Are you a hardware-centric, procurement-heavy company looking for ways to improve your spending process? One solution could be providing your trusted employees with a corporate virtual card, also known as a purchasing card or P card. This card allows employees to make online purchases while providing automatic tracking to ensure expenses stay within budget.
In this blog post, we will explore the benefits of virtual purchasing cards, including increased security, better spending visibility, and empowered employees. We will also discuss how integrating virtual cards into a purchasing platform like ControlHub can streamline the purchasing process and improve decision-making. Read on to learn more about how virtual purchasing cards can benefit your company.
What is a P-card?
If you are thinking, “What are P cards,” it’s actually a simple concept. A purchase card is simply a business virtual card assigned to an employee that enables them to pay for items they need to do their jobs, complete projects, and drive your company’s success.
With the simplicity, flexibility, and automatic tracking that purchasing cards for business offer, it’s difficult to understand why many companies still rely heavily on corporate credit cards to fund employee purchases.
What is a virtual card?
If you have ever received a prepaid gift card for a special occasion or holiday, you are already familiar with the concept. A virtual purchase card is typically pre-loaded with a specific amount of money, and employee purchases are deducted from the card’s balance in real time.
Virtual cards only exist online; however, they involve the same data as a physical debit or credit card, such as a standard card number, expiration date, and 3-digit CVV.
Single-use virtual cards are available for companies that want the greatest control over their employees’ spending power. For some employees - those who have recurring expenses and have shown responsible virtual card use - a card with a monthly replenishment of available funds would streamline the process for everyone involved.
Virtual cards were introduced into the market to reduce fraud risks involved in online shopping. That’s one reason their popularity has soared - in 2021, analysts estimated total virtual card usage at about $315 billion.
P card vs Credit Card?
Credit cards allow users to make partial payments and revolve balances, on the other hand purchasing cards, or P-cards, requireyou to fully pay your balance each month. Their statements generally include more information than credit card statements and often eliminate the need to retain invoices.
How do virtual purchasing cards work?
Employees can shop online as they would for a personal purchase, but when they arrive on the checkout page, they use their assigned virtual card number, expiration, and CVV instead of entering information from a physical credit or debit card.
Virtual cards improve purchasing workflows by streamlining:
- Subscriptions and renewals on SaaS agreements
- Business expenses, such as travel and hotel costs
- One-off expenses, such as hardware parts, electronic components, office supplies etc
Any time an employee would use a physical card for a purchase, they can take advantage of the benefits of a virtual card instead.
Is managing financial security important to you?
MacKeeper CIO Alex Maklakov says that online purchases are turning traditional corporate cards into a high security risk. When employees are using corporate cards to purchase everything from plane tickets, to car rentals, to SaaS, to office supplies, they’re potentially exposing corporate credit card information to thieves and black market resellers - people who make money selling your credit card details to others.
The security risk isn’t just limited to hackers, though. Corporate cards are commonly passed around the office without adequate tracking or accountability. Some employees even “share” cards by writing the data on a sticky note - hardly the pinnacle of security.
Disposable virtual card numbers, though, can enhance security even as retailer data breaches grow in velocity and scope. If a virtual card’s information is compromised, you can just cancel that specific card without the hassle of closing the account and establishing another.
Want better spending visibility?
Tracking spending can be difficult enough for a solopreneur or microbusiness, but it can become a nightmare as an organization grows. As more employees, contractors, and freelancers come on board, more transactions and more hands can complicate the process of keeping track of where your company’s money is going.
If you have 50 employees and 5 corporate cards, for example, it’s only a matter of time before it stops being clear who made and authorized each purchase. With no accountability, employee spending can quickly get out of control.
The best virtual credit cards eliminate the hassle of sorting through receipts and credit card statements trying to determine who made which purchases.
Empowered employees do the best work.
Increased fraud protection and greater spending transparency are excellent benefits for your organization, but how do your employees benefit from virtual purchasing cards?
In short, they are empowered. When an employee identifies a need for a purchase - whether for a product or a service - and the cost is within their pre-loaded virtual card balance, they don’t have to wait around for approvals.
That means they can order and receive the items they need quickly, without discovering that they won’t receive their items for weeks because the purchasing manager is vacationing in Tahiti.
When they can do that, they feel supported. Workers who feel that their companies are truly “setting them up for success,” are more inspired and committed to deliver exceptional results.
Also, switching to a virtual card environment allows you to have as many virtual cards as you need. While a typical credit card provider might limit the number of cards you can have, you won’t have this restriction with virtual cards.
Virtual cards can be integrated with your company’s purchasing platform.
When your company relies on corporate cards for purchasing, reconciliation involves sifting through credit card statements and purchase receipts, which is messy, tedious, and prone to human error.
In a virtual card environment, though, you can gain impressive insights into - and control over - your company’s spending. You can have a crystal-clear understanding of who is making purchases, what they’re buying, and how much they’re spending. You can even decide which employees should have the most purchasing power, and which purchases require a purchasing manager’s approval.
How?
By integrating virtual cards into a procurement software like ControlHub. This sophisticated but intuitive platform takes the messiness, inconsistencies, and hassles out of business purchasing, so that business owners and employees have exactly what they need to thrive.
Employees can be granted virtual card access on a one-time or recurring basis, depending on their specific needs. As long as purchases total less than the pre-loaded balance, your authorized team members can immediately order what they need and bypass the traditional approval process.
Controlhub also provides sophisticated tracking for 100% accountability and error-free reporting. All the information you need to analyze purchases and approvals is right at your fingertips - not at the bottom of someone’s file cabinet.
You can set up administrative and approval roles quickly, so that decision makers can quickly evaluate purchases that do not fall under the automatic approval rules you have set, or that would require a greater balance than is available on an employee’s virtual P card.
Combining virtual expense cards with a sophisticated purchasing platform like ControlHub, you can give employees the purchasing power they need, while eliminating costly errors and rogue spending.
Best of all, you can do it without adding another employee to your accounting team. Every virtual card’s activity is available at a glance from your dashboard, and you can set purchasing limits, grant and remove permissions, and access individual, team, and aggregate spending reports in seconds.
Try ControlHub for yourself today to see if this time- and cost-saving solution is right for you.
What is the expense recognition principle?
The expense recognition principle, a core guideline of accrual accounting, dictates that expenses should be recognized in the period they are incurred, regardless of when the cash payments are made. This principle ensures that financial statements accurately reflect a company's financial performance by matching expenses with the revenues they generate. For example, if a company incurs costs to produce goods sold in a specific period, those costs are recorded as expenses in the same period the related revenues are recognized, providing a clearer picture of the company's profitability during that timeframe.
What's the Difference Between Purchase Requisition and Purchase Order?
In the buying process, purchase requisitions and purchase orders are steps that help businesses communicate what they need and how they plan to pay for it. A purchase requisition is an internal request. It's when someone within the company asks for the green light to buy something needed, detailing what, why, and sometimes where to buy it from. It's about getting approval before making a purchase.
A purchase order, on the other hand, is an external document sent to a vendor. It confirms the business wants to buy something, detailing the items, amounts, prices, and delivery info. It's a formal agreement to buy, laying out the terms of the purchase.
Learnings
Providing your employees with a corporate virtual card, or purchasing card (P card), could be a productive step for hardware-centric, procurement-heavy startups looking to streamline their spending process. A P card provides employees with the flexibility to purchase online while also providing employers with automatic tracking to ensure expenses stay within budget. The benefits of virtual purchasing cards include increased security, better spending visibility, and empowered employees.
Virtual cards, which are pre-loaded with a specific amount of money, are typically used for online purchases and deduct employee expenses in real time. Single-use virtual cards offer the greatest control over employee spending, while cards with monthly replenishment of available funds streamline the purchasing process. The popularity of virtual cards has soared, with analysts estimating total virtual card usage at about $315 billion in 2021.
Corporate cards, on the other hand, pose a security risk to companies as they expose corporate credit card information to thieves and black market resellers, who sell credit card details to others. Corporate cards are commonly passed around the office without adequate tracking or accountability, and some employees even share cards by writing down the data on a sticky note.
Virtual cards eliminate the hassle of sorting through receipts and credit card statements to determine who made which purchases. The best virtual credit cards provide a crystal-clear understanding of who is making purchases, what they’re buying, and how much they’re spending. Virtual cards can be integrated with a purchasing platform like ControlHub, which offers sophisticated tracking for 100% accountability and error-free reporting.
Empowering employees with virtual purchasing cards can inspire and motivate them to deliver exceptional results. Employees can order and receive the items they need quickly, without having to wait for approvals, and they feel supported by their company. Virtual cards can also be granted to as many employees as needed, unlike traditional credit cards that come with a limit.
Integrating virtual expense cards with a sophisticated purchasing platform like ControlHub streamlines the purchasing process and eliminates costly errors and rogue spending. Decision-makers can quickly evaluate purchases that don't fall under the automatic approval rules that have been set, or that require a greater balance than is available on an employee’s virtual P card. Virtual cards provide the purchasing power employees need while providing employers with the control and visibility they require.
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