Corporate Cards and P-Cards: Get Better Insight into Employee Spend

As your company continues to grow and evolve the way it manages employee spending, consider whether corporate cards and P-Cards can provide better visibility and control. A unified reporting and reconciliation process of corporate cards and P-cards can streamline work for your finance and audit team. 

Why is Spend Visibility So Important? 

Timing is everything when it comes to effectively managing spend. Many organisations have done away with pre-approvals for employee spend as it can delay associated approvals and lead to additional costs. Instead, many organisations have now incorporated policies at the organisational and departmental levels that guide employee spending behaviour. The trade-off here is that the employee decides when to buy and for how much, which results in less visibility for the business. 

Although there are many benefits departments can gain from advanced visibility into payments due, the accounts payable (AP) department is the most obvious, as they are responsible for making payments, ensuring the firm takes advantage of early payment discounts, and avoiding late charges.  

But when employees use their own cash or credit card to pay for home office expenses, meals, entertaining clients, or attending a local conference, AP does not know how much is due. Furthermore, they won’t know which department’s budget will be charged until the expense report is created and approved and/or the invoice is received for payment. 

However, visibility extends beyond just benefiting AP. The department heads that are eventually cross-charged for the expenses – such as engineering, field services, marketing, and sales – also have an interest in knowing how much their employees are spending. Each department has a monthly expense budget it must adhere to, and without early notice of expenses approaching its budget limits may be exceeded, resulting in a difficult explanation to the treasurer or controller.

Key Takeaways: 

• Advanced visibility helps control spending: By having advanced visibility on charges coming their way, all department heads can ask their employees to withhold spending until the next cycle or spend within the current budget if doing so will enable the department to stay within budget from one cycle to the next. 
• Distributing employee cards speeds up financial processes: Firms that provide employees with corporate cards, travel cards, or process payments with P-Cards have the benefit of receiving feeds from the financial institution within days of when the charge is made. This enables your finance and AP teams to gain visibility on amounts due and payment due dates, usually days or weeks before the expense report or invoice is processed and approved for payment. 

The Difference Between Corporate Cards and P-Cards 

Corporate cards are cards issued by a bank or financial institution to employees whom the firm wants to grant access to corporate funds. Each card is associated with an employee name and/or number, which helps track any disbursement made by that employee to any supplier. This association helps not only the accounts payable department but also the audit department – when looking for patterns of employee spend for procurement synergies or checking for potential fraud. 

Purchasing cards, also known as P-Cards, are account numbers that a financial institution (referred to as issuer or provider) issues to an organisation for the purpose of making purchases by its employees. Suppliers are set up to accept and process payments via P-Cards through the existing credit card system. Information about the purchase, captured by the supplier’s point-of-sale (POS) system, may include the supplier’s name and transaction amount, as well as customer-defined codes and line-item details. The organisation receives feeds from the financial institution with notifications of charges as they are incurred, and a billing statement once per month. Charges are allocated to the appropriate department and expense type based on the employee making the purchase, the supplier code, etc. In addition, a benefit of P-Cards is the controls that the organisation can implement for each P-Card, for example: purchase thresholds, monthly limits, and merchant category codes. 

P-Cards and Corporate Cards as Separate Spending Channels 

Charges made through corporate cards are typically matched to expense reports submitted by the employee or invoices processed, whereas purchases made through P-Cards have a higher degree of substantiation. This creates the added benefit of increased control on spend before it happens as well as a streamlined purchase reconciliation afterwards. Here’s how it works: 

1. First, P-Card purchases are matched with invoices and P-Card statements.  
2. Then, the employee making the purchase must verify that the charges are correct and that the goods were received. 
3. Finally, the organisation’s card programme administrator must validate the transaction and record it in the accounting ledger for payment.    

Because expense report submission, review, and approval processes are different for purchases made through corporate cards versus purchases made through P-Cards, it’s common for organisations to train employees on both processes; and to account for P-Card spend and corporate-card spend as two distinct spend channels – even if they are both a part of what we consider employee spend. 

Benefits of Combining and Automating Card Spend Channels 

Since employee spend occurs through both corporate card and P-Card channels, organisations that combine the corporate card and P-Card streams onto a single platform have much to gain. For example, by providing a similar, streamlined user experience for submission, validation, and approval of charges, the more likely purchases and expenses will be reported and submitted for approval and then reflected in the accounting ledgers driving to payments and reporting.  

Automating these tasks with the help of artificial intelligence (AI) and machine learning (ML) can help minimise much of the work involved, resulting in increased productivity and more time for meaningful work, thereby enhancing employee satisfaction. These advanced technologies can audit for human error, monitor for duplicate payments, and facilitate approvals for employee-defined charge amounts as they flow through the same system. As a result, the treasury department benefits from more predictable cash management and quicker approvals for low-spend, high-volume card charges. 

Putting it All Together – Card Payment Key Takeaways 

• When it comes to employee spend, there are several payment channels: cash, corporate cards, P-Cards, ACH, cheques, and more. 
• Payment to suppliers, reimbursement to employees, and reporting to department managers across the business are driven by how soon the employee creates and submits an expense report or substantiates, verifies, or reconciles charges that come through via card statements.  
• The sooner the charges are reconciled, approved, and recorded in the accounting ledgers, the more visibility AP has on payments due and department heads have on actual expenses versus available budget. 
• Integrating supplier lists across these channels provides a more accurate view of a supplier's spend volume, resulting in additional opportunities for the procurement department to negotiate favourable pricing.  
• Combining corporate-card and P-Card spend into a single platform helps the internal audit department check the accuracy of recordkeeping and accounting and helps the treasury department with enhanced visibility on cash needs. 

Spend intelligence is an essential component of how organisations can better respond to their customer needs, engage talent in new ways, create disruptive business models, and more.