Small Business Resource Center
Making Payments: Purchasing or Credit Card?
Everyone groans when they’re in the checkout line at the grocery store and the person in front of them pulls out her checkbook to pay. Why? Because writing a check takes longer and is more inefficient than using a debit or credit card.
The same is true for a business’s accounts payable department. It is more time intensive—and therefore more costly—to issue a check or purchase order for goods and services than using a card. Many companies have realized they can help streamline their cash flow by paying with credit cards.
Commercial credit cards are a great payment method for most businesses, but some may need even more card-level control and flexibility than a standard card can offer. That’s where corporate purchasing cards come into play.
Corporate purchasing cards look and act just like credit cards, but they’re more than that—they’re a payment tool. These cards provide enhanced internal controls and reporting that come in handy for businesses that spend a lot each year, regularly purchase large-ticket items or have a lot of lower ticket travel and entertainment expenses. Many states and large corporations have established purchasing card programs, but smaller businesses may benefit too.
The business’s purchasing card administrator can turn cards on or off for employees easily and can set spending limits per employee. Cards can also be designated for certain purposes, such as specific merchant type (e.g. office supply store).
These cards are particularly helpful for businesses with fleets. Fleet cards can help companies manage mileage tracking by vehicle, driver fuel utilization and vehicle maintenance recordkeeping.
Administrators can also receive email notifications in fraud scenarios to help control against abuse and misuse.
Before you implement a purchasing card program, you’ll want to:
- Assess your current procurement process to get an idea of the possible cost savings.
- Make sure your vendors would accept payment by card—many appreciate receiving payment more quickly.
- Take into account your technology and current controls.
- Evaluate the support that the purchasing card program provides, including help with implementation, training and assistance for individual cardholders.
Paying with a card is much more efficient than writing a check—you just have to decide which card is best for your business.
David Sturdivant can be reached at 615-744-3726 or [email protected].