Want to Make Administration Easier? Try Purchase Cards

Amy Sink, Teachers Credit Union
April 21, 2005

How long does it take to approve an expenditure? In the good ol’ days the accounting department would require a requisition, a purchase order, and invoice, followed by the receipt. The receipt needed to be signed by one, if not two people. Then the accounting department, the masters of paperwork, would match up all the paper, check the amounts, make the ledger entries, and file the paperwork by vendor and general ledger number.

Let’s face it: Accounting departments have taken expense control to a new level. No rational business person wants to go through all those steps just to buy anything! Thank goodness times are changing. In March 2002 Teachers Credit Union (TCU) implemented a purchasing card (p-card) process and settlement is completed by PNC Bank; Works, Inc. in Austin, Texas manages the authority matrix and purchase-order process.

TCU in South Bend, Indiana and has approximately $1.4 billion in assets. Currently we have 171 p-cardholders and process approximately 6,000 p-card transactions a month. The average p-card transaction is $689. The highest p-card transaction processed is $285,000. Our annual expenditure in 2004 was $7,500,000. We are on pace to achieve $10,000,000 in 2005.

What Is a Purchase Card?

Purchase cards are essentially credit cards that let you authorize employees to make business purchases from any merchant or vendor that accepts VISA. What makes it stand out from normal credit cards is the heightened level of efficiency and control it brings to your purchasing management process. Think of the time and resources devoted to managing expense authorizations and approvals, spending limit adjustments, requisitions, and purchase orders. Don’t forget all the separate invoice processing; check writing, expense reporting, and the headaches of account reconciliation. Purchase cards use leading edge technology to bring these purchasing management burdens into a single streamlined process.

Purchase card programs apply Internet technology to the purchase request/approval process. Procurement rules and limits are conveniently integrated into a Web-based system. Signature controls and spending limits, including maximum transactions and discretionary limits, are applied automatically to all purchase requests before transactions occur.

Reporting, accounting, and settlement are easier. Online records of each cleared transaction are readily available. Comprehensive data feeds of card activity allow for real-time tracking of transactions as they clear. Account reconciliation on a cost-center or branch-by-branch basis is possible. Data can be viewed at any time and additional details such as purchase order numbers or cost center allocations can be inputted. And every month a single debit settles total purchase activity. Accounting department receives a consolidated statement detailing activity for all individual accounts. There are no interest charges because the account is paid in full every month. Purchase card programs support most standard general-ledger software packages.

Purchase card programs not only bring increased efficiency in purchasing and accounts payable, but also offer the opportunity to receive money back in the form of interchange rebate paid on each transaction. A progressive rebate means the more that is spent, the higher the rebate.

Amy L. Sink is senior vice president and CFO of Teachers Credit Union in South Bend, Indiana. Contact her at 574 284-6489 or asink@tcunet.com.