One issue to be considered when introducing procurement cards is which suppliers the card will be used with. In some implementations, the use of cards is limited to contracted suppliers while in others they may be used with any supplier that can accept a credit card. There are reasons for both approaches and the one followed will depend in the attitude and culture of the institution.
The main argument for the use of the procurement card with contracted suppliers only is that the business managed using the card will be under agreed terms and conditions. Further, users will be more likely to use the contracts as it is easier (in terms of staff and paper-processing time) than raising purchase orders and, later, approving invoices of payment. This can help reduce maverick purchasing ie where non-contracted suppliers are used to purchase goods and services where a formal arrangement exists. A further reason for restricting the use of the procurement card to contracted supplier is to reduce the risk of the card being used in an inappropriate manner, for example, using the card for personal purchases.
All suppliers (contracted and non-contracted)
The main argument for using the procurement card with all suppliers is that, as the individual transaction limits are low, there is minimal risk of an inappropriate use of the institution’s funds. The risk of the abuse should be balanced against the costs of dealing with the very high number of suppliers that are, perhaps, only used once or twice in a year. If a procurement card can be used to manage the payment, this negates the need to create, as a minimum, a one-off manual payment or to create a full supplier record on the institution’s financial system.
The central administrator (which is usually a mandatory requirement of the procurement card provider) provides an additional control on contract spend (where there’s no supplier restriction) by regular monitoring of expenditure. This is retrospective however, it enables non-compliance with the institution’s procurement card procedures can be identified and dealt with accordingly
It is up to each individual institution to determine which approach best suits its needs.