Purchasing Cards Drive Down Business Costs

Paper or plastic – it’s not just a consumer’s choice at the grocery checkout any more, it’s a corporate matter of reducing operating costs and streamlining businesses. Companies are increasingly using purchasing cards to save time and money on small yet labour-intensive business-to-business transactions. One clean swipe of a card eliminates scads of paperwork resulting from purchase order and invoice forms that need to be filled out by teams of people.

According to a survey conducted for Visa USA Inc. by Deloitte & Touche Consulting Group, 18 multinational corporations that have adopted purchasing card programs have reduced their invoice processing costs an average of 73 per cent.

Consider Monsanto Co., the St. Louis-based agro-chemical giant, which is slashing its operating costs faster than it can produce its Roundup Ready Soybeans. The company began rolling out purchasing cards in October 1997 so that employees would spend less time on what Steven Pennington, Monsanto’s manager of administration and IT purchasing, calls nonvalue-added activities, like filling out forms and chasing down signatures and approvals.

Currently, 4,600 of Monsanto’s 31,800 employees use the card, which works just like a credit card. Employees use it to pay for as many noncapital purchases as possible – for example, conference registration, catering and office supplies.

Pennington adds that such transactions constitute 60 per cent of all of Monsanto’s non-raw material purchases and, if the card isn’t used, cost the company $40 to $45 per transaction. Though Monsanto hasn’t yet determined the cost per transaction with the card, it does know that the payment process has been streamlined. Employees no longer need busy themselves with such time-consuming tasks as issuing cheques and entering invoices into the company’s accounts payable system. Cycle time for completing transactions with the purchasing card has been reduced from weeks to days and even minutes in some cases.

Another added benefit: though not biodegradable, purchasing cards generate less waste than the traditional method of reconciling purchases. That may make companies awash in paper-based transactions green with envy.