Responsible spending is a tall order in today's economy. But according to a report from financial services firm JPMorgan, effective procurement card compliance continues to make that job even more difficult. Detecting and controlling the use of purchasing cards (also referred to as "P-cards"), including out-of-policy spending and even fraud, are just a few of the key issues facing the companies that participated in the study.
"In today's highly regulated environment, where the main focus is on compliance and auditing controls, a procurement card program provides the foundation and visibility tools to better manage corporate spending," says Rich Erario, JPMorgan's managing director of commercial card and electronic procurement, invoicing and payables.
The tricky part is figuring out how to create a more effective program -- one that can better position companies to accelerate efficiency and improve the compliance and auditing processes, Erario points out.
So to help companies get started down the right path, JPMorgan asked several top-performing companies what's worked for them. Here are four of the key best practices highlighted in the report.
Incorporate new technology. Technology is key to helping card administrators pinpoint potential misuse and guide back-end auditing. Best-in-class systems enable administrators to block unauthorized purchase categories, monitor corporate compliance, modify spending limits and cancel cards.
Train first. Education and a clear understanding of cardholder roles and responsibilities are vital to any program. Once an application is received, companies should consider having card applicants participate in a training course before receiving their card. Keep education at the forefront and train early and often. Petroleum and energy provider Chevron, for example, says its employees are required to take a training course every two years to continue using their cards.
Enhance auditing practices. Best-in-class organizations enhance their auditing practices by looking beyond traditional controls such as cardholder spending limits and restricted merchant category codes. Consider conducting audits on purchases that are made in the evening or on weekends. Purchases shipped to an individual's home as opposed to a business address should also be investigated. Other red flags could be personal technology purchases such as computers, cell phones and PDAs, or items acquired using PayPal or through sites like eBay.
Conduct periodic peer reviews. To mitigate improper card use and help support Sarbanes-Oxley requirements, best-in-class organizations also perform ongoing peer reviews of purchasing practices well in advance of regularly scheduled audits. International Paper's P-card practices are audited every other year by internal audit. In anticipation of these audits, cursory peer reviews are conducted annually at each location. Divisions also perform monthly transactional reviews.