would need to wait for the manager's approval in the absence of a purchasing card.
With p-cards, the employees can initiate a request through their p-card software. Managers receive it within seconds and approve it on time. They need not leave their desk for approval purposes.
Once the request is approved, employees get access to the funds. They can easily purchase resources without the employer's interference. Later, the payment receipt is directly sent to the finance department to update their accounting entries.
Although p-cards and corporate cards function similarly, they have some key differences. Let us understand the differences with the help of separate examples for both cards.
Purchase Cards are designed considering the requirements of businesses. Therefore, businesses should prioritize a p-card over a corporate card.
All the troubles faced by the finance department are acknowledged by the purchase cards. Purchase card providers have several benefits to offer to p-card users.
Some of them are mentioned below.
• Purchase cards need not be shared between employees. It is aware that the initiated payment belongs to which employee.
• P-card providers offer both virtual as well as physical purchase cards so that employees can make both online and in-store payments.
• Employees can request access to funds with a simple process. A separate record is maintained for these requests.
• It comes with software that offers visibility to business spending.
So, it is clear that purchase cards are far better than corporate cards for business spending purposes.
You might be unaware of the functioning of a typical corporate card issued to the companies. Corporate cards are given physical shape and are linked to the bank account of the companies.
The corporate cards can be issued in the name of managers, CEO, or traveling team managers of a business organization. Corporate cards are linked only with the company's bank account and not with personal funds.
However, it works similarly to your personal credit card.
• You can make online purchases, invoice payments, or in-store payments through your physical corporate card.
• Purchasing limits set by banks are difficult to alter.
• If the same card is distributed amongst different employees, it is hard to know who initiated the payment.
• The ledger needs to be balanced by matching physical payment receipts with the bank transaction history every month.
• The corporate cards are available only to a group of people working in a company. Others face difficulty in making business payments through their own pocket and further ask for reimbursements.
These drawbacks are neglected by corporate card issuers. As a corporate credit cardholder, you must know how to use it efficiently.
Purchasing cards are better in comparison to traditional methods of expense payments. P-cards are purposely designed for businesses, so it offers additional benefits.
Dissimilar to a corporate credit card, p-cards permit funds to set unique controls on the sum and kinds of purchases.
This sets spending assumptions for employees and wipes out the misrepresentation capability of traditional corporate credit card use. A proper report of employees' spending is maintained by purchasing cards for businesses.
It offers visibility to business spending. This guarantees an elevated degree of monetary control and dismisses additional reporting and guesswork at month-end. It likewise sets out open doors for reporting and business spend analysis.
Businesses are advised to go for a corporate purchasing card instead of traditional methods of making payments for business purchases.
You might be wondering if it is worth acquiring a purchasing card for business. The advantages of having a purchase card for your business expenses are listed below.
Most small businesses are concerned about control over their business spending. However, spending is an integral part of business operations. Businesses need to spend on purchasing resources and assets.
It is important to have proper control over business spending. If a business lacks the proper management of spending, it is probably because of inefficient payment methods.
Corporate purchasing cards offer great flexibility for business spending. Businesses can set limits on the rates and kinds of purchases by acquiring a p-card.
Users with a corporate card need to contact providers to set new spending limits and privileges. It becomes a hectic process. On the other hand, purchasing cards offer the ease of spending limit customization.
Companies can alter their business spending limits directly through an online app. The online application is an additional benefit to the companies who acquire a purchasing card.
If an employee requires new resources for product execution, he may send requests to the manager through p-card software. Once the manager approves it, the employee gets access to the funds.
The manager need not move from his desk for approval purposes. Purchasing cards offer the ease of approving funds which was previously a hectic task for managers. Businesses can effectively meet employees’ demands within seconds.
In the absence of cards, accounting reconciliation was done manually. It is a human tendency to commit errors. The invention of p-cards replaced the manual work done by the finance department.
Procurement card providers offer the benefit of accounting reconciliation efficiently. The finance department is free from the stress of matching physical receipts against bank statements.
Recurring expenses are those expenses that keep repeating in a firm, such as expenses for advertisement and purchase of resources. The employees are not required to rely upon the higher authority to pay for recurring expenses.
They get full access to the business fund through a simple request process done through p-card software. It brings flexibility to the business to manage recurring expenses.
Businesses find it difficult to trace which employee has made what payment through their corporate card. On the other hand, procurement cards offer real-time visibility over the spent data.
The finance team can find all the details relating to the payment initiated by the employees through p-cards. The tasks done by the finance team are made simpler with the procurement cards.
Access to business funds lies only with the higher authority. The request for access to funds is sent to the manager’s software by the employees for approval.
Corporate purchasing cards might have issues incorporating other monetary detailing instruments or card handling frameworks. This might require workarounds or substitute techniques for payment.
Any feature or new technological advancement would have some drawbacks. It is your responsibility to choose the product which is best for your business, and the flaws that exist in it do not hurt or harm your business too much.
Moreover, whichever card you select, your company needs to have a top-of-the-shelf spend management platform to sync all transactions together and help in overall financial management. Don’t worry.
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Direct accounting integration, corporate cards, both virtual and physical, reimbursement system, credit line offering, budgeting tools, and multi-currency wallets. This is just a glimpse, we have so much more to offer.