A daily order of fresh fruit for a school, a £100,000 vehicle and 18,000 timesheets don’t appear to have much in common. In fact, they are all procured and paid for by Leeds City Council as it meets the frontline needs of its citizens. England’s second largest metro council is now using Visa purchasing cards to save money on such transaction. Given the current austerity challenge facing the public sector, it’s a welcome boost.
Watch this video that explains Leeds City Council purchasing card journey.
While local government is one particular sector, the success of the Leeds programme illustrates many of the benefits companies in other sectors can also achieve if they switched to purchasing cards.
Leeds’ results tally with those of a 2014 Purchasing Card Benchmark Survey Results report. It highlighted a saving of 77% when using purchasing cards, compared to a standard purchase order process. That equates to a saving of almost $70 per invoice.
The council’s successful adoption of a purchasing card programme formed part of a study Visa’s UK commercial team undertook for the city’s council. It explored the rationale for moving to card payments and how to make it the first resort for frontline staff.
In case you’re not aware; purchasing cards are exactly what they imply; a company charge card that allows goods and services to be procured directly from a supplier. In Leeds’ case these range from wholesale greengrocers, through car part suppliers to staffing agencies.
The Leeds’ study had several interesting results.
Streamlined purchasing experience
Purchasing cards can deliver an improved and faster purchasing experience compared to the traditional purchase order process. People who need to buy items quickly can get hold of them – and that helps keep the business running without the sort of interruption and delays that can be encountered in a traditional PO process. The video highlights how purchasing cards play an important part in the supply of ad hoc goods in sometimes out- of-business-hours circumstances.
Improved reconciliation efficiencies
Card transaction data is captured electronically and can be submitted to a wide variety or ERP systems or issuer accounting systems. In such systems the data can be coded – sometimes automatically, to enable automated import into an organization’s general ledger. In addition Level-3 transactions have the benefit of being able to populate and allocate constituent line item data from an invoice. These transactions can also be used for VAT reclaim purposes in certain European countries, rather than having to retain paper invoices.
Improved supplier relationships
As well as the working capital benefits provided to a buying organisation – sometimes up to 56 days credit),suppliers can benefit from the same by accepting purchasing card payments. A supplier can be paid within just a few days – a marked improvement compared to the time taken for most businesses to process and settle an invoice. Suppliers also benefit from automated allocation of any particular payment from a purchasing card, compared to a lengthy and manual process to reconcile remittances via alternative methods such as bank transfer. One of Leeds’ suppliers wished all his customers paid this way.
Flexible purchasing Controls
They provide an organization with extra confidence in their purchasing programme as purchasing cards can offer controls on where, what and how much can be spent by department or individual. In addition through reporting solutions offered by purchasing card issuers, they provide an organisation with almost real time visibility of transactions being made. Some cards can be restricted to a specific to prevent fraud. This combined with additional controls and purchase approval flows built into e-catalogues or marketplaces can provide an organisation with a previously unknown level of spend control.
There are significant opportunities for savings for any organisation, to simplify processing as well as reducing the cost of purchase and reconciliation.
Whether used by business or a public sector body, purchasing cards can deliver significant savings and benefits to many organizations.