Managing Procurement Cards
Over the last few years, the use of Procurement Cards in Accounts Payable departments has skyrocketed. What was once thought of as a secondary payment form is now a default for many organizations. Because P-Cards offer a simple and efficient way to manage the payment of smaller transactions, many businesses have committed to increasing their use.
Over time, this increase in activity has exposed certain problems with P-Cards. While some issues may be unique to certain organizations, the following issues occur accross most industries:
- Limitations in Tracking Spend
- Increased Opportunities for Fraud
- Increased Duplicate and Erroneous Payments
With P-Cards, it is imperative to think differently in order to mitigate the risks that occur. When A/P Managers attempt to address issues surrounding P-Cards, they typically fall back on old habits, trying to draw from the parameters of traditional A/P processing.
Unfortunately, these tactics will likely fail with P-Cards. Since it is such a different system than traditional invoicing, it requires its own approach.
Understanding and Utilizing the Data
P-Card Statements always contain Level 1 data. This high-level data is similar to the information many of us see on our personal credit card statements, including: Transaction ID, Vendor Name, Transaction Date, Currency, Amount, and MCC Code.
While this data is enough to cover the basics, it doesn’t allow for analysis that can reveal fraud and other issues. Many card issuers are now including Level 3 data (or Enhanced Data). This typically includes: Part Numbers, Item Descriptions, Quantitites, Price Per Item, and Sales Tax.
This enhanced data can reveal a great deal about the kinds of purchases being made. Certain questions should always be asked when analyzing this data.
- Do retail transactions include purchases of gift cards or other non-business items?
- Are there payments to utilities or service providers that do not tie to business locations?
- Do individual part prices trend correctly to supplier negotiated terms?
- Are transactions occurring on weekends or holidays when business purchases would be inappropriate?
- Do certain employees have multiple risk factors associated with their spending? (example: weekend transactions plus non-business items)
Duplicate Payments Dangers
The increased usage of procurement cards has also led to new scenarios involving duplicate payments. Companies are seeing an increase in cases where a payment is made via P-Card, and a manual invoice is processed later. Since P-Card transactions do not have an invoice number, the basic checks of an ERP system will not detect this type of duplicate.
As such, it is imperative for modern auditing tools to have the capability to identify P-Card vs. Invoice duplicates. This is especially true for companies whose vendors frequently used mixed transaction processing. Technology Insights tools are leading the way for the management of P-Card transactions.
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