How can procurement drive down the cost of processing transactions?

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IanHendry2.jpgWhat is the cost to your business to process one purchase order (PO)? How many POs do you process with a value below that amount? Are you spending a lot of money processing invoices of a low value?

If you need to simplify your procurement of low-value items, then you are in the company of most South African organisations. The average cost of processing a PO in South Africa is more than R700.

Implementing a P-Card programme is one solution. The average cost of processing procurement card (P-Card) transactions is typically less than R200, says Ian Hendry of Nedbank Commercial Card.

Procurement professionals who are spending 80% of their efforts processing POs and payments for 20% of their spend are on the wrong side of the Pareto principle (also known as the 80/20 rule). They need to reduce the time and costs wasted on low-value transactions.

A P-Card solution processes the high-volume, low-value transactions that add little strategic value to your business, freeing the procurement team’s resources and time so that they can focus on supplier relationships and purchases that are valuable to the business.

Simply put, a P-Card is like a charge card that allows the holder to make low-value purchases without generating a PO.

No Purchase Order?

The P-Card statement contains all the detailed information you would normally receive in an invoice, which means the procurement department can rely on the P-Card statement, instead of generating a purchase order and retaining invoices.

Consequently, a P-Card payment mechanism lends itself to small, low-value commodities for which you do not necessarily need a buyer. This includes things such as stationery, coffee supplies and even printing services.

The global adoption of P-Card programmes is significant – as much as 75% of organisations in the USA have adopted the payment mechanism to replace manual processes and remove human error or the risk of misuse. By eliminating manual processes and the number of steps in processing payments, there’s an associated decline in data entry errors.

Furthermore, each P-Card can be individually configured with set limits and spend categories, which means that transactions do not need to be approved by a senior staff member, which in turn speeds up procurement and provides convenience for all levels of staff, including procurement, management and accounts.

Concerned that implementing a P-Card solution simply opens the gate to increased unauthorised spend? A P Card payment mechanism operates in a very controlled environment, where spend and commodity limits are applied.

For more information on the efficiencies delivered by a P-Card Programme, contact Ian Hendry on IanHe@nedbank.co.za.

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