White Paper: 4 Key benefits for Procurement Departments using Corporate T&E Cards

| 0 Comments

 

images.jpgAs procurement function has to deal with many small transactions, corporate cards provide distinct benefits for at least five different functions within a procurement department: treasury, accounts payable, financial systems, audit/compliance and budgeting/planning, explains Virginia Miller, Business Leader, CPS Product Development of MasterCard in this month's SmartProcurement. 

 

This white paper sets out the advantages for each of them:

• Treasury—Improved liquidity, lower payment costs, improved banking relationship, better visibility of cash flow, and elimination of cash advances;

• Accounts payable—Efficient payment, internal assignment of costs, and lower administrative costs;

• Financial Systems—Streamlined processes as companies can extend their Days Payable Outstanding (DPO) from the typical 30 days from date of Travel and Entertainment invoice to 46 days for payment by corporate card;

• Audit/Compliance—Control through proactive enforcement of travel policy and control through reporting; and

• Budgeting/Planning—Budget tracking and forecasting also explains the vital services cards perform for other key company stakeholders:

o Strategic sourcing, supplier negotiation, and tracking contracted spend

o Human Resources—Non-compliance deterrent, duty of care, temporary staff, and employee induction

o Travellers themselves – convenience and safety


When considering strategic options to help grow company revenues and increase customer loyalty, companies often neglect to consider changes to revenue collection methods in favour of product innovations and brand-awareness campaigns. This is potentially an oversight, as changing a company’s collections process can provide strategic advantage over its competitors.


For example, card acceptance at the point of purchase for business-to-business (B2B) transactions is a cost-effective way to manage collections. New research conducted by MasterCardwith Kaiser Associates studied the buying habits of corporate purchasing managers to evaluate the effect of card acceptance on corporate purchasing. The findings indicate that card acceptance can lead to increased revenues for card-accepting suppliers.


In fact, MasterCard found four revenue benefits for suppliers namely increased volume per customer; greater revenue consistency; increased likelihood of initial vendor selection and decreased customer churn.


REVENUE BENEFIT #1: Increased volume per customer
Many suppliers already know that buyers appreciate the value that cards offer. However,many suppliers don’t appreciate the extent to which buyers would alter their spending habits to realise this value. Customers are more likely to increase purchasing volume with a previously non-accepting supplier once it starts accepting cards. Data from the study indicates that this increase in volume results from three key drivers:


1. Buyer interest in consolidating suppliers: Card acceptance is a significant decision driver for buyers considering vendor consolidation opportunities.

2. Buyer willingness to substitute card for early pay discount: Suppliers lose top-line revenue when offering early pay discounts to incentivise speedy payment. By accepting cards at the point of purchase, even faster payments can be achieved, and without a reduction in price for the supplier.

3. Facilitation of ad-hoc purchasing: Cards provide a level of control and fraud prevention that’s often beyond what traditional payment methods can offer. An example of de-centralised purchasing occurs when a manager circumvents the traditional procurement processes, most often in the case of a time-sensitive purchase. By accepting cards, suppliers make themselves more available for this type of purchasing.

REVENUE BENEFIT #2: Greater revenue consistency
Paying with cards enables a more streamlined purchasing process for buyers. The streamlining effect comes from removing multiple manual processes such as the need to write a cheque or match an invoice to a payment. Data suggests that cards streamline the payment process so much that they encourage buyers to purchase more fre¬quently from their suppliers.


REVENUE BENEFIT #3: Increased likelihood of initial vendor selection
Buyers’ preference for using cards leads them to seek out card-accepting suppliers. This effect was observed across all spend categories, and was strongest in non-strategic spend categories. The top four spend categories with the greatest supplier selection effect due to card acceptance were fuel, travel, office equipment and printing services.

MasterCard has witnessed an increase in buyers using MasterCard’s Merchant Match Tool (MMT) – a database listing all MasterCard accepting B2B vendors. Adding card acceptance to a firm’s capability list – and thus gaining representation on MasterCard’s MMT – has proven to be a simple way to increase competitiveness.


REVENUE BENEFIT #4: Decreased customer churn
Suppliers appealing to buyers’ preference for using cards for purchases may see an increase in customer satisfaction. Managers in the study indicated that an increase in satisfaction would increase relationship longevity by over 60 percent. Card acceptance can thus facilitate considerable growth in the lifetime value of customers.

Why do buyers prefer cards?

• Purchasing control: Cards provide for protection against unintended and fraudulent purchases, errors, and misuse by employees.

• Level 3 data: Data provided at the line-item detail level allows for efficient reconciliation, tracking of purchases, and oversight of compliance.

• Payment float: Card billing cycles lengthen the gap between the time of purchase and the time of cash disbursement, helping to achieve lower working capital requirements.

• Streamlined enrolment: Eliminating trade credit mitigates the need for a vendor-sponsored background credit check thereby streamlining the vendor enrolment process.

Conclusion
The research conducted in this study reveals that buyer decision-making and purchasing habits are influenced considerably by the card acceptance status of a supplier. By opening up card acceptance as a payment option for business customers, suppliers can position themselves to earn higher revenues and better compete against their non-accepting competitors.

 

Leave a comment


SmartProcurement Newsletter
X

Please enter your details below to receive the SmartProcurement Newsletter for FREE on a regular basis.

As part of the SmartProcurement Newsletter you will be receiving World Class Procurement News, Tools, Tips, Tactics, Procurement Training updates, Upcoming Events, and the latest Procurement Career Openings.

* Email Address:
* Title:
* First Name:
* Surname:
* Company:
  Position:
* Country:
* Public / Private:

 

 

Career opportunites

Warehouse Manager

  • <500 000 Gauteng Logistics & Warehousing Operations, Planning & Inventory Permanent
R400 000 - R480 000 CTC per annum.Location: ...More

Supply Chain Analyst

  • <500 000 Analyst Permanent Supply Chain Western Cape
R400 000 - R500 000 per annum.Location: Cape ...More

Commodity Manager

  • <500 000 Commodities Gauteng Permanent Procurement Consultant
R650 000 - R750 000 per annumLocation: Cape ...More

Logistics Manager

  • <500 000 Gauteng Logistics & Warehousing Operations, Planning & Inventory Permanent
Salary: R 800 000 - R 900 000 ...More

Demand Planner

  • <500 000 Gauteng Operations, Planning & Inventory Permanent Projects / Category Management
Salary: R 600 000 - R 650 000 ...More

Supply Chain Analyst

  • <500 000 Analyst Gauteng Permanent Supply Chain
R600 000 - R700 000 per annum Location: ...More

Commodity Manager

  • <500 000 Commodities Gauteng Permanent Procurement Management
R850 000 - R1 000 000 per annumLocation: ...More

Commodity Manager

  • <500 000 Commodities Permanent Procurement Management Western Cape
R700 000 - R850 000 per annum,Location: Western ...More

National Supply Chain Manager

  • <500 000 Across borders Permanent Procurement Management Supply Chain
R750 000 - R1 000 000 per annum,Location: ...More

Industrial Engineer

  • <500 000 >500 000 Industrial Engineer Operations, Planning & Inventory Permanent Western Cape
R450 000- R500 000 CTC per annum,Location: Western ...More

Commodity Manager

  • <500 000 Commodities Gauteng Permanent Procurement Management
Category: Procurement,Salary: R700 000 - R800 000 per ...More

Supply Chain Manager

  • <500 000 Gauteng Permanent Procurement Management Supply Chain
Category: Consulting,Salary: R750 000 - R800 000 CTC ...More

Logistics Manager

  • <500 000 Across borders Logistics & Warehousing Permanent Procurement Management
Category: Logistics,Salary: R900 000 - R1 000 000 ...More

Demand Planner

  • <500 000 Gauteng Operations, Planning & Inventory Permanent Projects / Category Management
Area of Specialisation: Planning,Salary: R500 000 - R650 ...More

Industrial Engineer

  • <500 000 Analyst Gauteng Industrial Engineer Permanent
R800 000 - R850 000 CTC per annum.Location: ...More

Security Manager

  • <500 000 Analyst Gauteng Permanent Procurement Officer / Specialist
(Total Cost to Company R350K - R550K).This is ...More

Operations Manager

  • <500 000 Gauteng Operations, Planning & Inventory Permanent Projects / Category Management
(Total Cost to Company R650k - R750k) excluding

Commodity Manager Raw Materials

  • <500 000 Commodities Gauteng Permanent Strategic Sourcing
(Total Cost to Company R980k - R800k) excluding ...More

Commodity Manager Logistics

  • <500 000 Commodities Gauteng Logistics & Warehousing Permanent
(Total Cost to Company R1mil - R900k).Industry: Engineering

Procurement Consultant

  • <500 000 Gauteng Permanent Procurement Consultant Procurement Management
(Total Cost To Company 550K - 450K) includes ...More