Finance tools & tech 5 min read

How do P-cards work? A quick guide for growing businesses

Alfie Marsh

Even as technology advances and companies become more efficient, there are still a few core processes that never seem to improve. And chief among them is spending. 

The vast majority of employees have no easy or safe way to spend money when they need to. And most finance teams waste huge amounts of time chasing those same employees for documents when they do make purchases. 

But one tool has emerged relatively recently to help you avoid these common pitfalls. Purchasing cards, procurement cards, or p-cards - they all mean essentially the same thing - give your teams access to company money in a controlled environment. They can spend easily and quickly, but only with good reason and never over the limits. 

This article gives a brief overview of what these cards are and how they work. And to finish, we’ll see the circumstances in which they make the most sense for companies. 

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What are purchasing cards?

We’ve already shared a more comprehensive guide to p-cards for corporate purchasing. So we’ll touch on this quickly here.

As the name suggests, these cards are there to make the purchasing process easier for businesses. Most employees don’t have their own company card - this is usually too risky and expensive for the average business. 

But the typical alternative is to rely on expense reports, and you already know just how painful this process is. 

So purchasing cards offer a more flexible, secure, and easy-to-use option. They let employees access goods and services as they need them, but with a built-in reviewing and approving flow for managers. 

How do p-cards work?

In essence, purchasing cards work just like any credit or debit card you’ve used before. They have a card number, expiry date, and CVC code (that three-digit number on the back), and work in-store or online. 

And importantly, they’re exactly the same for the merchant accepting payments. They see a valid card in a real person’s name, and payment processing is the same as always. 

But for business owners, they remove the stress that comes with spending and help to install a clear structure. Here’s what that might look like.

Classic purchasing card program

An employee needs a new software tool to work more efficiently. Normally, they would have to ask a manager to buy it on their behalf with the company card. Or the manager would share the card details. Either way, it’s harder than they’d like. 

But with a p-card, the process is simple

  • The employee makes a request through their p-card software. This includes the vendor, price, and reason for purchasing.
  • Their manager gets a notification, and has all the information they need without leaving their desk.
  • The manager approves, and the employee now has access to the funds. 
  • Using their own virtual purchasing card, they make the software transaction online.
  • Once complete, the transaction (and receipt or invoice) go directly to the finance team for their records.
  • The company’s general ledger is updated with the transaction, the receipt, and all the accounting information required.

Crucially, the financial controller can see all of these steps from anywhere - in real time - and always knows who has spent what, why, and when. And the company’s books are up to date.

Which obviously all sounds like a great idea. But to see how powerful this actually is, let’s compare it with the traditional company card process.

P-cards vs corporate credit cards

P-cards and company credit cards have several key differences. Let’s look at each one by one. 

Classic corporate cards

american-express-business

Let’s start with an explanation of the typical company card. This is a physical credit card, linked to the company bank account, in the name of the CEO, office manager, or perhaps a key manager or travelling team member.

Other than the fact that it’s linked to company and not personal funds, it works essentially like your personal credit card:

  • You use the same physical card to purchase online, pay invoices, or pay in-store
  • Any limits are set by the bank, and these are hard to change
  • When you share the card, there’s no easy way to know who made each purchase
  • To balance your ledger, you need to match physical receipts against the card transaction statement at the end of the month
  • The cards are managed by a few select people, and other users have to jump through hoops to use them

These cards were invented as a workaround so that some key team members could avoid filing expense claims or complicated purchase orders. And they haven’t improved much in decades.

If you have a card, you have to stay on top of it. And if you don’t have one, you simply can’t pay.

Procurement cards

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The reason purchasing or procurement cards are better for businesses is that they were designed for businesses. All those administrative and reporting headaches finance teams hate were addressed when p-cards were first dreamed up. 

Of course, all p-card providers will have their own priorities. But here’s what the good ones provide: 

  • Purchasing cards for every user who needs them. You never have to share cards, and always know exactly who paid for what.
  • Unique virtual cards for online spending, and physical cards to use in stores. Virtual cards have unique details for each purchase, so you don’t share one card on hundreds of websites.
  • A simple process that lets employees request funds before spending, for managers to approve or deny. Crucially, these requests are recorded and can be referenced any time. 
  • Flexible, individual limits for each spender. Set global spending rules for specific job descriptions or teams, or even set spending limits and rules for each user. These can be changed in seconds in the app by managers and financial controllers. 
  • Software that gives finance teams a full overview of company spending. Every request, approval, and payment is logged, and users can check their settings any time. 
  • A mobile app to snap and store receipts as you go. No more lost receipts!
  • Accounting automation to keep your general ledger accurate and up to date with minimal effort.

There are plenty more advantages or features we could add to this list, but these are the essentials. And they amount to a clear step up over the company cards most of us have become used to. 

Prepaid or debit cards vs credit

There’s another interesting difference between p-cards and classic company cards. Purchasing cards are almost always either prepaid or debit charge cards. For example, Spendesk offers employee debit cards.

This gives peace of mind to founders and their finance teams. You fund your “wallet,” and all spending on p-cards draws only from the amounts you pre-load. So you don’t have to worry about interest on individual cards, or accidentally forgetting to pay off a bill and incurring fees.

Of course, some companies prefer to operate with credit to extend their working capital. Which is fine too! You can always fund your wallet from a company credit card (you’ll always have one or two of those), but then share your more secure p-cards with the wider team. 

The fact that they’re debit - and not connected to the real bank account - adds an extra layer of confidence for companies, and also for employees who don’t want to make costly mistakes. 

With p-cards, they can’t.

Are p-cards the payment tool for you?

Clearly, we’re confident that purchasing cards are an excellent addition to any company’s internal processes. But to help you decide for yourself, here some of the biggest issues that p-cards help to overcome:

  • An over-reliance on expense reports. Expense claims waste time and effort for the whole company, and aren’t fair on employees. A claim or two occasionally is understandable, but if they’re a core part of your processes, it’s time to upgrade. 
  • A lack of control over company spending. This is a concern for lots of small businesses, and a common response is to reduce spending overall. But you need to spend to succeed, and a lack of control probably comes down to insufficient payment methods.
  • Endless admin for finance teams. Expense reports and company credit cards both lead to a lot of admin. Finance teams have to match payments with credit statements, chase receipts, and coach the whole company on following the rules. But with p-cards, the process is built into the tool, so everyone stays inbounds naturally. 
  • Concerns over your ability to scale. Slow, manual processes don’t scale well. As the company grows, you’ll spend more, but expense claims and company cards will just take longer to manage, and more users will have issues. A proper procurement card process is easy to understand for new hires, and works from anywhere. 

If any of those rings a bell for you, it sounds like p-cards are worth investigating. They’re simply the best option around for smart, safe company spending. 

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Alfie Marsh

Alfie Marsh is Spendesk's Head of US Sales. He helps growing companies create more efficient and effective spending processes, and move away from the traditional hassles of spending at work.