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p-Cards for Schools: Streamline Your Procurement and Accounts Payable Process Spring 2008
Ronald E. Everett
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Myth:
The more paper, the better the paper trail
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The Traditional PO Process Can The Traditional PO Process Can Be Painful…Be Painful… Paper Intensive / Mountains of Paper Multiple Departments Involved Same Process Regardless of Transaction Value High Average Per Transaction Cost to School
District High Average Per Transactions Cost to the
Vendor Not Cost-Effective for Small Purchases
(Less than $2500)
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What does it actually cost to process a PO from start to finish? Requisition Approval Purchasing Receiving Accounts Payable
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What are the Experts Saying?What are the Experts Saying?“The average cost of processing a purchase order manually is between $75 - $200. Automating procurement reduces that cost to between $10 - $40... The Return-On-Investment (ROI) is amazing.” Deloitte Consulting
Accenture US Bank Fifth/Third Bank American Express Chicago Public Schools - Elgin U-46 - Rockford
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Real example of reducing paperwork Naperville 203 2001 - 9,847 PO’s 2006 – 4,724 PO’s Saved 5,123 PO’s
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Savings of Time and Money for Naperville 203 PO’s Eliminated
5123 * $75 = $384,225 PO’s Still Used But With Improved Efficiency
4724 * $35 = $165,340Total: = $549,565*
*Assumes MINIMUM savings rate based on citedresearch studies.
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P-Cards Should Not:
Eliminate all of the Purchase Orders a district uses – whether paper or electronic!
Only the many small PO’s will be eliminated.
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Bench Marking Questions
How many non-payroll checks are written each month?
What percentage are for less than $1,000?
What percentage are for less than $500?
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Why is the Streamlining of Small Why is the Streamlining of Small Purchases Significant?Purchases Significant?
The majority of transactions in most
organizations are for relatively small amounts District 203 – 58% of AP checks are for
less than $500 District 204 – 58% of AP checks are for
less than $500 Private Sector Business case study:
60% of purchases for less than $1, 000
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The reduction of PO’s has also resulted in the reduction of checks written Naperville 203 (Cont’d) 2001 – 16,954 Checks Written 2006 – 8,689 Checks Written
Savings of 8,265 Checks!
Postage savings alone = $3,388
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Savings for Naperville 203 caused by writing fewer checks Actual Savings from Checks NOT Written
*$2.50 * 5123 = $12,807 Postage to mail each check
$0.41 * 5123 = $2100Total = $14,907
*Cost of check, envelope, stuffing and mailing.
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Ask yourself:
What can you eliminate? What can you save?
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Bench Marking Questions
How many “petty cash” transactions per year?
How many “emergency/reimbursement” checks written per year?
How many “imprest fund” checks written each year?
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Could all of these small transactions each month be consolidated into one payment?
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Who are the employees creating all of these small purchases?Get the cards into the hands of people who do the purchasing.
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Key to Consolidating Small Purchases into one payment:
As a minimum – Get p-Cards into the hands of as many employees as you can who are currently making small purchases/ generating PO’s of less than $1,000.
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What are Procurement Cards?What are Procurement Cards?
They look and operate similar to credit cards
They do not carry a revolving line of credit Usage and authorization parameters can
be reviewed and managed via the internet by district administration
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Specific card use parameterscan be established for each card
Transaction limits per chargeMonthly limitsPreferred Supplier RestrictionYou control what can be purchased, where
it can be purchased from and limit amount per transaction
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Customized Card
design can display:
Card holder name School District name and
number and/or Tax ID
2 Lines of text per card
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Advantages of an Association Sponsored Program Single Contract Creates a user group/support network Negotiation clout Due diligence costs eliminated Rebates
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Rebate Distribution
Rebates are calculated in May and distributed in June to Illinois ASBO
We then turn around and distribute to each district
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Rebate History
2003-04 $0 2004-05 $46,101.51 2005-06 $125,522.01 2006-07 $295,899.63 2007-08 $??
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Current Rebate Schedule 5/1/2007
Tier 6 $70,000,000+
Tier 5 $50,000,001- $70,000,000
Tier 4 $30,000,001- $50,000,000
Tier 3 $20,000,001- $30,000,000
Tier 2 $10,000,001- $20,000,000
Tier 1 $5,000,001- $10,000,000
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p-Card Growth - DistrictsMonth 2003-04 2004-05 2005-06 2006-07 2007-08
May 5 48 84 137 205
June 7 53 88 141 207
July 12 58 88 145 213
August 16 61 93 146 217
September 18 66 99 152 220
October 20 68 103 158 220
November 21 71 106 161 220
December 24 72 109 163 246
January 26 76 113 177 265
February 30 80 114 183 265
March 36 81 117 187 287
April 41 83 133 194 295
41 83 133 194 295
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p-Card Growth – Purchasing Volume
2003-04 2004-05 2005-06 2006-07 2007-08
May 1,200 355,405 1,025,004 2,562,422 3,512,633
June 30,500 420,569 1,018,773 2,558,846 3,806,285
July 24,300 356,835 1,140,360 2,354,778 3,392,511
August 24,700 452,171 1,499,626 3,374,260 5,023,218
September 101,400 697,709 1,499,395 3,376,079 4,270,506
October 186,900 664,393 1,405,328 2,622,251 5,203,320
November 192,100 623,687 1,448,102 2,719,870 4,617,983
December 217,000 733,780 1,374,497 2,607,935 4,057,096
January 194,200 709,256 1,606,136 2,534,792 4,341,755
February 254,700 987,478 1,763,880 2,466,692 5,264,745
March 357,400 885,233 2,257,205 3,227,319 5,059,284
April 318,600 1,181,706 2,454,114 3,475,371 6,398,865
1,903,000 8,068,222 18,492,420 34,344,057 55,017,907
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Customized Card Design
Individual Card Department Card – No Fraud Coverage Ghost Card – No Plastic – No Fraud
Coverage
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Billing Cycle Requirements
School District may choose a billing cycle cut-off of the 5th or the 20th
Payment is due at Harris Bank within 21 days of billing cycle cut-off Penalty for late payment (Prime + 7%) on all
transactions in the billing cycle Penalties can be avoided with pre-planning and
monitoring online usage reports
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Only 3 Possible costs to participating school Late fee ATM Charge – IF cash advance option is
selected Interest owed on any cash advance
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Billing and Payment
Monthly Billing StatementsConsolidated Billing Statement (Available
online)Cardmember Report (available online) Individual Reports
Payment MethodsAutomated Clearing HouseCheck
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Why was MasterCard selected?
Superior vision with technology and e-commerce
Fraud Protection insurance Dedicated group to sign up suppliers Customized card design displaying the
name of card holder, school district and/or tax exempt number
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Why was MasterCard selected? (Continued) Individualized training Global acceptance at over 35 million
locations Retailers benefit from low transaction
charge
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Online Capabilities (24/7)
Online Program Management Submit, approve, and cancel Card accounts Instant Account Activation Adjust spending limits/manage Cardmember profiles View Cardmember charges Change accounting information
Online Information Services View/Manage Program Information Access to Web reporting tools
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Vendor Benefits
Reduces paper processing/billing Reduces vendors’ time/costs of
processing/depositing payments Reduces vendor transaction costs Vendor paid by Harris within 48 hours of
shipment/pick-up Reduces the issues of partially filled orders
Reduces vendors time/costs of processing & depositing of payments
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Benefits of a p-Card Program for ManagementEasier on Accounts Payable
Submit one monthly payment vs. multiple payments to multiple vendors
Reduction in paperwork Fraud prevention and protection through the Bank
and MasterCard Detailed reporting available 24 x 7 Easy online administration and dedicated customer
support Control on spending limits and accepted vendors
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How to Get Started
1. Download documents www.illinois-pcard.com
2. Submit resolution to local board of education for purchasing card participation
3. Identify local p-Card administrators
4. Complete application packet – send to State ASBO affiliate
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The Next Step
Order Cards Training with Harris Bank/BMO Distribute Cards/Train Cardholders Reconcile Bills
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Side Benefits
More time on task Less wasted time Reduction in the publication of the annual
“Statement of Affairs” Reduction in time/cost of monthly bank
statement reconciliation Better investing/cash management
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A Sampling of Major Textbook Companies who accept the p-Card:
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Sample of Suppliers who accept the p-Card:
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Partners :
Illinois Principal Association (IPA) Illinois Association of School Administrators (IASA) Illinois Association of School Boards (IASB)
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For more information, word documents and other tools, or to download all available files, please go to www.illinois-pcard.com.
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Holly Wallace815.753.9083 (tel)815.753.9367 (fax)[email protected]
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p-Cards for Schools: Streamline Your Procurement and Accounts Payable Process Spring 2008
Ronald E. Everett