THE PURCHASING CARD IN THE PRIVATE SECTOR
Organizations need a fresh and insightful look as they face continued pressure to drive down Source-to-Settle process costs and respond to ongoing complexity in their businesses.
To evaluate the changing nature of procurement processes over the past few years, Accenture partnered with American Express to offer a fresh perspective on its 2003 study Procurement to Payment Processes and the Role of Procurement Cards.[2003 survey]
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This study revealed that organizations are continuing to focus on addressing Source-to-Settle process efficiencies through automation. These organizations also recognize the need to drive compliance to preferred supplier agreements and to find ways to reduce costs of procured goods and services in indirect spend areas. To do so, organizations are planning to expand their use of eProcurement and Procurement Card solutions.
Today's organizations are using a wide range of Source-to- Settle processes with varying degrees of automation to deliver these savings. This study looked at the most popular processes by average percent of indirect spend. The process types with the highest spend volume are:
• Manual / Paper Process with Check Payment (31%)
• Manual / Paper Process with Electronic Payment (25%)
• Procurement Card (21%)
Upon analyzing Process Efficiency, the study discovered that companies have seen a rise in indirect expenditures over the past several years. In 2007, 53% of participants’ expenditure was a result of purchasing indirect commodities, a 13 percentage point increase from 2003.
This increase suggests the growing importance that strategic procurement initiatives play in corporate management.
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The procurement environment has grown increasingly complex over the past several years.
Accenture, in partnership with American Express, conducted this study to determine how organizations manage their Source-to-Settle processes, as well as understand the role of Procurement Cards in today’s procurement environment and how their role will continue to evolve over the next few years.
This study captures an equal representation of company sizes, industries, and revenue ranges.
76% of the participants had Procurement Card programs.
The Role of Procurement Cards in the Source-to-Settle Process
Accenture, in partnership with American Express, 2007
This study had been presented during APECA annual conference in 2007
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Procurement Card overview
Procurement Cards have moved from a status of best practice to common practice, and are now widely used for almost all indirect categories of spend
Procurement Cards function much like a credit card with three distinctions:
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data captured is of a much higher quality than with credit card transactions,
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many more controls are available,
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card balance must be paid in full.
Procurement Cards are one of the many tools being used in today’s organizations to drive process efficiency, compliance and sourcing benefits. Some organizations use this tool as just a payment vehicle while others have leveraged the controls and data provided by Procurement Cards and integrated it into their procurement processes.
When used effectively, Procurement Cards increased compliance, drove cost savings per card transaction down by 35- 40%, and provided high quality data capture.
Procurement Cards allow organizations to achieve the lowest process costs amongst all Source-to-Settle processes in use today whether used on their own or with eProcurement solutions by:
- reducing approval costs with pre-approval of spend and transaction limits,
- largely eliminating purchase orders,
- consolidating invoices from multiple suppliers into one electronic invoice,
- capturing enhanced information that helps with faster reconciliation, dispute resolution and tax processing
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Procurement Cards, when used as an end-to-end process, allowed organizations to reduce process costs down to an average of $9 per transaction.
This is a per transaction decrease of over 50% from the 2003 average transaction costs for Procurement Cards of $19. |
Procurement Card programs offer benefits in spend consolidation by helping organizations to rationalize their supplier base.
In the area of compliance, Procurement Cards enabled companies to improve contract compliance by establishing clear buying processes and allowing for control mechanisms prior to a transaction taking place.
As Procurement Cards continue to gain acceptance, the authors have seen mature commodities, such as office supplies, start to stabilize. In these commodities, survey participants did not anticipate additional growth in the use of Procurement Cards.
More importantly, they are seeing a growth in commodities that were not previously widely managed via Procurement Card programs: direct goods, utilities, lease and rental payments, capital assets.
Procurement Card benefits
Companies using Procurement Cards attained among the lowest transaction processing costs identified in our study.
When a company incorporates the Procurement Card with a manual requisition process, companies experienced a significant decrease in process costs.
Organization benefits:
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reduces paperwork, less labor intensive,
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promotes cost savings through consolidated payment,
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supply base consolidation & increased compliance,
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improves supplier relations due to faster payment,
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provides consolidated data & flexible reporting,
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fexible authorization controls to manage spend per cardholder,
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Improves cash flow.
Cardholder benefits:
- convenience and ease of buying,
- improves accuracy of orders,
- requires no manual approval/requisitions,
- speeds delivery of goods.
supplier benefits:
- payment, on average, within 2-3 days (improved cashflow) ,
- reduces billing and payment processing costs,
- improve relationships with their customers ,
- potentially leading to increased sales from new & existing customers.
[more about the survey]
More on private sector
Maximiser la valeur du processus approvisionnement-paiement
Livre Blanc réalisé conjointement par American Express et ATKearney, 2002
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Le processus global approvisionnement-paiement. Les Meilleures pratiques
Etude réalisée par Deloitte & Touch et Deloitte Consulting, pour le compte de VISA, 2002
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