visa commercial solutions best practices—summaries … · this document provides high-level...

V I S A C O M M E R C I A L S O L U T I O N S

B E S T P R A C T I C E S — S U M M A R I E S

Profit from the experience of best-in-class companies.

Introduction

To stay competitive, you know how important it is to find new ways to streamline and save on your company’s operations. Learning

how leading companies handle commercial payments can give you deeper insights into where and how you can improve. Help you

understand how to run your Procure-to-Pay processes more efficiently. Enhance visibility into corporate spend. Gain better control

and compliance. And ultimately, help enable you to add more profit to your bottom line.

Visa commissioned Deloitte Consulting to conduct 90 in-depth interviews in 2007 with more than 60 global/multinational, mid-size

and large corporations as well as federal and local government agencies across the world. See the section entitled “Study Methodology”

for additional detail. The 2008 Visa Global Procure-to-Pay and Commercial Card Best Practices Study describes how these organizations

implement and optimize their Procure-to-Pay processes and commercial card programs.

This document provides high-level summaries of the best practices. The summaries give you a quick overview of each best practice

and its key benefits—including maximizing your purchasing and corporate card programs. Streamlining travel and entertainment

management. Taking advantage of the latest innovative best practices. And automating the entire Procure-to-Pay process.

To obtain the full version of the 2008 Visa Global Procure-to-Pay and Commercial Card Best Practices Study, contact your

commercial banker.

Table of Contents

Procure-to-Pay Best Practices

Articulate a Procure-to-Pay Strategy with a Short and Long-Term Vision . . . . . . . . . . . . . . . . . . . . . . 1

Establish Center-Led Management of Critical Procure-to-Pay Functions . . . . . . . . . . . . . . . . . . . . . . 1

Create a Procure-to-Pay Shared Services Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Institute a Center-Led Travel Management Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Develop a Procure-to-Pay End-to-End Automation Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Set Performance Goals for Procure-to-Pay and Card Management Employees . . . . . . . . . . . . . . . . . . 5

Communicate Enterprise-wide Procure-to-Pay Policies and Procedures . . . . . . . . . . . . . . . . . . . . . . 5

Communicate Enterprise-wide Travel Policies and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Institute a Supplier Management Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Develop a Contract Lifecycle Management Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Establish Supplier Key Performance Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Automate Order Placement with an e-Procurement Solution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Maximize Use of an Online Travel Booking Tool . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Evaluate Accounts Payable Automation Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

Note: Survey results, research and practice recommendations are intended for informational purposes only and should not be relied upon for marketing, legal, technical, tax, financial or other advice. When implementing any new strategy or practice, you should consult with your legal counsel to determine what laws and regulations may apply to your specific circumstances. Visa is not responsible for your use of the information, including errors of any kind, or any assumptions or conclusions you might draw from its use.

Much of the information contained in this document applies internationally, but a certain amount of information applies only to certain countries or regions. Although Visa tries to mark all country- and region-specific information with a country indication, it does not warrant or represent that all information without indication applies internationally. You should check the applicability of any information in this document to you or your organization.

Automate Invoice Receipt and Payment with Electronic Invoice Payment and Presentment (EIPP) . . . . . 12

Reduce Invoices with Evaluated Receipt Settlement (ERS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Automate the Payment Approval Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Create a Controls and Compliance Strategy for the Procure-to-Pay Process . . . . . . . . . . . . . . . . . . . 16

Consolidate Spend Data and Conduct Spend Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Benchmark the Performance of the Procure-to-Pay Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Analyze Enterprise-wide Travel Spend Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Commercial Card Best Practices: STRATEgy

Implement a Purchasing Card Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Implement a Corporate Card Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Consider Implementing a Commercial One Card Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Consider Implementing a Fleet Card Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Consider Implementing a Multinational Commercial Card Program . . . . . . . . . . . . . . . . . . . . . . . . 22

Integrate the Commercial Card Program with Enterprise-wide Cost Reduction Initiatives . . . . . . . . . . 23

Establish Center-Led Management of the Commercial Card Program . . . . . . . . . . . . . . . . . . . . . . . 24

Achieve Active Senior Management Support of the Commercial Card Program . . . . . . . . . . . . . . . . 25

Integrate the Commercial Card Program into the Green Initiative . . . . . . . . . . . . . . . . . . . . . . . . . 26

Create a Controls and Compliance Strategy for the Commercial Card Program . . . . . . . . . . . . . . . . . 27

Commercial Card Best Practices: PRogRAM MAnAgEMEnT

Select the Liability and Billing Structure for the Commercial Card Program . . . . . . . . . . . . . . . . . . . 28

Define Issuance Criteria for Optimal Purchasing Card Distribution . . . . . . . . . . . . . . . . . . . . . . . . 29

Define Issuance Criteria for Optimal Corporate Card Distribution . . . . . . . . . . . . . . . . . . . . . . . . . 29

Establish Parameters for Eligible Purchasing Card Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Establish Parameters for Eligible Corporate Card Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Communicate Enterprise-wide Purchasing Card Policies and Procedures . . . . . . . . . . . . . . . . . . . . 32

Communicate Enterprise-wide Corporate Card Policies and Procedures . . . . . . . . . . . . . . . . . . . . . 33

Mandate the Use of the Purchasing Card for All Eligible Purchases . . . . . . . . . . . . . . . . . . . . . . . . 33

Develop Procedures for Commercial Card Account Management . . . . . . . . . . . . . . . . . . . . . . . . . 34

Deliver a Comprehensive Commercial Card Training Program . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Investigate Expansion of Commercial Cards into New Spend Categories . . . . . . . . . . . . . . . . . . . . . 36

Integrate the Commercial Card Program with the Working Capital Management Process . . . . . . . . . . 37

Commercial Card Best Practices: TEChnology

Integrate Commercial Card Data with Financial Accounting Systems . . . . . . . . . . . . . . . . . . . . . . . 38

Integrate the Commercial Card with e-Procurement Technology . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Automate the Reconciliation Process by Integrating with Expense Reporting Applications . . . . . . . . . . 39

Commercial Card Best Practices: oPERATIonS

Establish Audit Procedures for the Commercial Card Program . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Integrate the Commercial Card Program into the Business Continuity Plan . . . . . . . . . . . . . . . . . . . 41

Designate a Commercial Card for Meetings, Incentives, Conferences and Exhibitions (MICE) . . . . . . . 41

Optimize Use of Ghost Cards or Virtual Accounts for Procurement Spend . . . . . . . . . . . . . . . . . . . . 42

Optimize Use of Central Travel Accounts for T&E Spend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Use Fleet Cards to Track Fleet-Related Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Use the Commercial Card to Pay Invoices in Accounts Payable. . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Incorporate Commercial Card Acceptance into Supplier Contract Terms . . . . . . . . . . . . . . . . . . . . . 46

Communicate Commercial Card Benefits to Non-Accepting Suppliers to Encourage Card Acceptance . . 46

Utilize Enhanced Data from the Purchasing Card Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Utilize Enhanced Data from the Corporate Card Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Develop a Process for Reporting and Payment of Sales and Use Taxes . . . . . . . . . . . . . . . . . . . . . . 49

Develop a Process for Value Added Tax (VAT) / Goods and Services Tax (GST) Reclamation . . . . . . . . 50

Implement Imaging Technology and Establish a Receipt Retention Policy . . . . . . . . . . . . . . . . . . . . 51

Monitor and Evaluate Commercial Card Program Performance . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Share Commercial Card Performance Scorecard with Senior Management and Key Stakeholders . . . . . 52

Optimize Program Performance with the Use of Analytical Tools . . . . . . . . . . . . . . . . . . . . . . . . . 53

Study Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

1

Articulate a Procure-to-Pay Strategy with a Short and Long-Term Vision

Summary

Best practice companies establish a Procure-to-Pay strategy that is composed of short

and long-term goals. The short-term goals range from one to two years, while long-term

goals range from three to five years. The goals and initiatives are best developed by

incorporating feedback from key stakeholders throughout the organization.

Successful strategies contain goals for:

• Overall spend

• Spend by commodity type

• Spend by order placement mechanism

• Spend by payment type

• Cost Savings (estimated by activity-based costing

or full-time equivalent [FTE] savings)

• Supplier sourcing goals

This strategy is the foundation of the company’s Procure-to-Pay process and should

be a component of the company’s overall business agenda.

Benefits

• Cost Savings and Process Efficiency—A well defined and prioritized Procure-to-Pay

plan enables companies to identify achievable cost savings goals and increases

execution efficiency

• Supplier Management—Increased organizational alignment improves a company’s

ability to manage and rationalize suppliers

• User Satisfaction—Procure-to-Pay goals aligned with organizational needs receive

increased support from key stakeholders and employees

Establish Center-Led Management of Critical Procure-to-Pay Functions

Summary

Determining the degree of centralization of Procure-to-Pay functions is a critical

organizational design and management decision. A center-led management approach

ensures consistency of key Procure-to-Pay activities across the entire company, while

allowing requirements and restrictions to vary slightly based upon business unit/

regional needs. Activities that often have centralized oversight with location-specific

tailoring as needed include:

• Strategic sourcing

• Contract administration

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• Order placement

• Supplier payment

• Expense management

• Travel administration

• Communication and training

Many organizations achieve center-led management of Procure-to-Pay functions by

establishing a shared services organization. Shared service organizations centralize

and streamline functions across a company such as Procurement, Accounts Payable

and Accounts Receivable. In doing this, companies are able to reduce costs by taking

advantage of economies of scale and process standardization of key Procure-to-Pay

functions.

Benefits

• Control and Compliance—Centralized oversight allows for consistent

development and communication of policies and procedures, thereby providing

enhanced employee compliance

• Cost Savings and Process Efficiency—Center-led management helps eliminate

redundancies and increase process efficiencies across Procure-to-Pay functions

• Supplier Management—Center-led management of the Procure-to-Pay function

enables centralized negotiations with suppliers, which enhances the negotiating

strength of a company

Create a Procure-to-Pay Shared Services Organization

Summary

Leading organizations encourage a collaborative relationship between their Procurement,

Accounts Payable and business functions to maximize the efficiency of the entire

Procure-to-Pay process. In most organizations, a tighter integration of Procurement

and Accounts Payable has been achieved through the adoption of a shared services

model with center-led management of the Procure-to-Pay process.

This approach allows organizations to standardize and streamline non-strategic activities,

increasing the quality of service provided to the company. Additionally, this approach

facilitates Procurement and Accounts Payables’ joint participation on cross-functional

teams for initiatives such as a purchasing card implementation, an e-Procurement

upgrade or strategic sourcing.

The input of key individuals such as representatives from Procurement and Accounts

Payable, major internal Procure-to-Pay stakeholders and end-users helps set goals,

provide training and evaluate new opportunities for the shared services organization.

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Benefits

• Cost Savings and Process Efficiency—Strategic positioning of Procurement

and Accounts Payable results in cost savings and increased process efficiencies

through the streamlining and standardization of Procure-to-Pay activities

• Supplier Management—Increased collaboration between Procurement, Accounts

Payable and business units encourages the development of initiatives that

improve supplier sourcing, negotiations and contract management

• User Satisfaction—Increased Procurement and Accounts Payable alignment

with organizational needs increases user satisfaction

Institute a Center-Led Travel Management Function

Summary

Best practice companies centralize their Travel Management function to ensure

consistency of key travel program elements across the entire company, while

providing flexibility for the local business units to adjust policies and procedures

to support unique travel needs. Organizations typically centralize the following

Travel Management activities:

• Travel supplier negotiations and management

• Travel policy development and management

• Management of online travel booking tool

• Travel-related communications (e.g., newsletters, website)

• Corporate card administration

Centralization of the Travel Management function can reduce overall travel costs

by as much as 20 percent through cost and process efficiency savings, which are

achieved through:

• Improved travel coordination efforts across the company

• Enhanced negotiations with suppliers through volume pricing

• Consistent development and communication of travel policy

• Streamlined communication with suppliers

• Increased user satisfaction from centralized service

• Consistent and comprehensive travel reporting

Furthermore, leading companies use one travel agency to enhance the reporting

of travel spend. Many companies also integrate the folio data from their corporate

card programs with the travel agency data to gain a more comprehensive view of

company-wide traveling costs.

Benefits

• Control and Compliance—Consolidation of the Travel Management function

enhances the ability to track and analyze travel spend and compliance data

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• Cost Savings and Process Efficiency—Centralized travel and consolidation of

spend reduces costs and improves discounts

• User Satisfaction—Streamlined and standardized processes, in addition to

an enhanced ability to address employee questions and issues, improves

the user experience

• Supplier Management—Centralized Travel Management improves relationships

with and management of suppliers

Develop a Procure-to-Pay End-to-End Automation Strategy

Summary

Best practice companies develop technology strategies that detail how technology

implementations and enhancements can enable end-to-end automation of the

company’s Procure-to-Pay operation.

Technology strategies can include the following key components:

• Vision for the current and future Procure-to-Pay platform, including integration

with new technologies, automation and potential outsourcing opportunities

• Short- and long-term Procure-to-Pay technology initiatives with alignment to

specific Procure-to-Pay goals

• Identification of benefits to be achieved through the technology initiatives

• Framework for selection of technology partners and suppliers

Organizations prioritize their automation initiatives and ensure maximum alignment

with their goals. These organizations also typically work closely with key stakeholders

in senior management, IT, Procurement and Accounts Payable to ensure the initiatives

have the appropriate level of support and resource commitments within the organization.

Study participants indicated that the implementation of a commercial card program

was a crucial component of their long-term technology automation strategy. Often,

the success of these programs was used to develop business cases for further technology

automation and integration within the Procure-to-Pay process as well as commercial

card program expansion.

Benefits

• Cost Savings and Process Efficiency—Effective planning and development of an

automation strategy increases the efficiency of technology implementations and

maximizes the effective use of resources

• Supplier Management—Short- and long-term strategies provide guidelines for the

selection of technology suppliers, including capabilities and service-level expectations

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• User Satisfaction—Short- and long-term strategies that align with a company’s

Procure-to-Pay strategy tend to also align with end-user needs, increasing their

support of technology initiatives

Set Performance Goals for Procure-to-Pay and Card Management Employees

Summary

Best practice organizations establish specific performance goals for employees

that are aligned with the company’s Procure-to-Pay and Card Program strategy.

Performance evaluation criteria may be based upon:

• Department and Cost Metrics—Measuring employees against specific

department or cost savings objectives will align the employee incentives

with the company’s overarching objectives. Many individuals involved in the

Procure-to-Pay process are also evaluated against annual savings targets

• Personal Development Criteria—Companies assign individual goals related to

continuing education or accreditation with industry organizations. Establishing

individual goals will encourage employees to remain current on industry topics

and will provide them with development opportunities

Once performance goals are established, employees should be informed of

the evaluation criteria, measurement frequency and review process. In addition,

companies will often create a scorecard to monitor and measure employee

performance against the assigned goals.

Benefits

• Cost Savings and Process Efficiency—Encouraging the correct employee behavior

will improve internal efficiencies. In addition, performance goals will motivate

employees to achieve the company objectives and cost savings goals

• User Satisfaction—Clearly communicating expectations and providing continuing

education opportunities allows employees to achieve their goals and improves

both career development and employee satisfaction

Communicate Enterprise-wide Procure-to-Pay Policies and Procedures

Summary

Best practice companies develop Procure-to-Pay policies and procedures to communicate

the recommended Procure-to-Pay processes. Policies may cover a variety of topics,

including mission statement and objective, organizational structure, requisitions process

and use of commercial card. Organizations work closely with key stakeholders to ensure

that consensus is established when developing or modifying Procurement policies

and procedures.

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Leading organizations develop comprehensive communication strategies to ensure

that Procurement policies and procedures are effectively communicated to employees.

Most companies report that employees are more likely to use the appropriate purchasing

process if they understand purchase guidelines and how compliance supports the

overall company strategy. Therefore, organizations should considering communicating

purchasing guidelines and the impact compliance has on the organization (e.g., cost

savings, potential efficiency gains) to employees regularly.

Companies ensure that their Procurement policies and procedures are relevant and

up-to-date by conducting regular reviews on a frequent basis, modifying the policies

as needed. Changes to policies can then be communicated to users and incorporated

into existing Procure-to-Pay training.

Benefits

• Control and Compliance—Clearly defined policies and procedures allow

companies to define and monitor progress toward user compliance with policies

and procedures

• Cost Savings and Process Efficiency—Increased adherence to well-defined

policies and procedures maximizes the use of practices that are identified

to enable greater efficiency for the Procure-to-Pay organization

• User Satisfaction—A clear communication of the Procure-to-Pay process allows

employees to perform more efficiently and minimizes rework associated with

non-compliance

Communicate Enterprise-wide Travel Policies and Procedures

Summary

Best practice companies develop and disseminate company-wide travel policies to

travelers to increase compliance and realize the associated cost savings benefits,

such as increased use of preferred vendors and maximized use of efficient travel

booking systems.

To ensure the development of comprehensive travel policies and procedures, companies

often consult their travel agency, business travel network or third-party providers for

policy development. Companies also ensure that travel and entertainment (T&E)

policies align with overall Procure-to-Pay objectives and are actively endorsed by

senior management. Once the company-wide travel polices have been developed,

organizations often allow local or regional businesses to customize travel policies and

procedures such as the number of required approvals or recommended means of travel.

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Successful organizations communicate travel guidelines as well as the impact compliance

has on the organization, including cost savings and process efficiencies, to employees

regularly through multiple communication channels, such as intranet portals, targeted

emails, newsletters and meetings.

Companies ensure that their travel policies and procedures are relevant and up-to-date

by conducting regular reviews on a frequent basis, modifying them as needed.

Benefits

• Control and Compliance—Clear travel policies and procedures increase

employees’ understanding of travel restrictions, mandates and policy updates,

helping companies achieve a greater level of control

• Cost Savings and Process Efficiency—Increased compliance with travel policies,

including the use of preferred travel suppliers and payment by corporate card,

results in cost savings and payment process efficiencies

• User Satisfaction—Comprehensive travel policies and requirements provide

employees with a clear process for travel planning and booking

Institute a Supplier Management Program

Summary

Leading companies have corporate-wide Supplier Management Programs to guide the

selection and on-going management of suppliers. These programs are typically centrally

administered, while also ensuring that the program efforts are supported by the

business units and employees who interact with the suppliers.

These programs typically consist of the following components:

• Program Objectives—A formal Supplier Management Program should include

strategic and financial goals such as the number of contracted suppliers or the

number of preferred suppliers per spend category

• Contract Term Guidelines—Typical contract guidelines include instructions for when

to utilize volume guarantees, criteria for determining contract length, payment

terms, discount percentages for early payment and service level requirements

• Contracted/Preferred Supplier Criteria—Organizations also ensure that criteria

exist to determine minimum standards for contracted and preferred suppliers

• Commodity/Spend Type Management—Once the suppliers are selected,

organizations use cross-functional teams to manage the supplier relationship

Companies conduct periodic reviews of their Supplier Management Programs to track

performance and ensure the goals and objectives are aligned with organizational needs.

As Supplier Management Programs often take time to fully implement, companies

often align Supplier Management goals with long-term organizational objectives.

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Benefits

• Cost Savings and Process Efficiency—Suppler Management Programs enable

negotiation of increased supplier discounts due to consolidated spend and

improved process efficiencies through increased supplier alignment with efficient

order and payment methods

• Supplier Management—Centrally administered, corporate-wide Supplier

Management Programs guide the selection, optimization and on-going

management of suppliers across the organization

• User Satisfaction—Incorporation of user feedback into supplier performance

evaluation and simplification of purchasing options through a rationalized supplier

base enhance user satisfaction

Develop a Contract Lifecycle Management Process

Summary

Active management of suppliers and contracts is critical for organizations with a

large number of contracted suppliers. Leading organizations develop an approach

that uses automated tools to develop contracts and ensure that suppliers adhere to

the contracted pricing, terms and Service Level Agreements (SLAs).

A number of third-party vendors provide applications to manage the six stages of the

contract lifecycle, from contract drafting, negotiation and approval to contract storing,

administration and renewal. Depending on the number and complexity of the contracts,

companies select and implement tools with varying levels of functionality.

Software also exists to integrate the contract lifecycle with procurement, sourcing

and payment applications. The integration of these applications automates the

supplier selection and payment process and enables Evaluated Receipt Settlement

(ERS) and the performance of three- and four-way matching.

Benefits

• Control and Compliance—A contract management tool provides companies with

visibility into the details of supplier contracts, which allows companies to monitor

each supplier’s performance and adherence to contracted terms

• Supplier Management—The ability to monitor supplier performance against the

contracted terms provides companies with the information needed to manage

the supplier and identify performance improvement opportunities

9

Establish Supplier Key Performance Indicators

Summary

Leading companies monitor the performance of their suppliers to ensure adherence

to the negotiated contract terms and Service Level Agreements (SLAs). To track

performance, companies typically establish Key Performance Indicators (KPIs)

based on the terms and SLAs that are established in the contracting and negotiation

process. Common KPI categories include price, speed, accuracy, quality, billing and

customer service.

Often companies will develop a scorecard to monitor the KPIs. A scorecard

provides information on current and historical performance and allows companies

to proactively respond to issues and encourage the correct behavior. The scorecard

can be used for performance reviews with the supplier as well as status updates

with senior management.

In addition to tracking supplier performance against KPIs, companies also evaluate

suppliers on their ability to meet the company’s objectives. In order to communicate

the objectives, companies hold annual supplier meetings, during which the company

describes their strategy, goals and initiatives. The annual meetings allow the suppliers

to align their practices with company objectives.

Benefits

• Control and Compliance—Implementing a scorecard monitoring system allows

companies to gain visibility into and control over the supplier performance.

As suppliers increase compliance with the negotiated terms, companies receive

improved service and product quality

• Cost Savings and Process Efficiency—Improving supplier performance will reduce

inconsistency and errors, either in the product quality, shipments or pricing. This

will reduce the need for internal manual exception processing and expedited orders

• Supplier Management—Determining supplier KPIs provides companies with

metrics and criteria to monitor supplier performance. The scorecard provides

objective criteria that companies can use when meeting with suppliers to address

issues and/or concerns

Automate Order Placement with an e-Procurement Solution

Summary

Best practice companies have successfully implemented e-Procurement solutions

to streamline and automate their order placement activities. e-Procurement software

applications are employee self-service solutions that support requisition, approval

routing and order placement. These applications eliminate manual purchasing

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activities, minimize process variance, enable process integration, reduce the need for

multiple procurement systems and minimize invoice and payment errors. Studies have

shown that the use of such tools can reduce the average cost of Purchase Orders

between US$10 and $20.1

Successful e-Procurement implementations are based on the development of a clear

business case containing measurable goals and benefits. Successful implementations

require involved project sponsors, clearly defined communication and training

programs, and a phased rollout strategy.

Organizations develop formal processes to enroll suppliers in their e-Procurement

systems and maximize the automation benefits by integrating the purchasing card

as the payment method.

To ensure the estimated e-Procurement system benefit is achieved, companies

encourage compliance with the prescribed use of the system. Some companies

strongly encourage usage through education and compliance reporting while other

companies mandate usage.

Benefits

• Control and Compliance—The use of e-Procurement solutions increases

business with preferred suppliers and encourages compliance with purchasing

policies and procedures

• Cost Savings and Process Efficiency—e-Procurement systems automate the

requisition and Purchase Order creation process, leading to cost savings and

process efficiencies. Additional process efficiency can be gained through the

integration of purchasing cards as a form of payment in the system

• Supplier Management—Mandating purchases through the e-Procurement system

places a greater volume of spend with preferred suppliers, improving the ability

to negotiate for pricing, volume discounts and quality of service

• User Satisfaction—e-Procurement systems increase user satisfaction through

standardizing and simplifying the purchasing process

Maximize Use of an Online Travel Booking Tool

Summary

An online booking tool provides an effective way for companies to monitor travel

spend and to encourage the appropriate travel behavior. In addition, these tools can

provide transaction fees that are 30 percent to 50 percent lower than the transaction

fees for booking through an agency call center.

1 Forrester, The Forrester Wave™: eProcurement Solutions, 2007.

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Organizations typically select an online booking tool provided by their travel agency

or select a third-party software provider. Once implemented, due to the savings

potential, companies aim to achieve a high percentage of eligible trips booked online.

Companies take a variety of approaches to increase compliance with the online

booking tool, including communicating the benefits of the tool, training key users on

the tool, offering incentives to booking with the tool and identifying non-compliance.

Organizations take advantage of many features that online booking tools provide.

Online booking tools support the establishment of traveler profiles, which allow

organizations to set controls applicable to the employee’s travel needs. In addition,

the online booking tool allows for pre-trip approvals and can be used to monitor

compliance with preferred suppliers.

The incorporation of corporate cards into online booking tools further improves a

company’s ability to increase compliance with travel policies. In addition, data from

corporate card travel bookings can be integrated into expense reporting tools,

automatically pre-populating expense reports to streamline the reconciliation

process for travel expenses.

Benefits

• Control and Compliance—Online booking tools provide the ability to recommend

specific travel providers and/or lower cost itineraries. Communicating these

options results in an increase in travel with the preferred suppliers and

compliance with the travel policies

• Cost Savings and Process Efficiency—There is a reduced transaction fee for trips

booked using the online tool. In addition, employees often select a lower-cost fare

when presented with all the options through the online tool

• Spend Visibility—The online tool provides more comprehensive reporting on

travel spend as it allows companies to identify non-compliant travel purchases

or bookings made outside the online tool/preferred travel agency

• User Satisfaction—The online tool provides an easy and user-friendly method

for employees booking travel. The ability to book travel at their convenience and

select from a variety of options improves the overall travel experience

Evaluate Accounts Payable Automation Solutions

Summary

Organizations that rely on manual systems within Accounts Payable often have

to deal with duplicate, inaccurate, late or unauthorized payments as well as

misappropriated cost allocations. Leading organizations are addressing these

inefficiencies and risks by maximizing the level of automation within their

Accounts Payable function.

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A key component to an Accounts Payable automation strategy is the reduction of

paper in the invoice receipt-to-pay cycle. Organizations adopt technology solutions

that enable the receipt of electronic invoices, convert paper invoices into digital

images, store electronic invoices in a web-based repository and extract key data

from the invoices to enhance reporting and approval and payment processing.

Organizations typically evaluate the following aspects of the Accounts Payable

function when identifying opportunities for automation:

• Invoice Receipt—Organizations automate the receipt of invoices through EDI

or solutions supporting Electronic Invoice Payment and Presentment (EIPP)

• Document and Data Capture—Organizations consider imaging or automating

the conversion and capture of paper documents into an electronic format

• Content Storage and Management—Companies also automate the storage,

management and retrieval of electronic documents and data

• Workflow Management—Workflow management solutions allow invoices to be

automatically routed for appropriate approval

• Payment—Organizations can automate the payment of invoices through ACH or

a commercial card solution

Benefits

• Control and Compliance—By eliminating manual processes and potential

sources for human error, automation within Accounts Payable increases the

accuracy of payments

• Cost Savings and Process Efficiency—Automation within Accounts Payable

reduces paper invoices and manual review processes, which reduces costs.

Automating the payment process enables the company to make timely payments,

improving an organization’s ability to take advantage of early payment discounts

• Supplier Management—Automation within Accounts Payable increases spend

visibility, which supports supplier optimization and enables improved supplier

performance tracking and evaluation

• Spend Visibility—The electronic receipt and payment of invoices allows a larger

portion of purchasing and payment data to be centrally captured. The data

is aggregated across different business units and purchasing methods to reveal

spending patterns and aid analysis

Automate Invoice Receipt and Payment with Electronic Invoice Payment and Presentment (EIPP)

Summary

Best practice organizations use Electronic Invoice Payment and Presentment (EIPP)

solutions to automate key Accounts Payable processes such as invoice receipt, data

entry, disputes, approvals, payments and payment reconciliation. Depending on the

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type of solution, EIPP may also enable invoice validation, discount management and

payment status visibility.

A variety of EIPP solutions exist today. Organizations should evaluate their objectives for

supplier interaction and develop an EIPP strategy based on their business needs. The

cost of the EIPP system should also be evaluated. Pricing will vary by solution provider,

but most system costs include an implementation fee, an annual maintenance fee and

a transaction fee.

Once an EIPP solution is selected, organizations work with their suppliers to enroll them

in the system and to have them accept the preferred electronic payment method (e.g.,

commercial card, ACH). Companies initially target suppliers with high transaction

volume for integration with the select EIPP solution to maximize cost savings.

Benefits

• Cost Savings and Process Efficiency—EIPP eliminates the need for a paper invoice,

allowing invoices to be electronically received and approved, which reduces

processing costs. EIPP also enables organizations to make timely payments, which

improves the organization’s ability to take advantage of early payment discounts

• Spend Visibility—The electronic receipt and payment of invoices allows a larger

portion of purchasing and payment data to be centrally captured. The data is

aggregated across different business units and purchasing methods to reveal

spending patterns and aid analysis

• Supplier Management—Enhanced spend visibility supports supplier optimization

and enables improved supplier performance tracking and evaluation

Reduce Invoices with Evaluated Receipt Settlement (ERS)

Summary

Evaluated Receipt Settlement (ERS) is a business process used by best practice

organizations to eliminate the need for an invoice, which results in a more efficient,

streamlined payment process. ERS allows organizations to conduct a two-way match

between the Purchase Order and the goods or services receipt to trigger the approval

for payment.

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ERS streamlines the payment process as follows:

Buyer

Payment made to Supplier

Supplier

Purchase Orders sent to Supplier1

Buyer receives goods and logs receipt acknowledgement in the procurement or ERP system

3

An internal invoice based on the quantity of goods received and the Purchase Order prices is automatically created in the system, scheduling payment to the supplier

4

Goods sent to Buyer 2

6

Electronic payment notification sent to Supplier5

Companies implementing ERS often begin with a pilot program with select suppliers.

The pilot program allows companies to work closely with participating suppliers and

internal employees to identify potential implementation and process issues related

to ERS.

In order for ERS to work effectively, Procurement and Accounts Payable must clearly

communicate the new payment process to employees. Buyers must enter all ERS-related

Purchase Orders into the procurement system, and receiving employees need to ensure

that they validate receipts and review the quality/quantity of the goods/services before

logging acknowledgement of the receipt since logging the receipt triggers payment to

the supplier.

Benefits

• Control and Compliance—Using ERS, payment is triggered only upon the

acknowledgement of the receipt of goods, thereby minimizing payment errors.

The elimination of invoices also reduces the risk of duplicate payments

• Cost Savings and Process Efficiency—ERS eliminates the need for invoices, thus

reducing the costs associated with manual invoice data entry and rework due

to errors in the manual coding process. In addition, the pay-on-receipt process

reduces the payment time period, allowing companies to take advantage of early

payment discounts

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Automate the Payment Approval Process

Summary

Best practice companies automate the payment approval process by conducting

three-way or four-way matching, which integrates the purchase transaction data with

receipt and invoicing data. The matching occurs for the following data elements:

• Purchase Order

• Quantity of goods received

• Invoice

• Quantity of goods accepted or supplier contract terms

This automated process occurs within the e-Procurement or ERP system and verifies

that the Purchase Order, invoice and receiving information match within accepted

tolerance levels. If all documents match within a designated tolerance, the invoice

is authorized for payment. This automation minimizes the time Accounts Payable

spends reviewing and matching invoices and enables the department to focus

on managing the exceptions. Companies analyze exception patterns to set the

appropriate tolerances for low risk variances.

For three-way and four-way matching to function properly, employees must comply

with order and receipt procedures. Organizations communicate and enforce these

policies and procedures to minimize the time Accounts Payable spends reviewing and

managing invoices and receipts.

Benefits

• Control and Compliance—Conducting automated three- or four-way matching

helps to ensure that invoices being paid are valid and eliminates inaccurate or

duplicate payments

• Cost Savings and Process Efficiency—Cost savings are achieved as the automated

process streamlines the manual matching process and minimizes overpayments

on goods that are not received or are received in poor quality

• Supplier Management—Detailed data provided from the automated matching

process enables organizations to track suppler performance metrics, which can

be used to enhance negotiating strength with suppliers and improve overall

supplier management

• User Satisfaction—Automated matching eliminates the need for employees to

solicit signatures prior to payment, which simplifies the overall purchasing process

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Create a Controls and Compliance Strategy for the Procure-to-Pay Process

Summary

The Sarbanes-Oxley Act (SOX) passed in 2002 requires organizations to design

and implement an infrastructure that is controlled, is complete and can sustain a

controls-compliant environment, including:

• Standardizing purchasing and payment processes and controls

• Improving access to audit and compliance data

• Enhancing reporting capabilities and reporting on a periodic basis

• Increasing the ability to detect fraud

• Documenting and testing controls

• Conducting and signing off on controls reviews

Companies are continually looking for ways to develop strategies that will satisfy SOX

requirements and address control issues. Best practice organizations typically achieve

Procure-to-Pay control goals by implementing recommended practices within the five

areas outlined in the Visa Controls Framework:

• Ownership—An organizational structure needs to include well-defined roles and

responsibilities to monitor the Procure-to-Pay process and ensure compliance

with the organization’s control requirements

• Policies—Best practice policies are clearly defined and align with the Procure-to-Pay

organization’s overall control strategy

• Procedures—Procedures should clearly identify the appropriate “who, what,

where, when and how” of the Procure-to-Pay process and will assist in monitoring

and control

• Technology—Effective use of technology makes procedures more efficient and

guards against human error

• Audit—Regular audits enable organizations to monitor Procure-to-Pay policies and

procedures compliance as well as identify any needed policy and procedure updates

Benefits

• Control and Compliance—Developing a controls strategy minimizes Procure-to-Pay

process risks, increases compliance, enhances visibility of spend and assists in

SOX compliance

• Cost Savings and Process Efficiency—A controls strategy minimizes non-compliant

behavior. Automated monitoring and tracking (via three-way matching and online

travel booking tools) reduces time and effort needed to track compliance

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Consolidate Spend Data and Conduct Spend Analysis

Summary

Best practice companies standardize and consolidate their spend data from different

sources to conduct company-wide analysis of their total spend. Spend data analysis

helps companies better understand their purchases with top suppliers by spend type,

enabling them to negotiate better supplier terms and pricing.

Companies typically find that they do not have standard spend data elements (such

as supplier IDs, supplier names and spend types) across their multiple systems.

Therefore, the first step to spend data analysis is data standardization.

Organizations commonly use consolidated spend data to conduct analyses by:

• Spend Category (e.g., travel, office supplies)

• Commodity Type

• Business Unit

• Payment Method (e.g., commercial card, check or ACH)

• Transaction Size

Depending on the strategic priorities of the organization, the type and goal of spend

analysis will vary. Companies often use third-party providers that offer on-demand

spend management solutions, including applications for sourcing, spend analysis,

contract management and e-Procurement. In addition, Visa offers a series of tools to

assist companies with data consolidation and analysis. For more information, please

contact your local issuer.

Benefits

• Cost Savings and Process Efficiency—Analyzing consolidated spend analysis data

allows the Procurement/Sourcing group to rationalize suppliers and better negotiate

with existing suppliers

• Supplier Management—Spend analysis will assist in the identification of trends

or patterns in the supplier spend. This information will assist in the ongoing

management of the supplier relationship

• Spend Visibility—Standardizing and integrating the data provides companies

with visibility into their overall spend. In addition, the spend analysis allows for

segmentation of the data, including spend by supplier, spend category, business

unit, etc., which supports supplier management and cost savings initiatives

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Benchmark the Performance of the Procure-to-Pay Process

Summary

Best practice companies benchmark their Procure-to-Pay performance periodically

to identify key success areas and improvement opportunities. Organizations typically

benchmark quantitative and qualitative items such as:

• Cost metrics (e.g., the cost to place an order or the cost to process a check payment)

• Efficiency metrics (e.g., number of Purchase Order defects or the average time

to generate a Purchase Order)

• Supplier base metrics (e.g., the number of suppliers under contract, average

supplier discount by spend type)

• Customer Service metrics (e.g., average time to resolve and the number

of resolved custom service inquiries)

• Implementation of best practice processes or technology or adoption

of innovative practices

Companies can use the results of benchmarking studies to create a scorecard to

promote the success of the Procure-to-Pay function to senior management and to

gain support for key initiatives.

Companies work with other similar organizations to share benchmarks and performance

data. Some companies also use third-party companies to conduct “blind” benchmarking

studies against their immediate competitors.

In addition, companies with commercial card programs work with their issuers and

card providers to benchmark the payment process and better understand the uses

of purchasing and corporate cards.

Benefits

• Cost Savings and Process Efficiency—Benchmarking allows companies to

prioritize/identify metrics and compare themselves against best-in-class

organizations to identify cost savings and process efficiency goals and opportunities

• User Satisfaction—Tracking user experience and customer service

benchmarks allows organizations to identify user satisfaction goals and

improvement opportunities

Analyze Enterprise-wide Travel Spend Data

Summary

Leading companies integrate and analyze enterprise-wide travel spend data.

This information is often used by a centralized travel management function to track

total spend and spend by supplier, monitor compliance to travel policies and identify

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improvement opportunities for the travel program. Organizations also often use travel

data to assist with strategic sourcing efforts aimed at reducing supplier rates and

managing supplier performance.

In order to develop comprehensive reporting, companies often need to integrate their

travel spend data from multiple sources. Travel data integration can be performed

in-house, by a third party or through a combination of the two.

Once travel data is consolidated, companies develop a “reporting dashboard”

to report on the important travel metrics, including:

• Spend and Transaction Volume

• Policy Compliance

• User Satisfaction

Benefits

• Control and Compliance—Integration of travel data allows for reporting on

corporate card usage and travel agency compliance. Companies use this

information to identify issues and educate travelers on the appropriate travel

behavior

• Cost Savings and Process Efficiency—Comprehensive travel data provides

companies with the information needed for supplier negotiations, such

as frequently flown city pairs

• Spend Visibility—Integrating data from multiple sources provides a

comprehensive view of travel spend and the ability to create customized

reports for senior management and business units leaders

Implement a Purchasing Card Program

Summary

Evaluating and sourcing a purchasing card program can occur when implementing

a purchasing card program for the first time or when selecting a new card provider.

Best practice organizations create a cross-functional team to provide input during

the sourcing process, including representatives from key business units, senior

management and current card program administrators (if a card program already exists).

Organizations define goals and objectives for their purchasing card program before

initiating the evaluation process and include stakeholder input when developing a

Request for Proposal (RFP) for distribution to potential issuers.

Organizations analyze the costs and benefits of each available purchasing card

program, taking into consideration product variations across card issuers. Some also

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hold briefings with potential issuers to gain a better understanding of their offerings

and receive demonstrations of technology used to support the card program.

Once a provider is selected, organizations work closely with their issuer to document

the company’s purchasing card needs and facilitate the implementation process with

a step-by-step plan.

Benefits

• Control and Compliance—Careful selection of the card program ensures that the

appropriate controls, such as MCC blocks, user profiles and transaction data

security, can be implemented to meet the company’s needs

• Cost Savings and Process Efficiency—The company is able to maximize cost

savings and process efficiencies by selecting a card program that offers the best

technology, spend analysis, consultative support and customer service

• Supplier Management—Selection of a program that offers advanced reporting

and enhanced data supports supplier management and negotiations

• User Satisfaction—By involving cardholders in the card program selection process

through user focus groups and feedback sessions, companies can increase user

satisfaction with the chosen program

Implement a Corporate Card Program

Summary

Evaluating and sourcing a corporate card program can occur when implementing

a corporate card program for the first time or when switching to a new card provider

or issuer. Best practice organizations create a cross-functional team to provide input

during the sourcing process, including representatives from key business units, senior

management and current card program administrators (if a card program already exists).

Organizations define goals and objectives for their corporate card program before

initiating the evaluation process and include stakeholder input when developing

a Request for Proposal (RFP) for distribution to potential issuers.

Organizations analyze the costs and benefits of each available corporate card

program, taking into consideration product variations across card issuers. Some also

hold briefings with potential issuers to gain a better understanding of their offerings


Once an issuer is selected, organizations work with them to document the company’s

corporate card needs and facilitate the implementation process with a step-by-step plan.

21

Benefits

• Control and Compliance—Careful selection of the card program ensures that

the appropriate controls, such as MCC blocks, user profiles and transaction data







• User Satisfaction—By involving cardholders in the card program selection process

through user focus groups and feedback sessions, companies can increase user

satisfaction with the chosen program

Consider Implementing a Commercial One Card Program

Summary

Evaluation of a commercial one card program can occur when selecting a new

commercial card provider or upon deciding to consolidate existing card programs

to capture procurement, travel and entertainment, and fleet expenses. Organizations

evaluate the advantages and potential challenges of a one card program against their

card program objectives and Procure-to-Pay strategy in order to determine whether

or not a one card program is the best solution to meet their needs.

To guide the sourcing process, companies assemble a cross-functional team of

stakeholders to define the assessment criteria, which forms the content for a Request

for Proposal (RFP) that companies distribute to all potential issuers. Organizations

analyze the costs and benefits of each available commercial one card program,

taking into consideration product variations across card issuers and card providers.

Organizations also meet with potential issuers to gain a better understanding of

their offerings and receive demonstrations of technology solutions used to support

the card program.


the company’s commercial card needs and facilitate the implementation process.

Benefits

• Control and Compliance—Careful selection of the card program ensures that the

appropriate controls, such as MCC blocks, user profiles and transaction data



savings and process efficiencies through selection of the appropriate card program

• User Satisfaction—Consolidation of card program management and administration

eliminates end-user confusion over which card to use for different spend types

22

Consider Implementing a Fleet Card Program

Summary

Evaluating and sourcing a fleet card program can occur when selecting a new fleet

card provider or upon deciding to consolidate existing card programs to capture fleet

expenses on a single card. Best practice organizations create a cross-functional team

of stakeholders for the sourcing process, including representatives from key business

units, senior management and current card program administrators (if a card program

already exists).

Organizations first define goals and objectives for their fleet card program and then

employ a thorough sourcing process to select the program that best meets their

needs. Organizations reference these goals and objectives and include stakeholder

input when developing the Request for Proposal (RFP) distributed to potential issuers.

Organizations analyze the costs and benefits of each available fleet card program, taking

into consideration product variations across card issuers and card providers. Organizations

also meet with potential issuers to gain a better understanding of their offerings and

receive demonstrations of technology solutions used to support the card program.


the company’s fleet card needs and facilitate the implementation process.

Benefits









• User Satisfaction—Consolidation of card program management and administration

eliminates end-user confusion over which card to use for different spend types

Consider Implementing a Multinational Commercial Card Program

Summary

Companies that have divisions or subsidiaries operating in foreign countries often

evaluate a multinational corporate and/or purchasing card program.

23

Organizations evaluate the advantages and potential challenges of implementing a

multinational card program against their card program objectives and Procure-to-Pay

strategy to determine the best course of action. Global consolidation of spend data,

consolidation of issuers, payment process standardization, consolidation of card program

management and the need for increased cost savings are the primary drivers for

selecting a multinational card program.

Companies should take the time to understand and accommodate regional and

country-specific differences and take relevant factors into consideration when

developing a multinational card program. It is also recommended that companies

conduct a formal RFI/RFP process even if they have an existing issuer relationship.

Questions such as presence, experience and track record in certain regions/countries

are especially important to discuss in detail with potential issuers.

Organizations analyze the costs and benefits of each available multinational card

program, taking into consideration product variations across card issuers. Organizations

may also meet with potential issuers to gain a better understanding of their offerings


Once a lead bank is selected, organizations work closely with the issuer to document

the multinational commercial card needs and facilitate the implementation process

with a step-by-step plan.

Benefits









Integrate the Commercial Card Program with Enterprise-wide Cost Reduction Initiatives

Summary

Organizations are increasingly focused on reducing their internal costs. Many

companies establish annual savings targets and develop enterprise-wide cost

reduction initiatives to realize their goals.

24

Best practice companies view the commercial card program as one mechanism for

achieving the savings targets and they develop card goals and objectives that align

with broader cost reduction goals.

In order to develop the card program cost reduction goals, organizations typically

involve stakeholders from other shared services functions. The cross-functional team

identifies savings opportunities and confirms that targets are achievable within the

broader enterprise cost reduction initiatives.

Defining clear objectives and establishing metrics to track progress relative to

identified goals allows companies to easily evaluate program performance. Leading

organizations also review and update program goals and objectives on a regular basis.

Best-in-class companies develop a business case that estimates the program costs

and anticipated savings. Companies use these metrics to evaluate card program

performance against the baseline on a regular basis.

Benefits

• Control and Compliance—Clearly establishing, communicating and monitoring

card goals and objectives that support the enterprise cost reduction strategy will

encourage compliance with the card program policies and procedures

• Cost Savings and Process Efficiency—Aligning card program savings objectives

with enterprise cost reduction targets allows the company to maximize the

program benefits and cost savings opportunity

Establish Center-Led Management of the Commercial Card Program

Summary

Determining the degree of centralization of card program management and

administration is a critical step in designing a card program. Card program policies

and procedures development, training program creation, supplier management and

cardholder account maintenance are all activities that can be centrally managed.

A center-led management approach ensures consistency of key card program elements

across the entire company, while allowing card requirements and restrictions to vary

slightly based upon business unit procurement needs. Activities that often have

centralized oversight with location-specific program administration include:

• Training delivery

• Location-specific reporting

• Reconciliation

• Response to end-user inquiries

25

Organizations also ensure that established roles and responsibilities clearly segregate

duties among the various individuals involved in card program management. This

allows organizations to confirm that the appropriate checks and balances exist for

preventing card program abuse.

In addition, companies must also evaluate the placement of the center-led card program

management within their organization. Often, card administration is a function of a

shared services organization, rolling up into either Accounts Payable or Procurement.

Benefits

• Control and Compliance—Centralized card program policies and procedures

improve an organization’s ability to enforce and clearly communicate the card

program’s policies and procedures to all cardholders

• Cost Savings and Process Efficiency—Center-led administration of the card

program streamlines the management process and eliminates duplicative efforts

• User Satisfaction—Center-led program management increases cardholder

satisfaction through consistent communications and designated personnel to

respond to questions and issues. A clear procedure for cardholders to reach

centralized management personnel ensures compliance and empowers users

to make purchases with fewer constraints

Achieve Active Senior Management Support of the Commercial Card Program

Summary

Obtaining senior management endorsement and involvement in the implementation,

administration and championing of the commercial card program is critical to

maximize the benefits of the card program. Organizations achieved senior management

involvement in the program by educating them about card use benefits and by identifying

ways senior management can demonstrate their support for the program.

Organizations often ask senior management to demonstrate commitment to the

program through the following:

• Integration of card use into business planning

• Inclusion of card use goals in management’s bonus plan

• Communication

• Training

• Card program enforcement

In addition to enforcing and communicating the commercial card program objectives,

senior management can also assist by incorporating the commercial card into broader

company-wide initiatives.

26

Finally, some organizations have found that an organizational structure that allows

program managers access to senior management, such as a dotted-line relationship

from Accounts Payable to the CFO, can be very effective for obtaining senior

management time and support for the program.

Benefit

• Control and Compliance—Senior management’s endorsement of the commercial

card program encourages use and compliance with card policies, providing

greater control on overall card spend

• Cost Savings and Process Efficiency—The broader adoption of commercial card

use that can be gained through senior management support will result in

improved process efficiencies and increased cost savings

• Spend Visibility—Senior management sponsorship will enable the growth of the

commercial card program, thus improving the visibility into overall spend placed

on the card

Integrate the Commercial Card Program into the Green Initiative

Summary

Leading companies have begun to develop green initiatives to demonstrate their

corporate social responsibility. Many organizations have used their commercial card

program to support company-wide green initiatives by establishing a subset of green

goals and objectives for the program. Such targets often include:

• Reduced paper usage through automated commercial card processes

• Use of “green” suppliers with international term ratings or green products

Companies have been able to significantly reduce their environmental impact

through internal green initiatives directly associated with the commercial card

program (e.g., reducing paper usage within the Procure-to-Pay process). In addition,

companies have used the commercial card for payment of green suppliers.

Benefits

• Cost Savings and Process Efficiency—Incorporating green initiatives into

commercial card objectives encourages cost savings and process efficiencies

by further reducing paper usage and automating processes

• User Satisfaction—Cardholders are more likely to abide by card spend policies,

knowing their card purchases make a positive “green” impact

27

Create a Controls and Compliance Strategy for the Commercial Card Program

Summary

As a result of the Sarbanes-Oxley Act (SOX) passed in the U.S. in 2002, organizations

around the world have refocused their attention on maintaining a controls-compliant

business environment.

Implementation of a well-controlled commercial card program is a key component

of mitigating risk throughout the Procure-to-Pay process. Organizations define card

program control goals such as:

• Compliance with procurement and payment policies

• Reduction of maverick spend

• Mitigation of fraud, loss and misuse

Best practice organizations typically achieve card program control goals by

implementing recommended practices within the five areas outlined in the

Visa Controls Framework:

• Ownership—Companies must establish card program ownership with an

organizational structure, including well-defined roles and responsibilities

to manage the card program

• Policies—Best practice policies are those that are clearly defined with specific

details for each of the aspects of the card program

• Procedures—Procedures clearly identify the appropriate “who, what, where,

when and how” of card use and will assist in the monitoring and control of the

card program

• Technology—Effective use of technology makes procedures more efficient

and guards against human error, thereby ensuring that misuse is more easily

detected and prevented

• Audit—Regular audits enable organizations to review and update card program

policies and procedures as necessary

Benefits

• Control and Compliance—Developing a controls strategy that addresses

ownership, policies, procedures, technology and audit minimizes the risks

of a commercial card program and increases compliance

• Cost Savings and Process Efficiency—A controls strategy minimizes non-

compliant behavior. Automated monitoring and tracking reduces time and effort

needed to enforce compliance

28

Select the Liability and Billing Structure for the Commercial Card Program

Summary

Leading organizations work with their issuers to determine the liability structure that

is most appropriate for their commercial card program. Typically, commercial card

programs have one of two liability structures:

• Corporate Liability—The organization is ultimately responsible for card payments

• Individual Liability—The individual cardholder is ultimately responsible for

card payments

The benefits of corporate liability are ease of use, improved access to cards and

minimized payment administration. However, companies must consider that with

corporate liability, they will need to track and recover non-reimbursable expenses

and develop audit procedures to minimize employee misuse, and that employees will

have less incentive to file expense reports promptly.

The benefits of personal liability are increased compliance with policies and high

incentives for timely filing of expense reports. However, companies must consider

that with individual liability, they may face employee resistance and risk due to

cardholder default.

In addition to selecting an appropriate liability structure, organizations also need to

choose the billing arrangement. In general, organizations that select corporate liability

prefer to pay the entire commercial card bill for all cardholder accounts centrally, to

streamline reconciliation and accounting processes. Organizations with individual

liability prefer that cardholders make payment directly to the card issuer.

The study found that best practice companies set up purchasing cards as corporate

liability with centralized billing, whereas most organizations prefer to set up corporate

card programs with individual liability and individual billing.

Benefits

• Control and Compliance—A clearly defined liability and billing structure reduces

risk by establishing clear roles and responsibilities and increases compliance

• User Satisfaction—Well-documented policies and procedures regarding liability

and billing improve cardholders’ understanding of their obligations

29

Define Issuance Criteria for Optimal Purchasing Card Distribution

Summary

Leading organizations ensure that purchasing cards are distributed appropriately

in order to maximize the benefits of the card program. These organizations develop

criteria for distribution of cards that are consistent with procurement and payment

requirements, company culture, polices and procedures, and spend parameters for

card eligible purchases.

To determine which individuals need a purchasing card, organizations review Accounts

Payable transactions in order to identify frequent buyers of goods and services eligible

for card payment. Organizations may also follow up with managers to ensure that

every employee who has purchasing responsibilities has been issued a card or has

access to a purchasing card.

Organizations utilize reporting capabilities to review card activity, ensure that all

issued cards have been activated, identify inactive cards and close or suspend any

card accounts that have not been used recently or are no longer needed by the

cardholders. Organizations also solicit feedback from cardholders and managers

through surveys and focus groups to identify opportunities to improve their issuance

criteria and to maximize card spend while maintaining adequate controls.

Benefits

• Control and Compliance—Establishing cardholder issuance criteria ensures

that cards are in the hands of appropriate and approved cardholders

• Cost Savings and Process Efficiency—Appropriately defined issuance criteria helps

ensure that the maximum number of eligible purchases are paid by card, reducing

the transaction costs associated with purchase orders, checks and petty cash

• User Satisfaction—Issuing cards to appropriate employees enhances their ability

to pay for purchases

Define Issuance Criteria for Optimal Corporate Card Distribution

Summary

Leading organizations ensure that corporate cards are distributed appropriately in

order to maximize the benefits of the card program. The best card distribution criteria

are consistent with company culture, polices and procedures, and spend parameters

for card eligible purchases.

To identify individuals who should be issued corporate cards, organizations can review

cash advance requests, expense reports, and travel volume and frequency. Organizations

often issue corporate cards to specific employee types such as sales teams and

30

recruiters or to all employees who travel more than twice a year. Issuance criteria

need to be clearly communicated to relevant employees and managers.

Organizations utilize reporting capabilities to review card activity, ensure that all

issued cards have been activated, identify inactive cards and close or suspend any

card accounts that have not been used recently or are no longer needed by the

cardholders. Organizations also solicit feedback from cardholders and managers

through surveys and focus groups to identify opportunities to improve their issuance

criteria and to maximize card spend while maintaining adequate controls.

Benefits

• Control and Compliance—Establishing cardholder issuance criteria ensures

that cards are in the hands of appropriate and approved cardholders

• Cost Savings and Process Efficiency—Having appropriately defined issuance criteria

helps ensure that the maximum number of eligible purchases are placed on card,

reducing the transaction costs associated with travelers checks and petty cash

• User Satisfaction—Issuing cards to appropriate employees enhances their ability

to pay for travel-related expenses and reduces concerns over access to funds

Establish Parameters for Eligible Purchasing Card Transactions

Summary

One of the most critical steps in implementing a purchasing card program is to clearly

define parameters for use that not only minimize the risk of misuse, but also maximize

card spend and user convenience. Useful purchasing card parameters to establish

include individual transaction limits, monthly transaction limits and Merchant

Category Code (MCC) blocks.

User profiles are commonly used as the basis for establishing card parameters

because common employee profiles tend to be associated with common spending

requirements. Each company should analyze its Accounts Payable data to determine

the appropriate parameters for purchasing cards.

Organizations use a combination of individual transaction and monthly limits

to control spend on purchasing cards, and establish guidelines for reviewing and

adjusting these limits on a regular basis. Organizations also make use of MCC

blocking to place additional controls on spending.

Spend controls must balance ease of use and control. Overly restrictive spend controls

prevent companies from optimizing the card program. To address this risk, companies

can develop procedures for one-time overrides or temporary adjustments of card limits.

Card program administrators can also run daily reports to identify declined charges and

determine the reason for decline.

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Benefits

• Control and Compliance—Establishing appropriate parameters for card use

provides clear guidelines for items that should be placed on a card and maximizes

compliance with spend policy

• Cost Savings and Process Efficiency—Clearly defined parameters for the card

program encourage card use, which leads to an increase in cost-savings and

process efficiency

• User Satisfaction—Clearly established parameters enable cardholders to use

cards appropriately and prevent point-of-sale declines

Establish Parameters for Eligible Corporate Card Transactions

Summary

One of the most critical steps in implementing a corporate card program is to clearly

define parameters for card use that not only maximize card spend and user convenience,

but also minimize risk of misuse. Useful corporate card parameters include individual

transaction limits, monthly limits and Merchant Category Code (MCC) blocks.

User profiles are commonly used as the basis for establishing card parameters

because common employee profiles tend to be associated with common spending

requirements. Each company should analyze its Accounts Payable data to determine

the appropriate parameters for corporate cards.

Leading organizations use a combination of individual transaction and monthly limits

to control spend on corporate cards, and establish guidelines for reviewing and adjusting

these limits on a regular basis. Some organizations make selective use of MCC blocking

to place additional controls on spending.

Spend controls must balance ease of use and control. Overly restrictive spend controls

prevent companies from optimizing the card program and can cause considerable

difficulty for staff when traveling. To address this risk, companies can develop

procedures for one-time overrides or temporary adjustments of card limits. Card

program administrators can also run daily reports to identify declined charges and

determine the reason for decline.

Benefits

• Control and Compliance—Establishing appropriate parameters for card use

provides clear guidelines for items that should be placed on a card and maximizes

compliance with spend policy

• Cost Savings and Process Efficiency—Clearly defined parameters for the card

program encourage card use, which leads to an increase in cost-savings and

process efficiency

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• User Satisfaction—Clearly established parameters enable cardholders to use

cards appropriately and prevent point-of-sale declines

Communicate Enterprise-wide Purchasing Card Policies and Procedures

Summary

Leading organizations document purchasing card policies and procedures to

communicate appropriate card use. It is important for cardholders and managers

to be informed on processes related to card application, the card payment process,

reconciliation requirements and audit procedures to ensure appropriate card use.

A purchasing card policy can contain program goals and objectives, cardholder

responsibilities, ordering process and eligible purchases, transaction and monthly

spend limits, record keeping and reconciliation, security, auditing process, dispute

resolution and lost card process. Once policies have been developed for the purchasing

card program, it is necessary to implement procedures in order to support and execute

those policies.

The policies and procedures are disseminated to all new cardholders and posted online

for ongoing reference. To help ensure cardholders understand the policies, the majority

of study participants also required all new cardholders to sign a cardholder agreement

form upon receipt of their card.

Finally, at leading companies, card policies and procedures are reviewed periodically

and updated as needed to ensure purchasing card programs are current and in

alignment with changing business policies.

Benefits

• Control and Compliance—Card program polices and procedures clarify

expectations and control mechanisms to managers, administrators and

cardholders, thereby enhancing compliance

• Cost Savings and Process Efficiency—Establishing policies and procedures

empowers cardholders to use cards appropriately, ensuring that the expected

program process savings benefits are achieved

• User Satisfaction—Card program policies and procedures improve cardholder

satisfaction by clearly defining appropriate card use and program guidelines

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Communicate Enterprise-wide Corporate Card Policies and Procedures

Summary

Leading organizations document corporate card policies and procedures to communicate

appropriate card use. It is important for cardholders and managers to be informed on

the card application process, the card payment process, reconciliation requirements

and audit procedures to ensure appropriate card use.

A corporate card policy can contain program goals and objectives, cardholder

responsibilities, ordering process and eligible purchases, transaction and monthly spend

limits, record keeping and reconciliation, security, auditing process, dispute resolution

and lost card process. Once policies have been developed for the corporate card program,

it is necessary to implement procedures in order to support and execute those policies.

The policies and procedures are disseminated to all new cardholders and posted

online for ongoing reference. To help ensure cardholders understand the policies, the

majority of study participants also required all new cardholders to review a disclosure

statement and sign a cardholder agreement form upon receipt of their card.

Finally, at leading companies, card policies and procedures are reviewed periodically

and updated as needed to ensure corporate card programs are current and in

alignment with changing business policies.

Benefits

• Control and Compliance—Card program polices and procedures clarify

expectations and control mechanisms to managers, administrators and

cardholders, thereby enhancing compliance

• Cost Savings and Process Efficiency—Establishing policies and procedures

empowers cardholders to use cards appropriately, ensuring that the expected

program process savings benefits are achieved

• User Satisfaction—Card program policies and procedures improve cardholder

satisfaction by clearly defining appropriate card use and program guidelines

Mandate the Use of the Purchasing Card for All Eligible Purchases

Summary

Leading companies pay eligible Purchase Order and non-Purchase Order payables

with a purchasing card. This minimizes transaction processing costs through decreased

invoice and check processing fees. Card payment eliminates Accounts Payable activities

such as invoice receipt, invoice routing for approval, invoice data keying, and check

printing and mailing.

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To maximize the use of purchasing cards, companies start by determining the types of

spend appropriate for purchasing card payment. Best practice companies identify eligible

spend based on criteria such as commodity type, dollar size of the transaction and

frequency of a transaction type.

Next, companies typically use spend analysis tools developed in-house or provided by

their issuer to identify the spend types associated with specific employee groups. In

particular, cardholder profiles are used to match spend types to certain employee types.

Transaction limits set for the purchasing card tend to vary by company. The majority of

companies mandate the use of purchasing cards for all purchases less than US$2,500.

Ensuring the proper use of purchasing card programs requires detailed policies and

procedures that specify eligible purchases. In addition, companies communicate and

encourage compliance with the policy in various ways. Some companies strongly

encourage usage through education and compliance, while others companies decide

to mandate and enforce usage.

Benefits

• Control and Compliance—Enables company-wide, centralized visibility into spend

data and supports effective reporting for audit and control purposes

• Cost Savings and Process Efficiency—Reduces internal processing and transaction

costs through increased use of a card for Purchase Order purchases

• Supplier Management—Maximizes the number of suppliers paid by card,

which improves ability to track spending and negotiate with preferred suppliers

• User Satisfaction—The streamlined process of using a purchasing card allows

users to quickly and efficiently purchase the goods necessary for their business

Develop Procedures for Commercial Card Account Management

Summary

Best practice organizations establish procedures for various aspects of card account

maintenance, including updates to cardholder profiles (e.g., change of department and

cost center), employee transfers and cancellations, changes in employment status

(e.g., terminations) and card renewals. Documenting procedures helps standardize

the management process, allows for an easy transition of roles and responsibilities to

new program managers and enables efficient growth of the card program. Ongoing

card management procedures include updating cardholder profiles, dealing with

employee transfers/cancellations, staying up-to-date with changes in employment

status and managing card renewal.

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Clear division of roles and responsibilities is necessary to ensure successful operation

of the commercial card program and to provide cardholders with a single point of

contact for any questions or concerns.

In addition to establishing card program management roles and responsibilities,

organizations utilize reports to monitor card activity and identify inactive accounts

as well as any cards that have not yet been activated. The card program administrator

should work closely with Human Resources to maintain an up-to-date list of current

employees. Some companies automate this process by having Human Resources

regularly send a feed of all current employees directly into the card management system.

Benefits

• Control and Compliance—Ongoing review of cardholder accounts provides

companies with increased visibility into their cardholder activity and allows

them to adjust card accounts to minimize card misuse

• Cost Savings and Process Efficiency—A standard, documented process for

ongoing card account management enables a company to expand its card

program quickly and efficiently

• User Satisfaction—Establishing guidelines for evaluating card limits and making

profile changes allows the cardholders to understand their account options.

Providing cardholders with the appropriate profiles will drive the preferred

purchasing behavior

Deliver a Comprehensive Commercial Card Training Program

Summary

Best practice companies develop and administer comprehensive commercial card

training programs that cardholders are required to complete. Conducting training

allows companies to communicate cardholder responsibilities prior to card issuance.

To ensure cardholders understand the information covered in the training, best

practice companies require cardholders to pass a short test on the training topics,

typically no more than 15 questions.

In addition to training sessions, such as online and classroom training, organizations

create other training materials such as Quick Reference Cards that summarize the

critical training topics and can be posted at employees’ desks.

Organizations typically conduct regular mandatory trainings to reinforce card program

policies and procedures. Trainings should also be considered when significant changes

are made to the card program.

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The format of ongoing training may vary; some companies conduct a “road show”

in which they visit major employee sites and conduct sessions with cardholders.

Other companies coordinate the training with internal events, such as department

or staff meetings.

Finally, organizations solicit feedback from cardholders and managers on training

programs and review and update training content to address the feedback.

Benefits

• Control and Compliance—Cardholders have a better understanding of the card

program policies and procedures when they participate in a training program.

Educating cardholders on their responsibilities leads to better compliance with

policies and procedures and reduces the potential of card misuse

• Cost Savings and Process Efficiency—Cardholder training ensures that they

understand how to efficiently use their cards, leading to increased card usage,

which drives cost savings and process efficiencies

• Supplier Management—Training that encourages card use with appropriate

suppliers enables the company to take advantage of price discounts inherent

in preferred supplier agreements

Investigate Expansion of Commercial Cards into New Spend Categories

Summary

Best practice organizations use a variety of creative methods to grow their commercial

card programs and maximize returns on investment. These methods and potential

expansion opportunities depend on the commercial card programs implemented

within the organization.

For purchasing cards, organizations often initially focus on high-frequency, low-value

items. However, organizations should also investigate expansion of use into other

spend categories such as recurring payments, temporary services and contract labor,

project costs (e.g., meetings/events and offsite projects), computers and IT equipment,

and professional services.

Corporate cards are typically used for basic travel and entertainment expenses such

as airfare, hotel and car rentals. However, in the absence of an established purchasing

card program, organizations should consider expansion of corporate card use to cover

those high-frequency, low-value items.

Leading organizations take a dual-pronged approach to expanding their card spend:

soliciting feedback from cardholders regarding additional purchases that can be

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placed on commercial cards, and working closely with their issuers to identify specific

suppliers or spend categories that represent the best opportunities for card payment.

The user-driven element of this process relies on cardholder behavior to identify new

spend categories while issuers perform a review of the current program.

Benefits

• Control and Compliance—Increasing spend on commercial cards provides

greater control over company spend (e.g., MCC blocking and transaction limits)

• Cost Savings and Process Efficiency—Increased use of commercial cards

streamlines the purchasing and payment processes, achieving cost savings

and process efficiencies

• Spend Visibility—Increasing the number and types of commodities purchased

by card consolidates more spend data into one location, thereby increasing

spend visibility

Integrate the Commercial Card Program with the Working Capital Management Process

Summary

Financial executives are increasingly realizing that commercial cards can play an

important role in increasing working capital. Commercial cards reduce the cost of

funds, enable longer payment cycles than checks and provide the financial data

necessary to help Accounts Payable to efficiently manage a company’s cash position.

Suppliers can be paid by card by provision of card account information either at the

time of order (via the phone or an e-Procurement system) or at the time of invoice

payment. In both cases, the advantage of card payment is that companies can

potentially receive an early payment discount (based on the contractual terms with

their suppliers) while also keeping the cash on hand until the company’s credit card

payment is due to the issuer, which can be 20–45 days or more after the original

transaction date, depending on the card billing cycle.

Benefits

• Cost Savings and Process Efficiency—Commercial cards provide greater

process efficiency with the reduction of manual invoicing and payment activities.

They also enable a company to increase working capital float by extending

the payment days with card-accepting suppliers

• Spend Visibility—Using commercial cards to support the working capital

management process will provide more detailed transaction data, enable more

advanced spend reporting and increase spend visibility into a company’s

cash position

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Integrate Commercial Card Data with Financial Accounting Systems

Summary

Best practice organizations integrate commercial card transaction data with non-card

spend data in financial accounting systems to achieve a comprehensive view of spend

and enhance analysis capabilities. Consolidating all spend data into a central location

improves the ability to track and report organization-wide spend by supplier and

commodity and enhances data accuracy through reduction of manual input.

Spend data is typically consolidated within a General Ledger from multiple sources

such as Accounts Payable systems, card reconciliation solutions and expense reporting

systems. Consolidating spend data supports detailed spend analyses that enhance

negotiating power, track spend patterns, identify savings opportunities and monitor

compliance to purchasing policies and procedures.

Once all payment data is consolidated in a single location, organizations can analyze

the information to identify trends, manage suppliers and ensure compliance with

policies and procedures relating to procurement and travel and entertainment. Best

practice organizations also analyze Level III data from suppliers, and run regular

transaction detail reports to gain insight into spend patterns.

Benefits

• Spend Visibility—Integrated commercial card data in the General Ledger provides

a company with a better understanding of purchases by spend types with

transaction level details for purchases by General Ledger codes

• Supplier Management—Integrating commercial card data with the General

Ledger assists in supplier negotiations by providing an accurate picture of total

spend per supplier

Integrate the Commercial Card with e-Procurement Technology

Summary

Best practice organizations continually investigate methods to streamline and automate

their Procure-to-Pay process, and increasingly they are turning to e-Procurement

systems to deliver these results. e-Procurement systems enable cost savings by

streamlining and automating a manual, multi-step purchasing process.

These savings can be increased even further by utilizing a commercial card to automate

the payment of electronically ordered products or services. Best practice companies

have found that integrating card payment into e-Procurement allows process steps

such as invoice receipt and processing, manual reconciliation and check printing to be

eliminated. Companies can use the commercial card as a method of payment for all of

their e-Procurement suppliers that are card-accepters and that pass Level II data.

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Benefits

• Cost Savings and Process Efficiency—Implementing an e-Procurement system

with card payment significantly increases Procure-to-Pay process cost savings

as manual ordering and payment processes are eliminated

• Supplier Management—An e-Procurement system integrated with the

commercial card program facilitates the use of preferred suppliers and the prompt

payment of suppliers

• User Satisfaction—Commercial card integration with e-Procurement systems

streamlines the purchasing process, reducing the time users must spend on these

processes, thereby increasing user satisfaction

Automate the Reconciliation Process by Integrating with Expense Reporting Applications

Summary

Best practice organizations automate the card reconciliation process, minimizing

the cost and time spent by cardholders manually entering card transaction data

and allocating charges to General Ledger and cost center codes. The average cost

to manually process an expense report in the U.S. is estimated at US$30 compared

to US$18.80 for electronic processing.2

Many organizations find that automating the reconciliation process encourages

employees to use their commercial cards for more purchases. This increase in card

usage improves the amount of spend data captured by organizations, which can be

utilized to assess spend by supplier and strengthen supplier negotiations.

Once the expense reporting tool has been selected, organizations work with their

issuer to determine the frequency and format of the statement data feeds. Next,

electronic statements are loaded into the expense reporting tool to provide an online

form that can be accessed and completed by the cardholder.

Default General Ledger and cost center codes can assist cardholders with

reconciliation by providing a “best guess” allocation, which cardholders can adjust

as needed. Organizations work with their issuers to pre-define these General Ledger

and cost center codes based on criteria such as supplier name, cardholder and

Merchant Category Code (MCC).

2 Aberdeen Group, Travel and Entertainment Expense Management Report. August 2006.

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Benefits

• Control and Compliance—An automated expense management process reduces

errors associated with manual processing by properly allocating General Ledger

and cost center codes with user review and approval

• Cost Savings and Process Efficiency—When card data is integrated, an expense

management tool reduces the amount of time required for cardholders to review

and reconcile card transactions

• User Satisfaction—An expense management tool streamlines the cardholder

reconciliation process, increasing the likelihood of prompt reconciliation by the user

Establish Audit Procedures for the Commercial Card Program

Summary

Best practice organizations have well-defined audit processes in place to evaluate

compliance with commercial card program policies and identify potential risks.

Organizations typically conduct many types of audits, such as:

• Ongoing Card Program Reviews—Leading organizations utilize card program

reviews conducted by the card program administrator on at least a weekly

basis to identify any misuse of commercial cards. Card program data allows

organizations to identify specific indicators that may highlight anomalies in the

card purchases, such as split transactions, unusual increase in cardholder spend

and purchases with unauthorized suppliers

• Purchasing Audits—Purchasing audits should be performed periodically by an

internal audit group and should include a review of card statements to confirm

adherence to purchasing policies and the existence of the required supporting

documentation (e.g., the purchase receipts)

Best practice companies perform random samplings of cardholder transactions

representing 5–10 percent of active cardholders. These organizations often ensure

that at least 50 percent of the sample consists of “at-risk” cardholders to target

transactions or expenses with a higher probability of misuse. If non-compliance is

identified by an ongoing program review, document retention audit or purchasing

audit, the program administrator is responsible for implementing the appropriate

disciplinary action.

Benefits

• Control and Compliance—Well-defined audit processes improve the efficiency

and accuracy of the control process and increase compliance with commercial

card program policies and procedures

• Cost Savings and Process Efficiency—Robust audit processes minimize costs

stemming from card misuse and the associated administrative effort

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Integrate the Commercial Card Program into the Business Continuity Plan

Summary

Leading organizations incorporate commercial cards into their business continuity

plans. A commercial card is a valuable tool that helps business operations to continue

by ensuring that organizations have the ability to pay for the emergency supplies

needed to conduct business.

During emergencies, funds must be accessible even when basic infrastructure such

as power grids, telecommunication networks and banking systems are disrupted.

In these cases, commercial cards may be the only efficient payment method when

checks, cash and direct transfers/debits are unavailable.

Companies can also work with their issuers to determine card controls that can be

adjusted under pre-determined disaster categories (e.g., spend limits and Merchant

Category Code blocking).

Online card account management tools allow card program managers to quickly

modify card controls in case of an emergency.

Finally, the spend data and reporting provided by commercial cards allows companies

to efficiently submit insurance claims by tracking all details associated with emergency

purchases. Some companies also use card spend data to track the location of their

employees during emergencies.

Benefits

• Control and Compliance—Improved visibility into spend data allows a company

to review and audit purchases made during a disaster and facilitates submitting

insurance claims

• Cost Savings and Process Efficiency—Reduced need to process emergency cash

advances and check requests allows critical business functions to continue even

under disaster circumstances

• User Satisfaction—Cardholders are able to use commercial cards to handle

unexpected business events and experience less stress during emergencies

Designate a Commercial Card for Meetings, Incentives, Conferences and Exhibitions (MICE)

Summary

Best practice companies require that all corporate events, such as sales meetings,

training or recruiting events, are planned and coordinated through a central event

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planning function. To effectively manage a centralized event planning function,

companies should use a designated card for meetings/event purchases such as airfare,

hotel rooms, facilities and banquet charges. Meetings cards are typically purchasing

cards with high individual and monthly transaction limits. Meetings cards are set up

with corporate liability and central billing.

Companies designate special meetings/event cards to capture the following benefits:

• Improved control, management and tracking of meetings/event spend

• Reduced time needed for reconciliation and transaction settlement

• Improved reporting though consolidated spend data

• Increased supplier satisfaction through streamlined order placement and payment

Companies should also establish and communicate the meetings/event policies.

The policies should outline scenarios in which centralized event planning should be used

and define the role of the event planner and how to use card to facilitate this process.

Benefits

• Cost Savings and Process Efficiency—Consolidating event-related spend on

meetings cards provides better visibility into spend, which enables companies

to negotiate better volume discounts. In addition, the use of a meetings card for

payment will reduce the need for Accounts Payable to set up a direct bill or issue

other manual forms of payment

• Spend Visibility—Consolidating the event and meetings spend through one

function will provide the company with detailed reporting into event spending

(e.g., frequency of events, selection and cost by locations)

Optimize Use of Ghost Cards or Virtual Accounts for Procurement Spend

Summary

Ghost cards are virtual purchasing accounts (i.e., no physical card) associated with

a single department, supplier or spend type regardless of the individual making the

purchase. Purchases are always charged to an individual account, which can only be

accessed by the designated purchaser. Organizations typically receive and pay ghost

card bills centrally and establish controls to validate purchases and reconcile card

statements through department and employee expense verification.

Examples of procurement spend categories that are typically handled through ghost

cards include:

• Recurring charges such as monthly bills for shredding, cleaning, telephone/pager

services, rent and utilities

• Office services, such as temporary staff, catering and copier maintenance

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• Event planning expenses, such as hotels and transportation for marketing

or training functions

• Capital items for projects, such as technology equipment

Ghost cards are also a particularly effective and efficient payment method for

e-Procurement purchases, as they eliminate the manual reconciliation and payment

process associated with invoice and check processing. Whether an organization uses

ghost cards for e-Procurement or standard purchasing, if there are many buyers within

an organization, this approach minimizes administrative work by allowing a company

to manage fewer accounts as opposed to having an account for each buyer.

Benefits

• Control and Compliance—Ghost cards do not have plastic cards associated with

them, improving fraud prevention and control

• Cost Savings and Process Efficiency—Ghost cards allocate an account number

to a particular supplier and/or department, which streamlines cost-allocation,

reconciliation and accounting

• Supplier Management—Ghost cards help encourage spend with preferred suppliers,

which improves supplier performance monitoring, allowing companies to gain

a better view of spend and negotiate decreased prices and increased discounts

• User Satisfaction—Ghost cards streamline ordering and payment processes,

minimizing the time users must spend on procurement administration and

enhancing the user procurement experience

Optimize Use of Central Travel Accounts for T&E Spend

Summary

Central Travel Accounts, also known as lodge cards, are commercial cards issued

for payment of air travel and related charges. They are assigned for use by a particular

travel agent and the account is dedicated to authorized travelers’ flight bookings.

A Central Travel Account can be associated with an entire department or an

entire company.

Many organizations mandate the use of Central Travel Accounts for travel expenses

and ensure that both travelers and travel agencies understand the company’s card

program policies, including preferred suppliers and negotiated rates.

Organizations typically receive and pay Central Travel Account bills (i.e., card

statements) centrally. They also establish controls to validate purchases and reconcile

card statements through department/employee expense verification.

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In addition, Central Travel Accounts may be used to cover T&E expenses for infrequent

travelers or non-employees, such as contractors or recruits, and for event planning

expenses, such as hotels and transportation.

Organizations consolidate transaction data from Central Travel Accounts with other

T&E data in order to get a complete view of spend for improved reporting and

negotiations with suppliers.

Benefits

• Control and Compliance—Implementing Central Travel Accounts for travel spend

encourages the use of preferred airlines, hotels and car rental agencies, while

enabling greater management of travel spend

• Cost Savings and Process Efficiency—The use of Central Travel Accounts

streamlines expense reconciliation, using a consolidated card account statement

• Supplier Management—Central Travel Accounts enhance the ability to monitor

spend with preferred suppliers

• Spend Visibility—Central Travel Accounts increase spend visibility by enabling

the capture of enhanced travel spend data

• User Satisfaction—Central Travel Accounts ease the travel booking and payment

processes, enhancing the user experience with travel and other T&E-related

purchases. There is also added convenience for those who do not have a

corporate card

Use Fleet Cards to Track Fleet-Related Expenditures

Summary

Implementing a fleet card program enables companies to gather unique fleet data to

improve management reporting, track vehicle maintenance, and mileage, and monitor

compliance with Procurement policies. The fleet card transaction data provides detailed

elements of the purchase. In addition to using the card data to track and manage

variable vehicle expenses, companies also use the transaction data for the following:

• Enhance Supplier Negotiations—By tracking fleet spending, management may

identify preferred suppliers and use actual spending volume to negotiate discounts

• Streamline Accounting Processes—Companies can remit single payments for

all fleet expenses instead of multiple Purchase Order invoices and/or

expense reimbursements

• Monitor Corporate Policy Compliance—Because fleet card reporting consolidates

all spend (including fuel type, scheduled maintenance, vehicle usage and preferred

vendor thresholds), companies can monitor compliance and progress toward

negotiated volume thresholds

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• Improve Spending Controls—Improved reporting and card controls are provided

by fleet card programs, such as restricting purchases by transaction or billing

cycle limits, fuel types and Merchant Category Codes

Benefits

• Control and Compliance—Provides a single tool for the internal accounting of

costs associated with the operation and maintenance of a vehicle

• Supplier Management—Enhances the ability to manage suppliers and negotiate

better pricing by keeping a closer record of fleet spending through reporting

• User Satisfaction—Vehicle operators find it easier to use a fleet card for payments

rather than use a T&E card and process an expense report for the fuel or

maintenance purchase. Maintenance providers find the use of a fleet card is

simpler than traditional paperwork used to allocate the cost to the vehicle

Use the Commercial Card to Pay Invoices in Accounts Payable

Summary

Leading organizations have realized additional benefits from their commercial card

program by distributing cards in the Accounts Payable department and using these

cards to pay invoices. At most organizations, processing paper invoices is manual

and requires a great deal of time and effort related to sorting, approving and

keying in invoices for payment. By transferring some invoice payments to card,

organizations streamline their payment process, which allows them to capture cost

and process savings.

The cards used in Accounts Payable departments are typically assigned to individuals

such as the Accounts Payable manager or key accountants, and the monthly spend

limit may be higher than that of average cardholders to allow for the higher volume

of invoices to be paid.

In addition, the Accounts Payable department should develop specific reconciliation

procedures for these cards to ensure that all charges are approved by the

correct purchasers.

Benefits

• Control and Compliance—Using commercial cards to pay invoices enables Accounts

Payable to more closely monitor transactions and compliance with card policies

• Cost Savings and Process Efficiency—Streamlining the reconciliation and

payment process through the use of commercial cards increases process savings

through displacement of manual check payments

• User Satisfaction—Using commercial cards in the Accounts Payable department

eliminates the need for individual cardholders to make payment

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Incorporate Commercial Card Acceptance into Supplier Contract Terms

Summary

Incorporating card acceptance into contracts with suppliers represents a prime

opportunity for organizations to increase spend on their commercial card, while also

offering significant benefits to suppliers such as prompt payment. This shortened

payment cycle maximizes cash flow for suppliers and reduces their cost of funds.

Issuers can also help organizations by conducting a review of spend to identify suppliers

who already accept card payments or to highlight spend categories or suppliers that are

high priorities for card acceptance. Once identified, companies often work with their

Procurement group to prioritize targeted suppliers and incorporate card acceptance

into upcoming contract negotiations.

When approaching supplier contract negotiations, organizations can consider card

acceptance as a criterion for supplier selection. As organizations negotiate with

suppliers, they can also use commercial card payment as a leveraging tool, requiring

that suppliers either accept payment by card or offer other desirable terms, such as

discounts or extended payment terms.

Benefits

• Cost Savings and Process Efficiency—Using suppliers who accept card

payment reduces transaction costs by eliminating paper invoice processing

• Supplier Management—Incorporating card acceptance into supplier contacts

enhances supplier management by providing consolidated card spend data

per supplier

Communicate Commercial Card Benefits to Non-Accepting Suppliers to Encourage Card Acceptance

Summary

Organizations can effectively expand their commercial card programs by actively

working with their suppliers to accept commercial card payment. Leading organizations

develop formal strategies to increase supplier acceptance that include methods to

identify, prioritize and communicate with non-accepting suppliers.

To identify non-accepting suppliers, organizations work with their issuers or use

a third-party provider to conduct the analyses. Once suppliers are identified for card

acceptance efforts, best practice companies prioritize them to focus on preferred

suppliers, suppliers with upcoming contract expiration/renegotiation dates, suppliers

with high transaction volumes or those where transaction data associated with

commercial card usage is needed to support negotiations and increase spend visibility.

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Organizations provide a clear explanation of the benefits of card acceptance to their

suppliers. These include:

• Prompt payments and consistent cash flow

• Streamlined Accounts Receivable process

• Reduced credit and collection expenses

• Reduced credit risk

Organizations can adopt various approaches to building supplier acceptance.

Some pursue proactive communication with non-accepting suppliers, while others

address commercial card acceptance during contract renegotiation. Companies

also use their card issuer to encourage acceptance of commercial cards among

non-accepting suppliers.

Benefits

• Cost Savings and Process Efficiency—Increased use of commercial cards reduces

internal processing and transaction costs

• Spend Visibility—The greater the volume of purchases and types of commodities

purchased by card, the more insight companies can gain into their spend

• Supplier Management—Maximizing the number of suppliers paid by card

improves ability to track spending, rationalize the supplier base and negotiate

with preferred suppliers

• User Satisfaction—Increasing the number of card-accepting suppliers streamlines

the payment and reconciliation process for employees, increasing user satisfaction

Utilize Enhanced Data from the Purchasing Card Program

Summary

Best practice organizations use enhanced purchasing card transaction data (also known

as Level II or Level III data or “line-item” detail) to improve reporting and analytic

capabilities, monitor spend policy compliance and facilitate reconciliation processes.

The levels of transaction data are defined as follows:

• Level I includes:

– Date

– Merchant Name

– Location (City, State, Zip Code)

– Transaction amount, including sales tax

• Level II includes Level I and the following:

– Purchase amount, excluding sales tax

– Sales tax

– Customer code (if using a purchasing card)

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• Level III includes Level I, Level II and the following:

– Full line item detail, such as item description, quantity, unit of measure, unit cost

and product code

All suppliers are able to pass Level I transaction data. However, Level II and III data

requires additional data capture capability; therefore, many companies work with

their card providers and issuers to enable suppliers as part of their overall supplier

management process. Companies use Level II and III data to improve spend and

compliance reporting and to aid in supplier negotiations. Companies can also track

supplier spend by line item to ensure compliance with spend policies and use of

preferred suppliers.

In addition to reporting, Level III data can be used to pre-populate expense management

tools, ensure policy compliance, monitor inventory and support sales/use tax estimation.

Benefits

• Control and Compliance—Enhanced data enables greater control of the type

of spend placed on cards through better reporting and monitoring of compliance

to card program polices and procedures

• Spend Visibility—Enhanced data improves spend visibility by enabling advanced

reporting, such as tax reporting by spend type

• Supplier Management—Enhanced data provides consolidated spend information,

which can be used during supplier negotiations to demonstrate the total value of

a company’s account

Utilize Enhanced Data from the Corporate Card Program

Summary

Leading organizations use enhanced data from their corporate card program in a

variety of means, including supplier negotiations, supplier management, compliance

tracking and tax reclamation.

Enhanced data from the corporate card program provides the spend elements to

support travel supplier negotiations. In addition to reduced rates, companies are able

to use the enhanced data to negotiate discounts on telecom, restaurant and parking

as well as airline upgrades, late checkout and guaranteed room reservations.

Companies also use the corporate card data to track and monitor the performance of

their suppliers against the contracted terms. Enhanced data can also be used to support

audits for corporate card and travel policy compliance. For example, this data can help

to identify spend with non-preferred vendors or spend outside of policy such as

unapproved room or ticket classes.

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Some organizations also use enhanced data to support the calculation of tax liabilities

and reclamations. Enhanced data provides a detailed breakdown of various sales taxes

(e.g., U.S., state and local taxes and VAT) associated with a card purchase. This tax

information can be used to receive accurate government tax rebates as well as to

comply with government tax compliance policies.

Benefits

• Control and Compliance—Enhanced data improves a company’s ability to

report and monitor compliance with its corporate card program and travel polices

and procedures

• Spend Visibility—Enhanced data improves travel spend visibility by enabling

advanced reporting by supplier, spend type and duration of hotel stay

• Supplier Management—Enhanced data provides consolidated spend information,

which can be used during supplier negotiations and strategic sourcing efforts

Develop a Process for Reporting and Payment of Sales and Use Taxes

Summary

Leading organizations understand and manage their businesses to comply with tax

regulations. If sales tax has not been paid at the time of purchase and the item purchased

is not exempt from tax, the purchaser must demonstrate that the use tax has been

accrued and remitted to the taxing authority. The most successful tax strategies

ensure collaboration between commercial card program management and corporate

tax administrators.

Leading organizations understand and manage sales and use tax responsibilities by

focusing on three areas:

• Taxability Management—Establishing a process to identify transactions where

a use tax accrual is required, which is generally addressed through a statistical

application or tax model. Organizations with commercial card programs may

also want to explore software applications that can help with tax reporting

• Compliance Management—Companies link the process used in determining use

tax liabilities on commercial card transactions with the existing sales and use tax

compliance process. Some outsourced the entire sales and use tax reporting and

payment process to a third party that specializes in understanding and processing

sales and use taxes

• Audit Management—Companies documenting the commercial card transactions

and tax management process to support the efficient management of state sales

and use tax audits

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Benefits

• Control and Compliance—A tax-reporting solution ensures that procedures

implemented support the efficient management of state sales and use tax audits

• Cost Savings and Process Efficiency—Implementing a tax-reporting solution

enhances the efficiency of sales and use tax accrual through use of tax models

or a statistical application and replaces the need to review each card transaction

Develop a Process for Value Added Tax (VAT)/ Goods and Services Tax (GST) Reclamation

Summary

Value Added Tax (VAT) or Goods and Services Tax (GST) is the primary form of tax

on purchases and is applicable in over 112 countries. VAT/GST is refundable as long

as the expense is for business purposes; however, the recovery process is primarily

paper-based and companies need to submit individual claims to each country in

which purchases were made.

Companies with large volumes of international spend often include VAT/GST

reclamation targets as part of their commercial card program goals. The ability to

achieve these targets depends on well-defined policies and procedures to ensure that

cardholders understand the necessary steps for completing expense claims, reporting

VAT/GST rates and amounts, and submitting necessary receipts and tax invoices.

Some companies in the study performed the VAT/GST reclamation in-house.

Increasingly, companies have used their expense-reporting system to automate the

identification of purchases with VAT/GST items, achieving great process efficiencies

and increased compliance relative to the manual identification process.

While some companies prefer to automate the process internally, other companies

have found it worthwhile to outsource the VAT/GST reclamation process to a third party.

Typically, third parties charge a percentage ranging from 5 percent to 20 percent of

recovered VAT/GST payments.

Benefits

• Cost Savings and Process Efficiency—Establishing a VAT/GST reconciliation and

reclamation process will produce substantial cost savings and process efficiencies

by capturing VAT/GST returns

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Implement Imaging Technology and Establish a Receipt Retention Policy

Summary

Best practice organizations require retention of card transaction receipts for a

specified period of time to ensure a consistent and complete internal controls process.

Increasingly, organizations are choosing to use electronic imaging to store receipts

electronically in order to reduce storage costs and make it easier to locate archived

receipts. Electronic receipt imaging can save a company US$4 or more per expense

report.3 In addition, receipt imaging streamlines the expense-reporting process by

minimizing receipt handling and simplifying the approval and audit processes.

While some companies prefer to automate the process internally, other

companies outsource the receipt-imaging process to a third party that specializes

in receipt processing.

In a further effort to reduce receipt-retention costs, many companies interviewed

are no longer requiring employees to submit receipts for purchases paid by the

commercial card. The U.S. Internal Revenue Service (IRS) will accept electronic

receipts in lieu of paper, provided there is detail for each individual purchase.

Benefits

• Cost Savings and Process Efficiency—Centralized storage of electronic receipts

reduces physical storage costs and improves the archived receipt-retrieval process

• User Satisfaction—With electronic receipt storage implemented, cardholders

are no longer required to obtain and provide copies of all receipts. In addition,

companies that centralize the imaging and storage process reduce the burden

on the cardholder to retain copies of their receipts

Monitor and Evaluate Commercial Card Program Performance

Summary

Best practice organizations use card program reports to assess performance against

goals, to gauge impact on recent expenses, to monitor compliance with policies and

procedures and to identify additional opportunities to improve their programs.

In general, card program reports fall into three basic categories:

• Performance Reporting—Performance reports can track financial performance

(e.g., cost savings and early payment discounts), card program usage (e.g., number

of active cardholders, card program spend volume, total transactions and spend

patterns) and cardholder satisfaction (e.g., number of customer service inquiries)

3 Concur Technologies Inc., 2007.

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• Compliance Reporting—Reports designed to assist in monitoring and auditing

the card program. Companies look for indicators of suspicious behavior, such as

split transactions, card declines/reasons for the decline and spend with

unauthorized suppliers

• Peer Benchmarking—Organizations are increasingly using card program reports

to measure their performance relative to industry and revenue peer groups

Organizations document the reporting process, such as the calculation of the metrics

included, reporting frequency (e.g., weekly, monthly or quarterly) and target audience.

Benefits

• Control and Compliance—Card program reporting provides increased compliance

with policies and procedures and identifies any patterns of card misuse and fraud

• Cost Savings and Process Efficiency—Card program reporting allows business

managers to assess and improve card program performance

• Supplier Management—Detailed card program reports enable analysis of spend

by commodity and supplier, which can be used to identify suppliers to be paid by

card and support price negotiation

Share Commercial Card Performance Scorecard with Senior Management and Key Stakeholders

Summary

Best practice organizations understand that senior management support is key to the

continued success of a card program. To gain support, some companies share basic

program performance reports, highlighting progress against the prior year’s performance

(e.g., spend volume on card, number of users, etc.), while others provide detailed reports

including cost savings targets and other Key Performance Indicators (KPIs). Leading

companies ensure that the metrics tracked align with organizational strategic objectives.

The frequency with which reports are shared depends on the maturity of the card

program, the aggressiveness of the program’s goals and objectives, and the desired

level of senior management involvement. In addition, organizations use a variety of

methods for sharing such reports with senior management, including presentations

and/or dashboards, assigning business unit liaisons responsible for providing senior

management with updates, and regular meetings specific to the card program with

executive level management.

Sharing reports with senior management to promote program support and buy-in is

a top priority. However, some companies have also found that sharing reports with a

larger audience can also be very beneficial. Such transparency stresses the importance

of the card program and promotes the adoption of card use company-wide.

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Benefits

• Control and Compliance—Sharing with senior management unrealized saving

opportunities due to non-compliance will encourage involvement in enforcing

future compliance with policies and procedures

• Cost Savings and Process Efficiency—Sharing cost savings and process

efficiencies gained through the card program increases the likelihood that senior

management will provide further support for card program goals and objectives

Optimize Program Performance with the Use of Analytical Tools

Summary

Best practice organizations use commercial card program analytical tools and

reporting solutions offered by their issuers and/or card providers to enhance the

performance of their commercial card programs.

Program Optimization is a comprehensive suite of analytical tools developed by Visa

and available through your issuer to help you conduct qualitative and quantitative

analyses and identify opportunities to optimize the card program performance. These

tools include:4

• Accounts Payable Analysis—The Visa Accounts Payable tools analyze a company’s

spend and identify opportunities to grow the card program. Analyzing spend

patterns allows companies to develop strategic and tactical plans for commercial

card program implementation or expansion

• Program Benchmarking—The Visa Industry Benchmark Analysis tool allows

companies to create customized card program performance reporting against

peer group by sector, industry and revenue

• Best Practices Comparison—The Visa Performance Gauge provides companies

with a personalized diagnostic report identifying best practice improvement

opportunities as well as their potential savings for the commercial card program

• Return on Investment (ROI) Tools—These tools aid in quantifying the benefits of

card program growth, such as process and working capital savings. In addition,

these tools help reflect the costs associated with growth, such as increased card

management and cardholder training

• Online Card Program Reporting Tools—These tools offer standard reports and

customized reporting capabilities to facilitate spend analysis, program

administration, travel management, tax reporting and 1099 reporting

4 The tools are available in the U.S., Canada, and select other markets. For more information, please contact your issuer.

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Benefits

• Control and Compliance—Analytical tools can track compliance to card policies

and identify card-eligible payments that were made by other payment methods

• Cost Savings and Process Efficiency—Card program analysis tools enable the

identification of potential process savings through expanded card use with

eligible purchases

• Supplier Management—Card program analytical tools assist companies

in identifying card-accepting suppliers capable of providing enhanced data

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Study Methodology

The objective of the 2008 Visa Procure-to-Pay and Commercial Card Best Practices

Study was to give you a better understanding of the changes in the segment and a

comprehensive look at best practices across the Procure-to-Pay process and within

the commercial card program. Visa commissioned Deloitte Consulting to conduct 90

in-depth interviews in the summer of 2007 with more than 60 global/multinational,

mid-size and large corporations as well as federal and local government agencies across

the world. The evaluation of the Procure-to-Pay process included sourcing, order

placement, payment and settlement, reconciliation, control and audit, and reporting

activities. For the commercial card management process, the assessment focused on

practices related to the purchasing and corporate card program strategy, management

and reporting. Interviewees included Regional Controllers, Chief Procurement Officers,

Directors of Strategic Sourcing, Procurement Managers, Accounts Payable Managers,

Global/Regional/Local Commercial Card Program Managers and Travel Managers.

Study participants had a range of commercial card programs in place, including

purchasing card, corporate card and commercial “one” card programs with the top

three card providers: Visa, MasterCard and/or American Express.

Study Participants by Industry

Other: 7%

Manufacturing: 27%

Consumer Products: 12%

Healthcare: 10%

Communication: 5%

Transportation: 7%

Public Sector: 7%

Financial Services: 7%

Technology: 9%

Energy and Utilities: 9%

EU: 13%LAC: 5%

US: 52%

CEMEA: 2%

Canada: 8%

Asia-Pacific: 20%

Study Participants by Region

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