In Part 1, we defined P-Cards and in this post we'll discuss some of the pros and cons of using them.
Pros
- They are perfect for one-off situations in which the vendor will not be utilized again or will be rarely utilized. Setting up a vendor in a system is a whole process involving the Accounting Department as well as Purchasing. Skipping all that and simply ordering with a credit card is much more efficient.
- They can replace PO's for small dollar items, again saving time and money in processing and reductions in checks issued.
- Delays in card billing cycles automatically create longer payment terms allowing the company to profit from the float.
Cons
- Control is always a concern. Multiple people are usually required to complete one PO so that cuts down on misuse. It is easier for a disgruntled or dishonest employee to commit fraud with a P-Card then it would be for the same person to commit fraud by issuing Purchase Orders.
- Require integration with other systems or a separate manual procedure for reconciliation.
For more information including case study examples, see this article.
What pros and cons can you add to the list?
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