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Harness the Power of Purchasing Cards
When you first heard about Commercial Cards, you might have been attracted to the idea of saving money on travel and entertainment and reducing the need for checks.
But the real power is in the ability to improve transparency on spending and increase efficiency throughout your organization. A Purchasing Card (also called a P-Card), can help you achieve that.1
Increased Efficiency with Robust Analytics
Monitoring your purchases on an ongoing basis can be cumbersome. While you know there may be hidden operational inefficiencies, without dedicated resources that kind of oversight often gets neglected.
Among the key benefits of P-Cards are the services that come with it. Your dedicated M&T team will leverage analytics to identify how efficiently you’re using your cards. Quite simply, the more you use your P-Cards, the more data we can mine and analyze to help you make better decisions.
Another service you won’t want to miss out on is competitive insights: We’ll characterize the card programs of your peers to learn about their vendors and potential inefficiencies.
Couple that with industry-specific benchmarks and our ability to find gaps in the types of suppliers you currently use and you have robust research without drawing on your team’s time or resources.
Customized analytics can be a game changer for your business, but don’t take our word for it. Recent independent survey data1 indicates that M&T Bank customers were more satisfied with the information they received about their P-Card transactions than were customers of other financial institutions.
An Upper Hand in Purchasing
We can work with you to uncover vendor discounts for cost savings. For example, your data may reveal opportunities to change how you make purchases. Perhaps you can gain leverage by consolidating orders across the enterprise or by bundling them.
Among organizations that use card-spending data to negotiate discounts, 56 percent reported obtaining a higher discount, according to the 2017 Purchasing Card Benchmark Survey.2 In fact, this latest study notes that, while the absolute improvement in the discount is 1.9 percent, if an organization was already receiving a 3.0 percent discount, the use of P-Card data in negotiations increased the discount to 4.9 percent.
While negotiating discounts may take some time to initiate, remember that P-Card transactions can prove beneficial to your cash flow in a more immediate sense.
A typical P-Card purchase provides, on average, 29 days of interest-free financing.3
Additionally, assuming a 5 percent annual return on working capital, if an organization spends $10 million through a P-Card program, they can gain approximately $40,000 in yearly cost savings (effectively, a 0.4 percent reduction in the annual cost of P-Card purchases) due to the working capital float facilitated by the delay in billing (average daily credit balance) and the payment grace period.4
Cost Per Transaction
Purchasing cards can also impact your transaction costs – that is, the labor costs associated with processing transactions. The average administrative cost of procuring and paying for items or services via traditional purchase orders is $89.99 – with an enterprise planning system (ERP), it comes to $44.25 – P-Card transactions total just $20.14.5
Those raw numbers are overshadowed by the percentage savings that P-Cards represent over either payment method in terms of both cost and cycle times.
Your organization could realize dramatic savings with P-Cards: 54 percent if you switched from an ERP or 78 percent if you converted from paper transactions. You could also see similar savings in terms of cycle time.
Purchasing Card Usage
One deterrent that may give you pause is whether or not your vendors will accept P-Cards. A survey of M&T customers found that respondents said they were satisfied or very satisfied with the level of supplier enablement performed by M&T.6
Of course, what matters most is whether your specific vendors are included. Your M&T team can gather that information – and so much more.
Adopting one or all of the four Cs of a Fully Charged M&T Bank Commercial Card program can have an immediate positive impact on the performance of your card program. Even adopting one or two can make a huge difference in your benefits.
The four C’s of a well-constructed Commercial Card program are:
Champion your purchasing card program via a senior-level manager.
- Identify and engage a cross-functional team to support program planning, communication and measurement
- Select a program administrator to coordinate daily program activities and employee training
- Participate in a kick-off call with the card provider and the employees involved in the payable program
- Monitor employee training on the program, the systems and vendor communication
- Set clear program goals for the first-year target, the ramp up phase and the yearly volume
- Set stakeholder accountability
- Set measurements for transaction volume and growth
- Evaluate the program’s performance twice a year
Calculate your realistic card spending.
- Have an accurate calculation of your accounts payable spending and realistic projections of how many vendors can be converted to card payment
Collaborate with vendors to get them on board.
- Your cross-functional team should collaborate with other staff to create a standard payment terms strategy. Your goal is to convert as many vendors as possible to card payment. A good strategy will include outreach to current vendors, incentives for accepting card payments, policies for contracting and renewing, and a yearly review process
Consult your vendors and respond to their concerns.
- Be prepared for vendors who agree to take a purchasing card but then raise objections or even want to revert back to check payment
- Consult those who know your vendors best: your staff with day-to-day business relationships with them and your accounts payable representatives. Make sure those who know your vendors best – your staff – understand and support the card as your preferred payment method
Contact your relationship manager or Commercial Card Consultant to set up a discussion. In general, we need only about a week to review your vendor list and make recommendations.
This article is for informational purposes only. It is not designed or intended to provide financial, tax, legal, investment, accounting, or other professional advice since such advice always requires consideration of individual circumstances. Please consult with the professionals of your choice to discuss your situation.
1 2017 Purchasing Card Benchmark Survey Results, M&T Customized Report, page 23.
22017 Purchasing Card Benchmark Survey Results – Market Trends & Best Practices, page 52.
3 2017 Purchasing Card Benchmark Survey Results – Market Trends & Best Practices, page 54.