Accounting Best Practices, Fifth Edition

3–4. Use Procurement Cards

Consider the number of work steps required to process a payment to a supplier: receiving paperwork, sorting and matching it, entering data into a computer, routing invoices through the organization for approvals, expediting those invoices that have early-payment discounts, creating month-end accruals, setting up files on new suppliers in the computer and the filing system, processing checks, obtaining check signatures, mailing payments, and filing away check copies. Now consider how many purchases are so small that the cost of all these activities exceeds the cost of the purchase. In many instances, one-quarter or more of all payment transactions fall into this category.

The answer to this problem is not to find a more efficient way to process the supplier invoices, but to change the way in which these items or services are purchased. Instead of using a purchase order or check to purchase something, one should instead use a procurement card. A procurement card, also known as a purchasing card, is simply a credit card with a few extra features. The card is issued to those people who make frequent purchases, with instructions to keep on making the same purchases, but to do so with the card. This eliminates the multitude of supplier invoices by consolidating them all into a single monthly credit card statement.

As there is always a risk of having a user purchase ...