Lack of internal controls is an organization’s most common weakness in occupational fraud. And though these schemes take on many forms, asset misappropriation accounts for 89% of company fraud cases. This includes cash larceny, personal purchases, and overstated expenses.
There’s no one preventative measure to combat occupational fraud. But companies have options to help deter or at least detect insider fraud. One such option is using a purchase card (p-card) for all business-related expenses.
If you’re asking, “What is a p-card?” and wondering how they can benefit you, keep reading. This article discusses purchase cards and why you need them for your business.
P-Card 101: The Basics of Purchase Cards
Purchase cards are commercial charge cards that work like consumer credit cards. Organizations issue p-cards to employees for payment of acceptable business expenses. You’ll often hear a p-card referred to as a Purchasing Card, Procurement Card, or Payment Card.
Unlike your personal credit card, there’s not always a physical p-card issued. For greater security, many businesses choose non-plastic p-card accounts like virtual visa cards. No matter the payment form used, businesses assume responsibility for paying p-card expenses every month.
Now take a look at some of the benefits of using a purchase card for your business.
Greater Internal Control
Part of developing a P-Card program includes building policies around card usage. And you can strengthen those policies by placing restrictions on each p-card account. Common restrictions include monthly account limits and individual purchase limits.
But you can also limit where employees can use their p-card. For example, you can restrict a card to a $50 per purchase limit at office supply merchants only. And ensure the total purchase amount doesn’t exceed $500 per month.
Simplified Purchasing Process
Most businesses create requisitions and issue purchase orders to their suppliers. Regardless of the purchase amount, this results in significant transactional costs. And processing invoices and issuing check payments can become costly and time-consuming.
According to the NAPCP, streamlining company purchases could result in 80% efficiency improvement. For many businesses, that means an average of $63 in savings per transaction.
Reduced Supplier Cost
Suppliers save money by not having to issue invoices or wait for payments from partner businesses. And the quicker suppliers receive payment, the better their operating cash flow. Not only that but processing fewer invoices reduces a supplier’s personnel costs, too.
You may not understand how a reduction in supplier costs benefits your company. But it’s possible for suppliers who accept p-cards for payment to pass savings onto you. Knowing that gives you leverage when negotiating purchase discounts with your suppliers.
By using a virtual ghost card, you can ensure all your purchases with a vendor generate savings.
Purchase Cards for Business Expenses
Don’t let occupational fraud put you out of business. A purchasing card program is an easy business solution to your lack of internal controls. And virtual Visa cards offer a level of protection even greater than physical purchase cards.
Did you find this information helpful? Check out our other blogs for suggestions on solving other common business issues.