Why Virtual Cards Are Better at Spend Management Than P-Cards
What is a P-Card?
P-Cards — also known as payment cards, procurement cards, and purchase cards — are a type of company card that allows employees to quickly and securely buy goods and services. Typically used for B2B and office purchases that are too small for purchase orders, P-Cards are a popular alternative to checks and automated clearing house (ACH) transactions.
P-Cards may be issued to an individual or shared across a department, allowing multiple employees to make real-time purchases. Even with heavy use, a P-Card provides one streamlined bill where you can pay, track purchases, and prevent fraud.
What is the difference between a purchasing card and a credit card?
Both business and consumer credit cards:
- Provide a revolving line of credit that can accumulate debt
- Charge interest on debt if the card isn’t paid in full each month
- Require a minimum payment each month if debt is accumulated
- May require a credit check
- May include an annual fee
Unlike credit cards, P-Cards:
- Have no annual percentage rate (APR) or interest
- Must be paid in full every month
- Don’t require a credit check
- Typically don’t include an annual fee
How do P-Cards work?
P-Cards function just like credit and debit cards when it comes to making purchases — you can pay in-store, online, or by invoice. There are also some P-Cards that offer a separate virtual card for online purchases. These virtual cards provide unique details for each purchase, so you (or a team) aren’t using the same account number across multiple websites.
Employees simply buy the items or services they need, and are billed through the P-Card provider system like a standard credit card bill. Bills can be paid automatically by connecting to a corporate checking account, or can be paid manually. Many P-Card provider systems connect to corporate accounting systems, streamlining the process further.
Why should I use a P-Card?
Using a P-Card to make purchases is faster, easier, and safer for both employees and businesses. P-Cards:
- Save Time: There’s no need to fill out expense reports or purchase requests, and you don’t have to wait for reimbursement; simply make your purchase on the card in real time.
- Save Money: Avoid interest charges, payment processing fees, and (generally) annual fees.
- Stay Secure: Businesses can set dollar threshold limits and restrict usage to specific merchants; this not only helps prevent fraud and over-spending, but helps with compliance monitoring, tracking, and auditing.
- Get Perks: If your service providers or suppliers accept credit cards, you may be able to snag early pay discounts and rebates by paying with your P-Card.
Why shouldn’t I use a P-Card?
There are many potential issues that could arise with the use of P-Cards, including, but not limited to:
- Employees using the card without preapproval
- Lack of clear approval process
- Manual coding and reconciliation by accounting without POs
Such inefficiency and lack of control leads many companies to limit P-Card use and forgo its benefits. But effective use of cards can benefit AP and provide business advantages such as rebates and the cash flow benefits of card billing cycles.
What is a good P-Card and credit card alternative?
Coupa addresses the challenges of credit cards, P-Cards, and traditional virtual cards while maintaining their benefits as part of our overall cloud Business Spend Management (BSM) platform. Companies have the option to:
- Issue a one-time-use virtual card right at the time of purchase or as payment on an invoice to prevent unapproved charges
- Collect accounting information and approve budgets upfront — eliminating the risk and reconciliation issues
- Pay suppliers quickly and often reduce costs with straight through-processing (STP)
Because cards are integrated into the P2P process, AP, procurement, and treasury realize the potential of their card-provider relationships through Coupa’s integrated BSM suite along with improved visibility and control over spend.
Who should use a Coupa Pay Virtual Card?
Coupa Pay Virtual Cards can be used by businesses of all sizes and functions, but they’re a particularly good option for:
- Growing companies that need to regularly make a lot of smaller purchases along with larger ones and want them to be seamlessly integrated in one BSM system
- Organizations that want to lessen the burden on accounts and finance teams
- Businesses needing to cut costs and take control of spending
- Companies wanting less fraud and loss risk
- Employers looking to gain perks and discounts