Reengineering Your Purchasing Card Program.

• Author: Kopp, Stephen

Concerns with fraud and abuse have kept many companies from aggressively building purchasing card efforts. But research shows that those concerns are overblown, and that greater usage and fewer restrictions can boost savings.

Most companies think their purchasing card programs are working. But the typical program is capturing only about 30 percent of its potential savings. Why? Studies identify three main culprits: companies are putting the cards in too few hands, imposing too many controls and restricting their use to too few products, services and vendors,

The initial impetus for purchasing card programs came from the recognition that small-dollar orders do not merit the same oversight as large-dollar orders. However, when companies first began instituting purchasing card programs, concerns about fraud and abuse led them to restrict cards to trusted employees, to limit purchases to specific categories of products and services from approved vendors, and to apply layers of controls.

Companies invested considerable time and money in getting their programs running. They had to sell the concept to management, employees and unions, then train everyone how to use the cards correctly. In most companies, someone had to administer the program; in some cases, that entailed a full-time staff. There were also costs for computer programming and the development of purchasing card Web sites. All in all, instituting the programs was a lot of work, and once they began generating savings, there was little incentive to rethink them.

Now, a number of pioneering companies have eliminated many of the traditional limitations on purchasing card usage and greatly increased their savings. They've found that their initial fears of fraud and abuse were exaggerated. Their success provides an argument for other companies to revisit their programs and reengineer areas where money now being lost can be recaptured. Here are 10 suggestions that may provide real opportunities:

1. Put Cards in More Hands -- Studies have found a direct correlation between the number of employees with cards and the volume of purchases handled by -- and savings generated from -- purchasing cards, Companies that expanded programs, including even hourly workers, report that fears of widespread fraud and abuse proved unfounded.

2. Increase Dollar Limits -- Seventy percent of most company transactions are less that $1,000. The higher the dollar limit, the greater the percentage of transactions that...