Purchasing cards are prevalent in the B2B payment world because they are convenient and they offer cash-back rebates on monthly spend. Many companies use them, despite there being another, better and more secure option. Because purchasing cards have become somewhat the standard for credit payments, the risks and adverse effects of have been disregarded.
But they shouldn't be.
Purchasing Cards: Benefits for Payers vs. Payees
According to the NAPCP, here is the positive aspect of using a purchasing card for payers:
- Handling and mailing cost reduction.
But most of the pros for P-Cards are on the payee side of the transaction:
- Electronically deposited funds.
- Faster receipt of payments and improved cash flow.
- Increased sales, as many organizations solicit only suppliers that accept P-Cards as payment.
As you can see, most of these positives are for the payee — not the payer. In addition, there is the impression that using a purchasing card is as safe for payers as the alternative: virtual cards.
Drawbacks of Using Purchasing Cards (and How Virtual Cards Help)
Problem 1: Using a procurement or purchasing card exposes your organization to the potential for undetected credit card fraud and identity theft, which can result in lost money.
Solution 1: Virtual credit card numbers are unique to each transaction, meaning that there is no potential for fraud and identity theft.
Problem 2: Multiple ways of placing orders (e.g., P-Card, eProcurement, ERP, requisitions, etc.) can confuse requisitioners. Especially those who may not know the proper method for each type of purchase.
Solution 2: There is no confusion with virtual cards. Each payment flows through the normal AP process and is assigned to designated organizations.
Problem 3: P- card spend data may not be integrated with other purchase data, resulting in incomplete information when conducting spend analysis.*Solution 3: Virtual cards may carry GL clearing information for ease of applying to overall systems, resulting in complete information when conducting spend analysis.
*source: Next Level Purchasing
Learn More About Virtual Credit Cards:
- How to Revolutionize Your Business with Virtual Credit Card Payments
- 6 Great Reasons for Accounts Payable Virtual Card Payments
- Accounts Receivable Automation Solutions
- AP Automation & Best Practices Guide
- Accounts Payable Automation Software
- The Benefits of Virtual Cards
- Knowing When to Use a Purchasing Card vs. Virtual Card
Now that you understand more about problems and risks associated with Purchasing Card transactions, find out more about integrating virtual cards into your Accounts Payable ePayments program.
Originally published October 17, 2019. Updated for content and quality on February 10, 2021.