In order to continue to provide valuable and insightful content, we decided this year to include articles from other experts in the field on occasion. Today, we have an article from our first “Payables Guest” – Mark Becker, Program Optimization Manager at U.S. Bank Corporate Payment Systems.
Most organizations have specific reasons for starting purchasing and travel card programs. It may be to establish better control over spending, to speed up the payment process, or to cut invoice processing costs by eliminating paper.
Whatever the reason, time and resources typically pour into a program’s launch to make sure it comes off without a hitch. Once up and running, though, many programs go on auto pilot. They do what they are set up to do, nothing less, and too often, nothing more either.That is, until something like the economic downturn of 2008 comes along to jolt the balance sheet. Budgets suddenly get squeezed, costs get greater scrutiny and settled questions get a fresh review. “Good enough” isn’t good enough anymore. And we ask ourselves: is our card program giving us our money’s worth?
Here’s good news: every card program, regardless of size, holds value that hasn’t been tapped into yet. And here’s better news: tapping into that value does not have to mean wholesale change or expensive IT investment. A few simple tweaks can significantly boost rebates, cut costs and enhance operational efficiency.
1. Conducting an accounts payable analysis.
The first step (often completed by the card provider) provides a benchmark with which to compare the performance of your card program against the industry average or against the top performing companies in your industry. It identifies inefficiencies and opportunities to consider. It might uncover instances where you are paying a single supplier both with a commercial card and a check. Or perhaps it will identify a common card spending category and associated suppliers you’re currently handling via check.
2. Use the results of that exercise to expand your program within existing policies.
Armed with these findings, the next move is to address the opportunities uncovered by expanding within your existing policies or tweaking those policies in minor ways that can lead to major benefits. This could mean expanding transaction limits to allow for larger expenditures on the card, broadening card distribution, establishing ghost accounts to pay suppliers not included in the initial program, or implementing other simple tweaks that can yield big savings and bigger revenue share opportunities.
3. Implement ePayables programs with all accepting suppliers.
This is often one of the most overlooked optimization steps, simply make sure all suppliers who currently accept cards for payments from your company are in fact being paid this way for all of the business you do with them. This can be accomplished through a program optimization report that shows all of the payment methods used with a supplier along with transaction detail for each of these methods.
4. Measure your progress.
After steps one through three are complete, it’s a matter of measuring your progress, identifying your successes, and taking on more as your capacity allows.
5. Do it again and again.
Once you’ve completed your first “program optimization” effort, step five is to use the benefits gained to drive additional accounts payable analyses. These additional analyses can drive changes in policies and procedures to capture additional spend and efficiency, identify other commercial card product opportunities (e.g., virtual cards, managed spend cards, etc.), and even develop a complete payment strategy that employs multiple payment methods, including electronic invoice processing and payment and employing ACH in a way that maximizes the benefit of each payment you make.
One of the “bonus” benefits shared by clients who undertake these steps is the improved visibility they gain into their overall spending. Among other things, clients discover ways to use a program’s reporting data to make more strategic sourcing decisions, including better measurement of contract compliance and identification of key spending categories used to develop new consolidated contracts with improved pricing.
Optimizing a card program by following these five steps costs little beyond the investment of time, but it pays off in lower costs, higher rebates and improved efficiency. It’s just a matter of taking the first step.
