What defines best-in-class purchasing card programs?
The Boston-based Aberdeen Group evaluated 297 organizations between March and July and determined best-in-class enterprises by two key measures: percentage of indirect spend placed on P-cards and percentage of the organization’s suppliers that accept P-cards.
According to the Aberdeen Group, best-in-class enterprises in the study share the following characteristics in the management of their P-card programs:
- They achieve a 64 percent greater savings benefit from their P-card programs.
- They use P-cards to settle 2.8 times higher percentage of transactions.
- They enjoy per-transaction cost savings. One best-in-class P-card manager noted: “Paying via P-card versus on invoice saves us about $18 for every transaction that is processed.”
The majority of enterprises that Aberdeen looked at have had a P-card program in place for more than three years. More than half (61 percent) of the best-in-class organizations have had P-card programs for more than 6 years, according to the Aberdeen Group.
Best-in-class examples in the education and public sectors
About 10 percent of the organizations that Aberdeen examined are in the education field, while 7 percent are in the public sector. Among the best-in-class P-card plans in the education and public sectors reported in the Aberdeen study:
- The P-card program at the University of California at San Diego produced 77,000 transactions last year, and is on pace to boost transaction levels by 30 percent in 2007. In order to promote usage of P-cards, the university raised the single-transaction limit from $2,500 to $4,999, with a monthly spend of $10,000. P-card administrators distribute a quarterly newsletter to promote usage and to update cardholders about program changes.
- The procurement department for the city of Tucson, Ariz., rolled out a P-card program to the entire city government in early 2005. This followed an extensive RFP process and a six-month pilot program. To ensure broader adoption, the procurement department established and enforced stricter usage guidelines for small purchases and reduced the times and days that petty-cash reimbursements are available. The management coordinator for Tucson’s Department of Procurement, Brian Garrity, CPM, CPPB, reports that the P-card program has yielded cost savings to the city.
Identify and empower a P-card manager
The Aberdeen report offers these suggestions for those agencies seeking to raise their P-card program performance up to best-in-class status:
- Identify a purchasing-card program manager and empower the position.
- Stimulate the program with the development of a new P-card policy and limit ways that P-card usage can be bypassed. Require that cardholders use the card for defined purchase categories.
- Implement a formal P-card expansion program, and institute an aggressive supplier outreach effort.
To download the report, click here.