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Visa Procure-to-Pay Best Practices
1
Introduction
The Visa Procure-to-Pay Best Practices study indicates that leading companies have
adopted best practices that incorporate six key findings:
• Proactive, ongoing senior management sponsorship for Procure-to-Pay initiatives
• Collaboration to ensure communication and enforcement of Procure-to-Pay
policies and procedures
• Progressive migration to automating the entire Procure-to-Pay information
technology platform
• Aggressive Strategic Sourcing focus to continuously enhance vendor relations
• Comprehensive data aggregation and reporting to support management and
enable continuous improvement of their Procure-to-Pay function
• Commercial card objectives alignment with a company’s overall
Procure-to-Pay strategy
Visa and Deloitte developed 60 best practices in keeping with these findings to help
large and mid-size companies attain greater work efficiencies and cost savings in their
Procure-to-Pay processes.
The average study participant that has adopted all of these best practices saves an
average $1.76 million to $8.3 million in annual, indirect transaction processing costs
(does not include potential cost savings associated with vendor discounts or front-end
processing efficiencies).
These findings represent a continuation in the evolution and sophistication of
Procure-to-Pay Best Practices that were identified in the 1998 Visa Corporate Card and
Purchasing Card Best Practices Study.
SECTION I
Executive Summary
StudyOverview
Study Overview
As part of an ongoing effort to understand and improve the processes of business,
Visa Commercial Solutions commissioned Deloitte to conduct a comprehensive study of
procurement and payment best practices for companies nationwide.
Scope
Visa’s Procure-to-Pay Best Practices encompass the entire Procure-to-Pay
function, including Procure-to-Pay foundation, commercial card management, and the
end-to-end Procure-to-Pay process, from sourcing to back-end reporting. Travel and
Entertainment is included in this study as a separate section and falls under the overall
Procure-to-Pay process section.
Procure-to-Pay Study Scope Best Practices
Section I
Executive Summary
2
FoundationStrategy
Organization
Technology
Commercial
Card
ProcessPurchasing
T&E
Purchasing Card
Travel and Entertainment (T&E) Card
Fleet Card
Sourcing ReportingOrderPlacement
Payment &Settlement
Recon-ciliation
Control and Audit
3
Study Overview
Approach
Deloitte identified 52 large corporate and mid-size companies with Procure-to-Pay
practices. The selection criteria ensured distribution among revenue size, geography,
industry, Issuer, and company culture.
The number of study participants and their corresponding industry affiliations are
summarized as follows:
Communications 1 1
Consumer Business 6 7
Energy 2 0
Financial Services 4 3
Health Care 1 4
Manufacturing 6 11
Professional Services 2 4
INDUSTRY COMPANY
Large Market Middle Market
Total Revenues
of Surveyed Companies
50%Greater than
$1 billion
30%Less than
$500 million
20%$500 millionto $1 billion
67%AmericanExpress
29%Visa
4%MasterCard
24%AmericanExpress
43%Visa
33%MasterCard
Type of T&E Cards Used
by Surveyed Companies
Type of Purchasing Cards Used
by Surveyed Companies
StudyOverview
Identification of Best Practices
Deloitte identified 52 large corporate and mid-size companies considered to
have leading Procure-to-Pay practices. After distributing a detailed questionnaire to
all companies, they conducted 20 on-site interviews with select participants.
The questionnaire gathered quantitative and qualitative information, including:
• Understanding best practices, key drivers, enablers, challenges, anecdotal
information, user satisfaction ratings, service-level quality
• Macro-level statistics — dollar spend, average transaction on card, average dollar
size of transaction, vendor-negotiated discount rates
• Micro-level statistic — indirect activity cost and time (excluding overhead)
• IT/data requirements
Participants included procurement, Accounts Payable (A/P), travel managers,
buyers, commercial card administrators, and representative users to gain greater
insight into companies’ specific Procure-to-Pay functions and best practices.
This data-gathering effort led to the identification of 60 leading-edge practices
across four categories: Foundation, Commercial Card Management, Procure-to-Pay
Process, and Travel and Entertainment. Best practices for each category follow:
Foundation Best Practices
Section I
Executive Summary
4
FoundationStrategy
Organization
Technology
1. Articulate a Procure-to-Pay strategy with a short- and long-term vision
2. Proactively obtain ongoing senior management and business unit support
by sharing information
3. Conduct benchmarking to gain additional perspectives and strategic focus
4. Strategically position procurement and Accounts Payable in the organization
5. Ensure center-led management and control of critical Procure-to-Pay functions
6. Develop enterprise-wide procurement policies and procedures
7. Develop an internal communication plan to convey procurement policies,
procedures, and successes
8. Develop a comprehensive change management discipline
9. Develop an overall Procure-to-Pay technology strategy
10. Establish a business case for each technology investment and track your performance
relative to your business case objectives
11. Maximize automation of an end-to-end technology solution
12. Implement and leverage an e-Procurement solution
5
StudyOverview
Commercial Card Best Practices
CommercialCard
Purchasing Card
Travel and Entertainment (T&E) Card
Fleet Card
1. Determine commercial card product(s) based on needs of the organization
2. Source, select, and implement a Visa Purchasing card program
3. Source, select, and implement a Visa Commercial One card program
4. Align commercial card program objectives with your overall Procure-to-Pay strategy
5. Source, select, and implement a Visa Fleet card program
6. Obtain active senior management promotion of and involvement in the commercial card program
7. Establish center-led management and administration of the commercial card program
8. Develop and disseminate enterprise-wide commercial card policies and procedures
9. Incorporate a comprehensive commercial card training program
10. Establish Visa Purchasing/Visa Commercial One card issuance criteria for optimal distribution
to employees
11. Mandate and enforce use of Visa Purchasing/Visa Commercial One card for all eligible purchases
12. Maximize use of Visa Purchasing/Visa Commercial One card virtual accounts
13. Incorporate commercial cards into business continuity planning
14. Establish parameters for eligible Visa Purchasing/Visa Commercial One card transactions leveraging
appropriate controls
15. Investigate Visa Purchasing/Visa Commercial One card expansion to non-typical spend categories
to maximize benefits achieved
16. Share Visa Commercial One card performance and savings reports with senior management to
promote appropriate use of the card
17. Use Issuer or card provider analytical tools to review and improve your commercial card
program performance
18. Use Visa Fleet cards to track expenditures through both external and internal sources
Section I
Executive Summary
6
Study Overview
Procure-to-Pay Process Best Practices
1. Optimize number of suppliers by selecting and monitoring vendors through a formal vendor
management program
2. Incorporate Visa Purchasing/Visa Commercial One card acceptance into preferred vendor
contract terms
3. Utilize e-Sourcing tools such as e-RFX and e-Auctions to source suppliers and gain savings
on one-off items
4. Limit the number of approvals required to place an order
5. Minimize the use of paper purchase orders for all Visa Purchasing card-eligible purchases
6. Integrate the Visa Purchasing/Visa Commercial One card into the e-Procurement system as a
method of payment
7. When commercial cards are not used, employ three-way matching to reduce the number of
approvals required prior to payment
8. Replace manual check payments with electronic payments
9. Use the Visa Purchasing/Visa Commercial One card to pay invoices received in Accounts Payable
10. Develop solutions that support the reporting and payment of sales and use taxes
11. Work with your Issuer to receive commercial card statements electronically with cost centers
and G/L codes pre-defined to facilitate end-user reconciliation
12. Outsource high-volume, specialized payment processes
13. Determine control strategy
14. Monitor procurement performance via a scorecard that includes cost, quality, and time components
15. Gain a comprehensive view of spend by integrating data from multiple sources
e.g., e-Procurement, travel, ERP, Visa Purchasing cards
16. Leverage SIC and MCC codes for categorization of spend and purchasing data
ProcessPurchasing
T&E
Sourcing ReportingOrderPlacement
Payment &Settlement
Recon-ciliation
Control and Audit
7
StudyOverview
Travel and Entertainment Card Best Practices
1. Institute a centralized travel management function
2. Develop and distribute company-wide travel policies
3. Coordinate event planning through travel management function
4. Source, select, and implement a T&E card program
5. Establish T&E/Visa Commercial One card issuance criteria for optimal distribution to business travelers
6. Mandate and enforce use of the T&E/Visa Commercial One card for all eligible purchases
7. Maximize use of T&E/Visa Commercial One card virtual accounts
8. Optimize the number of suppliers by selecting and monitoring vendors through a formal
vendor management program
9. Implement in-house Web-based booking tool
10. Establish well-defined expense report audit parameters
11. Standardize and pre-populate T&E/Visa Commercial One card expense reporting
12. Standardize and automate data interfaces between expense management and accounting applications
13. Capture, report, and analyze comprehensive, company-wide travel data
14. Implement post-trip exception reporting and distribute lost savings report
ProcessPurchasing
T&E
Sourcing ReportingOrderPlacement
Payment &Settlement
Recon-ciliation
Control and Audit
Summary of Key Findings
Section I
Executive Summary
8
Market and Industry Applicability
The study findings indicate that the best practices are equally applicable for large
corporate and mid-size companies. Both large and mid-size companies have similar
goals and challenges in obtaining a leading Procure-to-Pay function. Differences among
companies exist in scale of implementation, ability to dedicate resources, and level of
technology implementation. How companies handle the implementation activities
depends on their size, organizational structure, and company culture.
The study further indicates that companies in the manufacturing industry have
been leaders in the adoption and use of innovative Procure-to-Pay best practices. The
necessary disciplines of supply chain management, sourcing, and efficient procurement
of goods and services are fundamental to their existence. Financial services and
consumer business companies are “fast-followers” in the adoption of best practices, as
they integrate manufacturing disciplines into their internal culture. Mid-size companies
can be viewed as followers of large corporate companies in the adoption of best
practices as solutions are proven to succeed and are scaled and priced appropriately.
Six Key Areas
The 60 best practices detailed in this study provide practical ways for companies to
achieve an optimized Procure-to-Pay function by addressing six key areas:
1. Proactive, ongoing senior management sponsorship for Procure-to-Pay initiatives
A consistent critical success factor from the 1998 study to the 2002 study
continues to be the need to obtain senior executive sponsorship for Procure-to-Pay
initiatives. For large corporate sponsorship, this could include business unit leaders
and executive management and at mid-size companies, sponsorship could be a direct
line to the CEO/CFO.
Achieving senior management sponsorship is necessary for receiving endorsement
of existing initiatives, encouraging compliance with policies, and increasing awareness
of procurement initiatives throughout the organization. In recent years, leading-edge
companies have become more innovative in achieving sponsorship by using relevant
and realistic ROI measures, sharing information, and actively communicating goals and
successes to senior sponsors and throughout the company.
Summary of Key Findings
Summary ofKey Findings
9
Senior management interest in the Procure-to-Pay process has increased
significantly due to economic conditions and an increased focus on cost containment, as
well as recent focus on employee security (in regards to travel).
2. Collaboration to ensure communication and enforcement of Procure-to-Pay policies and procedures
In recent years, procurement and A/P managers have come to view business units
as internal customers. This is a progression from the siloed and often adversarial
approach of the past, which yielded sporadic compliance to policies and procedures from
the business units due to a lack of understanding of the benefits resulting from a
uniform approach and consistent compliance.
Although compliance with policies and procedures continues to be a challenge, leading
companies are addressing the challenge by encouraging business unit partnership. Shared
objectives and performances measures have led to more formalized ties between business
units, resulting in increased compliance with policies and a reduced overall cost structure.
3. Progressive migration to automating the entire Procure-to-Pay information technology platform
While survey participants in previous studies conceptually understood and strived
for an automated Procure-to-Pay process, companies traditionally made “one-off”
decisions rather than focusing on a plan to implement an entire solution. In recent
years, e-Procurement technologies were implemented without the support of a realistic
business case and a plan for achievable return on investment (ROI). More recently,
leading companies have taken a more pragmatic approach to automation, focusing on
the implications to the entire end-to-end platform. To support information technology (IT)
initiatives, they set realistic and achievable ROI objectives. In addition, leading
companies recognize that the benefits to automation can only be achieved by
incorporating process changes as part of the solution. These companies employ
change management techniques to achieve user support and consequently optimize
the benefits associated with improved processes.
Mid-size companies are no longer excluded from receiving the benefits of increased
automation as IT solution providers are increasingly targeting mid-size companies by
offering cost-effective, focused, packaged solutions or innovative hosting models.
Section I
Executive Summary
10
Summary of Key Findings
4. Aggressive Strategic Sourcing focus to continuously enhance vendor relations
This is an increasingly important strategic priority for leading companies and a
powerful tool in cost-reduction efforts. While companies have traditionally attempted to
achieve discounts with vendors, they are learning that a Strategic Sourcing discipline is
the most value-added procurement activity. A 2002 Deloitte Research study on Strategic
Cost Reduction indicates a potential cost savings of 15 to 25 percent through a focused
Strategic Sourcing initiative. Strategic Sourcing offers the following benefits:
• Rationalizing the vendor base
• Maintaining stronger oversight of relationships with vendors
• Using the data to understand market share
• Pushing vendors towards deeper discounts and better service
Companies have used different approaches to Strategic Sourcing and vendor
management. Some companies are collaborative in their approach, while others
stipulate implementation of their standards. In either case, results have clearly shown
that focused supplier sourcing and management lead to significant bottom-line savings.
Leading companies continue to dedicate resources to this discipline, with a
noticeable change in strategy towards multi-functional negotiating teams (e.g.,
procurement, A/P, IT, and other key stakeholders) that focus on a corporate-wide view
of spend. Formal tools have been developed to assess vendor and commodity spend,
establish achievable sourcing targets, and support and monitor sourcing initiatives.
11
Summary of Key Findings
5. Comprehensive data aggregation and reporting to support management and enable continuous improvement of their Procure-to-Pay function
Leading companies understand that data aggregation and reporting is critical to
accomplishing any key activity. They also understand that reporting is not a function of
the quantity of reports, but a function of the ability to integrate and analyze their data.
These companies accurately define required reports, and use them to share information
across the business and to track performance to goals.
The sophistication of in-house systems (e.g., ERP, e-Procurement, reporting tools
offered by Issuers) has improved to allow companies to obtain greater spend detail from
internal systems. Integrating data from multiple sources has provided leading companies
with a clearer understanding of the reports needed to support procurement goals.
However, large and mid-size companies still rely on a significant amount of customization
to reporting systems and make extensive use of ad-hoc reporting to provide necessary
information.
6. Commercial card objective alignment with company’s overall Procure-to-Pay strategy
The study found that commercial card program success factors include:
• Integration of the commercial card as a payment vehicle into the overall
Procure-to-Pay strategy
• Comprehensive training programs that help employees understand the benefits
realized by the corporation through use of the commercial card
• Enforcement, consistent with the corporate culture, of the commercial card for
eligible commodities and purchases
• Development of issuance criteria that target employees who have reason to use
the commercial card rather than employing a broad distribution process that
would include employees who do not have a need for the card
Section I
Executive Summary
12
Summary ofKey Findings
Emerging Procure-to-Pay Trends
The study also identified organizationally focused Procure-to-Pay strategic trends.
Today, corporations are working to coordinate A/P, procurement, and Strategic Sourcing
activities and are modifying their processes to improve information sharing. Center-led
management of these disciplines supports optimal vendor selection, negotiation, and
management.
The 52 companies that participated in this study provided detailed insights into their
current and future Procure-to-Pay goals. Study responses highlighted three emerging
Procure-to-Pay trends.
e-Auctions
e-Auction applications, if not already in use, will soon be deployed by a larger
percentage of the study’s survey participants. Seventeen percent of study participants
will implement an e-Auction solution in the next two years.
While e-Auctions will continue to play a role in procuring indirect and direct
commodities, companies have not developed Procure-to-Pay strategies that optimize use
of the commercial card as an e-Auction settlement option.
Benchmarking
Leading companies have created a group of “benchmarking partners.” This group
often includes companies outside of their industry as well as companies with which they
may have a complementary relationship, e.g., suppliers or vendors. Some companies will
use third-party companies to conduct “blind” benchmarking studies against their
immediate competitors. Additionally, leading companies participate in external
benchmarking studies, e.g., Forrester, IDC, Gartner, or ISM, on a periodic basis.
13
Summary ofKey Findings
Internet Applications for Booking and Reporting Travel and Entertainment
Use of the Internet for booking travel and generating expense reports continues to
increase. Companies report anticipated process savings of 80 percent, as well as a
significant reduction in data entry errors. Study statistics indicate:
• 40 percent of companies surveyed have already implemented Web-based booking;
another 10 percent plan to in the next two years
• 26 percent of companies surveyed have implemented automated expense
reporting
• 36 percent of companies plan to implement an automated expense reporting
application in the next two years
Benefits from Implementation
Study participants that have adopted these key practices have achieved significant
quantitative and qualitative benefits, including the following:
• 80 percent of suppliers are under contract
• 90 percent of all spend with preferred vendors
• 75 percent of office supplies are purchased through e-Procurement
• 75 percent of e-Procurement orders are paid using the Visa Purchasing card
• 71 percent of payments are automated
• 98 percent compliance with audit criteria
• 90 percent of all trips booked through an in-house Web tool
• 29 percent discount on negotiated airline rates
The table below reflects the performance, challenges, and benefits of companies
based on their adoption of the six key best practices:
Section I
Executive Summary
14
Summary ofKey Findings
Leading Company Key Practices
Proactive, Ongoing Senior Sponsorship
Level of Incorporation
Low-Adopter
Little or no senior sponsorship
No clear line of communication between procurement, A/P, and senior management
Inability to advance Procure-to-Pay initiatives
Common
Some senior sponsorship of key procurement initiatives
Infrequent communication (e.g., annually) with senior management
Limited advancement of Procure-to-Pay initiatives
Leading
Senior sponsorship of many procurement initiatives
Periodic upward reporting to senior management
Frequent communication between procurement, A/P, and business units
Advanced
Visible senior sponsorship of the overall Procure-to-Pay strategy and all related initiatives
Procurement and A/P department heads report directly to senior management
Quarterly progress review of goals and objectives
15
Summary ofKey Findings
Leading Company Key Practices
Collaboration,Communication, and Enforcement ofPolicies & Procedures
Level of Incorporation
Low-Adopter
No policies and procedures and/or outdated or inactive policies and procedures
Procurement and A/P are siloed and do not cooperate
Departments are viewed as cost centers vs. business partners
Poor compliance with policies and procedures
Common
Policies and procedures exist with little executive support and visibility
Infrequent communication of changes to policy
Compliance is not actively monitored or enforced
Leading
Effective policies and procedures developed
Readily accessible by users
Annual review, modification, and communication of changes
Consistent feedback loop
Reports produced to track compliance
Some collaboration between procurement and A/P
Advanced
Senior sponsorship of policy and procedure development
Frequent communication across functions
Procurement and A/P work collaboratively with business units
Sharing of lost opportunity and cost avoidance informationwith business units
Alignment of performance objectives
Potential alignment of compensation and bonus to achievement of goals and objectives
Section I
Executive Summary
16
Summary ofKey Findings
Leading Company Key Practices
Progressive Migration to IT Automation
Level of Incorporation
Low-Adopter
Manual data entry, few or no interfaces exist between legacy systems
Highly paper-intensive process
Common
Use of commercial cards to eliminate paper
Some adoption of integrated Accounts Receivable, General Ledger, and A/P
Mixed success in achieving automation
Little process reengineering and change management to support initiatives
Leading
ERP adoption with integrated financials and e-Procurement
Business case to support new business automation initiatives
Value of change management is recognized and used
Increased automation of invoice payment
Advanced
End-to-end Procure-to-Pay automation, including e-Auctions, e-RFX, EIPP
Detailed and achievable ROI measures used to prioritizefuture initiatives
Integration of virtual accounts to support e-Procurement
Outsourcing of platform and maintenance explored as viable option
Dedicated change management resources to support all initiatives
17
Summary ofKey Findings
Leading Company Key Practices
Aggressive StrategicSourcing Focus
Level of Incorporation
Low-Adopter
No Strategic Sourcing effort
Buyers focus on processing purchase orders instead of sourcing
Procurement does not formally manage spend through preferred vendor lists, vendor scorecards, or department metrics
Multiple discounts negotiated for one vendor
Common
Decentralized and informal sourcing policies
Negotiation with some key vendors without centrally supported effort
Negotiated discounts poorly communicated to buyers
Frequent occurrences of multiple discounts per vendor
Leading
Focused Strategic Sourcing effort
Initial attempts to rationalize and reduce supplier base
Central, commodity-based approach to sourcing
Achievement and communication of significant discounts for key commodities
Advanced
Dedicated Strategic Sourcing function with integrated team
Significant reduction in rationalization of vendor base
Significant discounts negotiated enterprise-wide
Annual review and scorecard measurement of vendor performance and communication of findings with vendor and business unit sponsor
Section I
Executive Summary
18
Summary ofKey Findings
Leading Company Key Practices
Comprehensive Data Aggregation and Reporting
Level of Incorporation
Low-Adopter
Difficulty capturing appropriate data from legacy systems
Data only captured from internal system
Use of rudimentary reporting templates
Use of vendor data is minimal or non-existent
Common
Some use of reporting system
Manual aggregation of data from multiple internal and external data sources
Inconsistent ability to capture and interpret relevant data for reporting purposes
Leading
Significant use of packaged or in-house reporting system
Significant leverage of data from integrated application suite
Well-defined, central data repository for aggregation of datafrom internal and external sources
Ability to define and create reports needed to support the Procure-to-Pay function
Advanced
Central, desktop, self-service reporting
Ability to integrate and analyze data from multiple sources
Information is current and accurate and provides executive-and managerial-level reporting
Ability to integrate data from new sources as they are implemented (e.g., e-Auction, EIPP)
19
Summary ofKey Findings
Leading Company Key Practices
Commercial CardObjectives Alignment with a Company’s Overall Procure-to-PayStrategy
Level of Incorporation
Low-Adopter
Nominal Procure-to-Pay strategy
Indiscriminate distribution of cards
No periodic assessment of card use or spend limits
Lack of corporate guidance directing expansion of card use
Common
Laissez-faire management of card program; management is aware of card program and periodically assesses carduse, but management does not directly encourage use of the commercial card as a payment vehicle
Management may encourage use of card for MRO purchases only
There is no effort to make the card program a primary payment vehicle
Leading
Procurement, sourcing, and A/P acknowledge the commercial card as a primary payment vehicle
Suppliers are either mandated to accept the commercial card or are given a preferential weighting on vendor scorecards
All commodities are reviewed for inclusion in the commercial card program
Advanced
User goals are established based on spend limit, commodities purchased, and cost savings
Reports provide periodic snapshot of goal-to-date performance, i.e., cost savings reports
Procurement organization stipulates use of card as payment vehicle for specific suppliers
Buyers are evaluated on their movement of suppliers and commodities to the commercial card program
Integration of commercial card in automated procurement and Strategic Sourcing tools
21
The 60 best practices that follow are practical ways for companies to gain real-world
benefits from optimizing their Procure-to-Pay function. They are broken down into three
main categories: Procure-to-Pay Foundation, Commercial Card Programs, and Procure-to-
Pay Process. Travel and Entertainment is included as a separate section and falls under
the overall Procure-to-Pay process section.
Each entry outlines the market applicability and implementation steps for each best
practice. It also details specific success stories and trends regarding its incorporation
into company policy.
SECTION II
Best Practices
Section II
Best Practices
22
23
Procure-to-Pay Foundation
Summary
Procure-to-Pay Foundation describes the strategy, organization, and technology
components of the Procure-to-Pay process. The best practices described in this section
form the building blocks and essential requirements for companies to have advanced or
leading-edge performance. Regardless of size or sophistication, companies will not be
able to achieve best practice performance without a successful foundation.
Best practice companies have defined a near- and long-term vision for their Procure-
to-Pay process. Their procurement and A/P functions are aligned to execute this vision,
and they use technology as a key enabler to meet their goals.
Strategy
Best Practice 1
Best Practice 2
Best Practice 3
Organization
Best Practice 4
Best Practice 5
Best Practice 6
Best Practice 7
Best Practice 8
Technology
Best Practice 9
Best Practice 10
Best Practice 11
Best Practice 12
Articulate a Procure-to-Pay strategy with a short- and long-term vision
Proactively obtain ongoing senior management and business unit support by sharing information
Conduct benchmarking to gain additional perspectives and strategic focus
Strategically position procurement and A/P in the organization
Ensure center-led management and control of critical Procure-to-Pay functions
Develop enterprise-wide procurement policies and procedures
Develop an internal communication plan to convey procurement policies, procedures, and successes
Develop a comprehensive change management discipline
Develop an overall Procure-to-Pay technology strategy
Establish a business case for each technology investmentand track performance relative to business case objectives
Maximize automation of an end-to-end technology solution
Implement and leverage an e-Procurement solution
IMPLEMENTATION
ACTION STEPS:
1. Define a team of key
stakeholders, including
senior management,
to develop the overall
strategic planning process
2. Review previous
strategies and year-end
spend analyses to set
meaningful goals
3. Communicate strategy
with procurement and
A/P to achieve buy-in
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Enables organization to identify
achievable cost savings goals and define a
“target” goal for achievement
Benefit Obtained: Vendor Management
Amount of Benefit: High
Rationale: Sets goals for supplier rationalization
initiatives
MARKET APPLICABILITY: All Companies
Benefit Obtained: User Satisfaction
Amount of Benefit: Medium
Rationale: Communication of strategy encourages
support from key Procure-to-Pay stakeholders
Benefit Obtained: Control
Amount of Benefit: Medium
Rationale: Sets guidelines for overall control
strategy
IMPLEMENTATION SUCCESSES and TRENDS
• One study participant publicly displays his company’s key Procure-to-Pay initiatives for the yearand his company’s progress to date in completing them. This has helped enable the companyto achieve its initial goals for the quarter.
• One best practice participant created a plan by business unit to detail how it would meet customer service requirements, increased control objectives, and reduced costs targets. This helped identify the appropriate goals for the company’s purchasing card implementation.
Companies should develop an overall strategy that defines the goals for the
Procure-to-Pay process. This strategy forms the overall blueprint for the company’s
process and is a component of the overall company strategy.
A successful strategy contains goals for overall spend, projected breakdown of
spend by commodity, spend by order mechanism, spend by payment type, cost savings
(either through activity-based costing or full-time equivalent [FTE] savings), and supplier
sourcing goals. The strategy also lists the tactical initiatives (both operational and
technological) that will enable these goals. This includes implementation and evaluation
of existing control mechanisms, new projects, and technology.
Goals are developed for the short-term (one to two years) as well as long-term (three
to five years). The advantage of developing the dual focus is that it enables companies to
prioritize their initiatives and helps provide direction for creating business cases.
The Procure-to-Pay strategy needs to be shared throughout the organization,
specifically with procurement, A/P, IT, and key business units. This will help secure the
support of key stakeholders in those functions and ensure that the organization works
toward common goals.
Strategy
Articulate a Procure-to-Pay strategy with a short- and long-term vision
Section II
Best Practices
24
Best Practice 1
Procure-to-PayFoundation
25
Best Practice 2
Procure-to-PayFoundation
Leading companies have recognized that obtaining ongoing senior management
support (e.g., business unit lead, senior or executive vice president) for the processes
and technologies that the procurement function has designed enables procurement to
add significant value to the organization.
Companies have successfully maintained senior management support by developing
an ongoing communication of the activity and successes of their organization through an
executive-level report, which can contain the following:
• Process metrics: Purchase order volume and trend, invoice volume and trend,
travel and entertainment volume and trend, Visa Purchasing card usage and trend
• Savings metrics: Dollars saved through use of preferred vendors and negotiated
rates, dollars saved through Procure-to-Pay process changes (e.g., expanded use
of Visa Purchasing card, implementation of automated expense reporting)
• Lost savings: Dollars lost through non-compliance with procurement policies and
procedures (e.g., maverick spend, use of non-preferred vendors)
• Current initiatives underway: High-level descriptions of efforts and expected
benefits to generate awareness and gain ongoing support
Companies have used innovative methods to share this information with senior
management. This includes creating unique presentations, assigning business unit
liaisons, and actively communicating successes through internal newsletters.
In addition to simply communicating procurement successes, procurement
organizations have actually shared their savings with their internal business customers
to encourage further compliance with policies and procedures. For example, rebates
from achieving volume discounts with vendors are shared with the business units that
used those vendors.
continued on next page
Strategy
Proactively obtain ongoing senior management and business unit support by sharing information
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Frequent communication of savings from
compliance and lost savings from non-compliance
with procurement policies and procedures encour-
ages senior management to promote compliance
with procurement policies and procedures
Proactively obtain ongoing senior management and business unit support by sharing informationcontinued
IMPLEMENTATION
ACTION STEPS:
1. Develop cross-functional
team to form
senior management
communication initiative
2. Proactively identify
compelling and relevant
procurement metrics
and review with senior
managers to determine
appropriateness
3. Develop communication
initiative with related-
tools (e.g., webcasts,
report layouts)
4. Adjust initiative to reflect
feedback as received
5. Schedule periodic review
meetings with senior
management to share
information and ensure
active participation
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Frequent communication of
procurement successes and opportunities for
improvement provides senior management with
the incentive to continue support of cost-saving
procurement activities
MARKET APPLICABILITY: All Companies
Section II
Best Practices
26
Best Practice 2
Procure-to-PayFoundation
IMPLEMENTATION SUCCESSES and TRENDS
• One organization tied management’s bonus objectives to achievement of procurement-relatedgoals. Because of this, the procurement department regularly reported its progress in meetinggoals and successes to the other business units in the organization.
• Another survey participant shared procurement performance numbers, such as cost avoidanceand cost savings, quarterly with his peers to obtain ongoing support of initiatives.
• One large corporate company’s head of procurement is a member of the senior managementteam and thus provides procurement performance information at weekly planning and statusmeetings with the company’s president.
• One-third of the study participants indicated lack of senior management support as asignificant barrier to card expansion.
27
Best Practice 3
Procure-to-PayFoundation
Best practice companies conduct benchmarking on a regular basis — at least
annually — to assess the performance of their companies and gain additional insight into
innovative practices and opportunities for improvement.
Benchmarking should assess quantitative items such as direct cost to place an
order, cost to produce a check payment, supplier base metrics, and qualitative findings
(e.g., implementation and control best practices).
Leading companies have created their own group of “benchmarking partners.” This
includes companies outside of their industry as well as ones with which they have a
complementary relationship (e.g., suppliers or vendors). Some companies will use third-
party companies to conduct “blind” benchmarking studies against their immediate
competitors. Additionally, best practice companies participate in external benchmarking
studies on a periodic basis — these include commercial card-provider studies as well as
U.S. Government figures, Forrester, IDC, and NAPM studies.
In addition to the benefits gained by learning from other companies, benchmarking
studies can also be useful tools in promoting the success of the Procure-to-Pay function
to senior management or, potentially, in providing information to develop business cases
for key initiatives.
continued on next page
Strategy
Conduct benchmarking to gain additional perspectives and strategic focus
Section II
Best Practices
28
Best Practice 3
Procure-to-PayFoundation
Conduct benchmarking to gain additional perspectives and strategic focuscontinued
Benefit Obtained: User Satisfaction
Amount of Benefit: Medium
Rationale: Enables user participation and ability
to benchmark user satisfaction
IMPLEMENTATION
ACTION STEPS:
1. Identify benchmarking
studies to participate in
as part of annual strategy
and allocate resources
(e.g., time and budget)
for participation
2. Solicit companies through
contacting peers, internal
networks, or trade groups
3. Allocate time to review
results of benchmarking
study, incorporate findings
into strategic initiatives,
and communicate results
to senior management
4. Attend conferences and
read industry publications
on a regular basis
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Helps set achievable cost savings goals
MARKET APPLICABILITY: All Companies
Benefit Obtained: Vendor Management
Amount of Benefit: Medium
Rationale: Provides potential negotiation and
sourcing goals for company
IMPLEMENTATION SUCCESSES and TRENDS
• One best practice company has a list of benchmarking partners to use in conducting periodicstudies. The partners are companies with leading Procure-to-Pay reputations and have helped raisethe expectations and goals for the company. For instance, after learning that one company saved$11.6 million through e-Auctions, the company began a partnership with an e-Auction company.
• Another study participant increased the airline discounts the company receives from 15 percent to 20 percent by reviewing trade publications and T&E benchmarking studies to understand market conditions and negotiation best practices.
• One study participant uses internal benchmarking that enables employees to enter time activitydata on a monthly basis. This is used to calculate procurement and A/P productivity and helps himidentify areas for improvement.
• Two mid-size study participants participated in extensive benchmarking studies, including theHackett Study.
29
Best Practice 4
Procure-to-PayFoundation
Leading companies have strategically changed their positioning of procurement and
A/P functions over the last two to three years. Traditionally, these two functions have
performed as separate silos within the organization. Best practice companies now
encourage a more collaborative relationship between the two departments in order to
optimize their Procure-to-Pay processes.
One key driver behind the change in this relationship is the new view of procurement
and A/P as internal service organizations. This has resulted from inclusion in a shared
services organization as well as the realization of their interdependency during Procure-
to-Pay reengineering initiatives such as Visa Purchasing card implementations, ERP
implementations, and Strategic Sourcing. These initiatives have helped procurement
and A/P demonstrate how they jointly enable the business units to achieve their goals.
Procurement and A/P often refer to other business units within the organization as
“clients” or internal customers. Conducting internal surveys or reviews with business unit
leaders to review service quality has now become common.
Procurement and A/P representation on cross-functional teams is now essential
for the success of most technology and strategic initiatives. Additionally, successful
companies have been able to use a combination of procurement, A/P, and business
unit personnel to focus on Strategic Sourcing and drive deeper negotiated discounts.
To enhance the service reputation of their functions, some procurement organizations
have assigned liaisons to work with individual business units to help set goals, provide
training, and evaluate new opportunities.
continued on next page
Organization
Strategically position procurement and Accounts Payable in the organization
Benefit Obtained: Vendor Management
Amount of Benefit: High
Rationale: Collaboration on sourcing will drive
deeper discounts; procurement brings negotiation
and industry expertise, and A/P can provide
detailed analyses of spend data
IMPLEMENTATION
ACTION STEPS:
1. Ensure participation
of procurement and
Accounts Payable on
cross-functional teams
2. Ensure business
unit liaisons exist in
procurement and
A/P functions
3. Align success of
procurement and A/P
functions with meeting
overall business goals
4. Conduct internal
surveys with business
units to measure their
level of satisfaction
and effectiveness
Benefit Obtained: User Satisfaction
Amount of Benefit: High
Rationale: Users benefit from service-oriented
approach and will have greater adoption of new tools
MARKET APPLICABILITY: All Companies
Benefit Obtained: Control
Amount of Benefit: Medium
Rationale: Enables central coordination
and monitoring of Procure-to-Pay function
and compliance with policies
Section II
Best Practices
30
Best Practice 4
Procure-to-PayFoundation
IMPLEMENTATION SUCCESSES and TRENDS
• One study participant helped transform his company’s Procure-to-Pay function to leading byassigning procurement business unit liaisons. These liaisons worked with the business units toidentify opportunities for vendor reduction, negotiate deeper discounts, and improve use of thee-Procurement system.
• One study participant has his company’s sourcing initiative jointly led by procurement and A/P.Combining procurement’s negotiating acumen with A/P’s ability to produce accurate spendinformation has helped his company to reduce the time necessary to issue a request for proposal(RFP) by over 50 percent.
Strategically position procurement and Accounts Payable in the organizationcontinued
Benefit Obtained: User Satisfaction
Amount of Benefit: Medium
Rationale: Reduces confusion within the
organization by providing single points-of-contact
31
Best Practice 5
Procure-to-PayFoundation
IMPLEMENTATION
ACTION STEPS:
1. Identify dedicated roles
and assignments in the
organization chart
2. Link employee bonuses
and performance ratings
with ability to meet
organization goals
3. Communicate name of
central points-of-contact
throughout the organization
4. Obtain senior management
sponsorship of company-
wide policies and
procedures
5. Validate reporting hierarchy
to ensure center-led
visibility of key reports
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: Medium
Rationale: Reduces duplication of functional roles
in the organization
MARKET APPLICABILITY: All companies, where a dedicated role may not be possible, a single point-of-contact should be assigned
Benefit Obtained: Vendor Management
Amount of Benefit: Medium
Rationale: Use of central management enables
unified negotiations with suppliers
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Enables central distribution and
management of policies and procedures
Successful companies assign dedicated roles and responsibilities for their most
critical Procure-to-Pay functions: contract administration, expense management,
administration of designated commercial cards, and development of policies and
procedures. Other activities, such as requisitioning and buying, have become more
decentralized and dispersed throughout the organization as new initiatives are
introduced. This enables the procurement and A/P functions to focus on their most
critical value-added activities.
Another advantage of the center-led approach is that it allows for centralized
monitoring and control over the Procure-to-Pay function. Companies have an easier
ability to create centralized reports that can track company spending and compliance.
It also enables a uniform distribution and enforcement of policies and procedures.
Organization
Ensure center-led management and control of critical Procure-to-Pay functions
IMPLEMENTATION SUCCESSES and TRENDS
• 67 percent of study participants believe they have central management and administration oftheir procurement function.
• One study participant reports that he has been unable to maximize the benefits of his company’scommercial card program because one of his company’s business units uses different policiesand procedures to manage the card.
Leading companies document procurement policies and procedures to
communicate to their internal customers their recommended Procure-to-Pay processes.
A procurement policy should contain the following content:
• Mission statement and objectives of procurement function, including alignment
with company’s mission statement
• Procurement organization chart with contact information
• Sourcing and procurement guidelines
— Sourcing strategy
— Requisition of expense items
— Requisition of capital items
— Requisition of services
— Preferred vendors
• Approval rules
• Receipt and return process
• A/P process
• Procurement control and audit
• Use of commercial card
— Commercial card manager contact information
— Issuance criteria and process
— Cardholder agreement
— Usage guidelines
— Reconciliation process
— Payment process
On an annual basis, best practice companies review their policies and procedures
and modify as needed. Changes are then communicated to users and incorporated into
existing training.
continued on next page
Organization
Develop enterprise-wide procurement policies and procedures
Section II
Best Practices
32
Best Practice 6
Procure-to-PayFoundation
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Designing and documenting procurement
policies and procedures that fit a company’s desired
level of control enables communication of require-
ments to ensure compliance
33
Best Practice 6
Procure-to-PayFoundation
Develop enterprise-wide procurement policies and procedurescontinued
IMPLEMENTATION
ACTION STEPS:
1. Develop comprehensive
outline that covers all
relevant aspects of
Procure-to-Pay process
2. For each Policy section,
analyze current practices
and third-party research
regarding best practices;
determine preferred
processes based upon
company culture and
capabilities
3. Document the policies
and procedures
4. Continually reexamine
policies and procedure
and update as needed
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: Medium
Rationale: Procurement policies and procedures
detail standard practices designed to make a
procurement organization operate more efficiently;
users who learn about and follow these practices
take actions that enable procurement savings such
as use of preferred vendors
MARKET APPLICABILITY: All Companies
IMPLEMENTATION SUCCESSES and TRENDS
• 85 percent of survey respondents have documented procurement policies and procedures. 74 percent of those respondents had less than 5 percent of all purchases fail a formal audit process.
• All of the study participants who do not have formally documented policies and proceduresstated user inability to comply with procedures or failure to follow the approval process as thereasons why they failed audit. These items are the most common component of any policy andprocedure document.
To enable understanding and compliance with procurement policies and procedures,
the guidelines must not only be documented, but widely disseminated as well.
Most companies have their policies and procedures manual available on their
procurement department’s intranet site. Best practice companies have additionally
developed more creative ways to disseminate their policy information.
New users and new employees often receive procurement training during their
new hire orientation. This training can be delivered in person or via documentation
with contact numbers for follow-up. The documentation can be laminated or brightly
colored to ensure that it is recognizable to the employees. Best practice companies
also streamline the documentation to ensure that only pertinent information is included
in the training to the employee.
Recognizing that ongoing communication is necessary to provide information on
updates as well as to refresh users’ memories, some procurement functions provide an
email procurement newsletter or submit articles to a company newsletter. For example,
an article submitted at one company was a quiz regarding procurement policies.
Prizes were given to a small number of employees who submitted correct answers.
Finally, procurement organizations have found that promoting the hard savings
received from complying with policies encourages communication and further
compliance with policies and procedures. For example, by communicating not only the
benefits obtained by preferred supplier compliance but also the savings lost through
non-compliance, senior management is more willing to encourage their departments to
follow procedures.
continued on next page
Organization
Develop an internal communication plan to conveyprocurement policies, procedures, and successes
Section II
Best Practices
34
Best Practice 7
Procure-to-PayFoundation
35
Best Practice 7
Procure-to-PayFoundation
Develop an internal communication plan to convey procurement policies, procedures, and successes continued
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Designing and documenting procurement
policies and procedures that fit a company’s desired
level of control enables communication of
requirements to ensure compliance
IMPLEMENTATION
ACTION STEPS:
1. Initiate cross-functional
team of business units,
(e.g., human resources,
procurement, travel,
and A/P) to develop
policies and procedures
communication plan
2. Track communication
success and implement
well-received methods
3. Develop process to
ensure that updates to
policies and procedures
are communicated and
distributed in a timely basis
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: Medium
Rationale: Procurement policies and procedures
detail standard practices designed to make a
procurement organization operate more efficiently;
users who learn about and follow these practices
take actions that enable procurement savings,
such as use of preferred vendors
MARKET APPLICABILITY: All Companies
IMPLEMENTATION SUCCESSES and TRENDS
• 82 percent of survey participants have widely disseminated procurement policies and procedures.
• One survey respondent developed his company’s procurement policies and procedures via a multi-disciplinary team. This team regularly meets to revise policies as needed.
Section II
Best Practices
36
Best Practice 8
Procure-to-PayFoundation
One of the biggest lessons that companies have learned from their previous
initiatives is the importance of change management. The ability to help educate, train,
and communicate new messages to users is essential for any new initiative to succeed.
Companies should develop a dedicated discipline to handle these activities. This
could be done as an expansion of the existing training department. Change management
activities should be staffed by people with training, marketing, and/or public relations
experience and should be included in all cross-functional initiative teams. The type of
change management activities should be tailored to the specific initiative.
Change management responsibilities include:
• Development of internal training manuals and courses
• Development of self-service and internal customer support
• Creation of internal marketing campaigns and key messages
• Assistance in determining the impact of an initiative on employees
• Identification of “Super Users” or business unit champions for each initiative
Ideally, the change management team could help develop a comprehensive and
ongoing Procure-to-Pay training and education program (e.g., classes and self-service
support) that would help employees understand and use new Procure-to-Pay tools.
continued on next page
Organization
Develop a comprehensive change management discipline
37
Best Practice 8
Procure-to-PayFoundation
Develop a comprehensive change management disciplinecontinued
Benefit Obtained: User Satisfaction
Amount of Benefit: High
Rationale: Increases likelihood of adoption through
training and support
IMPLEMENTATION
ACTION STEPS:
1. Mid-size Companies:
Allocate resources for
change management in
strategic initiatives
2. Large Companies:
Identify change management
role in organization chart
3. Both Companies:
Identify and assign change
management roles
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Enables greater adoption of new tools
and technologies and therefore helps meet cost
savings projections in business cases
MARKET APPLICABILITY: A formal change management function would be more likely to be formed by a large corporate company. Mid-size companies should consider assignment of change management responsibilities to a designated person for each important initiative.
Benefit Obtained: Control
Amount of Benefit: Medium
Rationale: Helps enable enhanced technologies
with systemic controls
IMPLEMENTATION SUCCESSES and TRENDS
• Two large corporate companies employed different change management strategies in support of the rollout of their e-Procurement systems. One study participant employed limited changemanagement activities (e.g., individual tutorials as needed) to support their deployment. As aresult, they estimate only $310,000 of spend has been placed through the system. The otherparticipant provided enterprise-wide training via computer-based training (CBT) and classroomtraining combined with strong internal marketing. They project $1 billion in spend through the e-Procurement system by the end of the year.
• One study participant cited lack of change management as the biggest reason why they were notsatisfied with their automated expense reporting implementation. The system has been in placefor over three years and still has not been adopted enterprise-wide.
Companies should have a focused technology strategy to complement the overall
Procure-to-Pay strategy. This strategy should describe how technology implementations
and enhancements could enable the achievement of the overall company goals.
Key components of the strategy should include the following:
• Key short- and long-term Procure-to-Pay technology initiatives with alignment
to specific Procure-to-Pay goals
• Vision for the current and future Procure-to-Pay platform, including integration
with new technologies and potential outsourcing opportunities
• Identification of benefits to be gained through the technology initiatives
• Framework for selection of technology partners and vendors
• Framework for development of Service-Level Agreements
• Proposed allocation of budget and resources
Using this strategy as a blueprint, companies can then prioritize their initiatives and
ensure maximum alignment with their goals. Additionally, necessary IT and outside
integration resources can be budgeted appropriately and Procure-to-Pay technology
initiatives can be executed effectively. Finally, the strategy can provide additional
direction for the creation of technology business cases.
As with the overall strategy, the technology strategy must be presented and
supported by key stakeholders in senior management, IT, procurement, and A/P.
continued on next page
Technology
Develop an overall Procure-to-Pay technology strategy
Section II
Best Practices
38
Best Practice 9
Procure-to-PayFoundation
39
Best Practice 9
Procure-to-PayFoundation
Develop an overall Procure-to-Pay technology strategycontinued
Benefit Obtained: User Satisfaction
Amount of Benefit: Medium
Rationale: Ensures buy-in of user community
on technology initiatives
IMPLEMENTATION
ACTION STEPS:
1. Leverage overall company
strategy, Procure-to-Pay
strategy, and existing IT
resources to formulate
technology component
2. Review previous year’s
strategy to determine
progress, identify gaps,
and ensure consistency
3. Create and review
strategy with key business
stakeholders to obtain
consensus and prioritize
technology initiatives
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: Medium
Rationale: Provides company with baseline
information to build business cases
MARKET APPLICABILITY: All Companies
Benefit Obtained: Vendor Management
Amount of Benefit: Medium
Rationale: Helps provide guidelines for
selection of IT vendors, including capabilities
and service-level expectations
Benefit Obtained: Control
Amount of Benefit: Medium
Rationale: Provides greater alignment of control
IMPLEMENTATION SUCCESSES and TRENDS
• One leading-edge company had IT representatives assigned to their procurement organization.This ensured that their e-Procurement and ERP implementations were aligned to meet thecompany goals.
• After reviewing their technology strategy with business users, one mid-size company identifiedthe need to have an ERP system. Creatively, they used an Application Service Provider (ASP) tohouse the system. This allowed them to have a cost-effective enterprise system to enable theirback-office initiatives, while not demanding extensive use of internal IT resources.
• One mid-size company used its IT strategy to help map its Procure-to-Pay technology investments.Following this blueprint, the company chose to hold off on immediate implementation of an e-Procurement system, as it would not have properly integrated with its existing platform andongoing initiatives.
Section II
Best Practices
40
Best Practice 10
Procure-to-PayFoundation
Leading companies develop business cases for each of their technology
investments. The creation of a business case serves several purposes: helps align all
participants with the objectives of the investment, necessitates detailed understanding
of investment costs, and provides a communication mechanism to gain senior
management buy-in.
A business case will contain the following components:
• Investment description
• Cost of the investment: The timing of the payments should be detailed if not all
payments are required up front. Investment costs will likely include third-party costs
as well as internal project management costs. If known, any investment
capitalization should be indicated.
• Expected benefits from the investment: The benefits described can be both
qualitative and quantitative. Qualitative benefits include increased end-user
satisfaction and increased productivity. Quantitative benefits include either
anticipated cost reductions or cost avoidances. Cost reductions are savings off
of current costs, such as an increased supplier discount or reduced staffing
requirements. Cost avoidances are future costs that can be precluded as a result
of the new investment, such as future maintenance costs on existing technology.
• Cost/benefit cash flow analysis: a detailing by time period of the cash outflows
and inflows based upon the expected investment cost and benefits. This
information is typically analyzed to create financial risk measures. Financial
metrics utilized to analyze investments include net present value, return on
investment (ROI), and investment payback period.
Once a business case has been established and the investment made, companies
should track their actual performance relative to the planned measures indicated in the
business case. These performance comparisons should be communicated and
analyzed to help improve current investment performance and develop lessons learned
for future investments.
continued on next page
Technology
Establish a business case for each technology investment and track performance relative to business case objectives
41
Best Practice 10
Procure-to-PayFoundation
Establish a business case for each technology investment and track your performance relative to your business case objectivescontinued
Benefit Obtained: Control
Amount of Benefit: Medium
Rationale: Providing users with an understanding
of the benefits of new process or technology
investments usually results in higher compliance
IMPLEMENTATION
ACTION STEPS:
1. Develop cross-functional
team of business and
technology employees
to analyze an investment
consideration
2. Detail investment
description and
anticipated costs
3. Calculate quantitative and
qualitative benefits that
the investment will enable
4. Analyze financial costs,
benefits, and risks where
appropriate
5. Monitor the actual
investment costs and
benefits and compare
actual performance to
projected performance
6. Analyze performance to
improve current and future
investment results
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: The development of a business case
necessitates an understanding of investment costs
and benefits — that understanding, combined with
performance tracking, facilitates benefit
achievement as expectations and progress
against the expectations is clearly defined
MARKET APPLICABILITY: All Companies
IMPLEMENTATION SUCCESSES and TRENDS
• 50 percent of survey respondents set an ROI goal for their technology investments; 80 percent of those who set an ROI goal tracked their performance relative to their goal.
• One survey respondent developed a business case for e-Procurement that was approved basedupon a clear description of the investment’s costs and benefits. Benefits detailed includedreduced procurement FTEs and improved end-user productivity.
Best practice companies are moving in the direction of an entirely “paperless”
Procure-to-Pay process. This follows the trend that began with ERP, commercial card,
and e-Procurement implementations. Companies see that an increase in automation
provides significant cost savings through reduction of handoffs, decreased time to
perform activities, and increased control and user satisfaction.
A complete end-to-end technology solution would comprise of the following
components:
• Use of electronic auctions and vendor requests for sourcing
• Use of e-Procurement and ERP solutions for requisition and order placement
• Implementation of ghost account program in e-Procurement and ERP systems for
automated payment
• Internal Web-based booking system
• Electronic receiving via EDI, bar coding, or XML
• Automated interface between procurement and A/P and G/L systems
• Electronic feed of card-provided data
• Automated pre-populated expense reporting system
• Electronic Invoice Presentment and Payment (EIPP)
• Electronic payment of suppliers, including card provider
• Electronic desktop reporting
The ability to implement this solution in its entirety requires significant time and
resources. However, companies should adopt this vision as part of their technology
strategy and then prioritize the initiatives needed to progress to this vision. Examples
include the creative use of outsourcing components to an ASP and development of
electronic spreadsheet templates for catalogs and reports.
continued on next page
Technology
Maximize automation of an end-to-end technology solution
Best Practice 11
Procure-to-PayFoundation
Section II
Best Practices
42
43
Benefit Obtained: User Satisfaction
Amount of Benefit: High
Rationale: Removes non-value-added activities
such as data entry
Best Practice 11
Procure-to-PayFoundation
Maximize automation of an end-to-end technology solutioncontinued
IMPLEMENTATION
ACTION STEPS:
1. Develop an end-to-end
Procure-to-Pay platform
vision as part of the
Procure-to-Pay technology
strategy
2. Identify and prioritize
initiatives that will achieve
vision using ROI analysis
3. Incorporate initiatives into
overall technology strategy
4. Evaluate appropriate
options for implementing
initiatives and create
business cases
5. Validate presence of
processes to support
technology initiatives
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Companies could reduce transaction
costs significantly by eliminating paper
MARKET APPLICABILITY: All companies should have an automated end-to-end vision. However, some technologies, such as EIPP, may only be applicable to large corporate companies.
Benefit Obtained: Vendor Management
Amount of Benefit: Medium
Rationale: Provides greater data capture and ability
to manage vendor spend
Benefit Obtained: Control
Amount of Benefit: HIgh
Rationale: Removes possibility of manual
“human error” from the function
IMPLEMENTATION SUCCESSES and TRENDS
• One company has been able to reduce per transaction costs from $9.00 to $0.89 through usageof an e-Procurement system.
• One study participant used an ASP to provide an e-Procurement solution that otherwise couldnot have been implemented within its internal IT department. The solution has been sosuccessful that 90 percent of all spend is placed through the e-Procurement application.
Best practice companies have successfully implemented e-Procurement software
to streamline and automate their procurement activities. e-Procurement software
applications and services are employee self-service solutions that support requisition,
approval routing, and order placement.
Several well-established software vendors offer complete e-Procurement packages,
including Ariba, Commerce One, Oracle, SAP, Clarus, PeopleSoft, and Works.
e-Procurement software implementations share three common success factors:
• Focus on ROI — Best practice companies not only develop a clear business case
but focus on tracking and meeting the goals established in their analysis.
• Phased Rollout Strategy — Best practice companies utilize a phased rollout
strategy. For example, some companies align deliverables by end date so a
number of major project milestones are met every 100 days. This phased
approach helps clients obtain quick wins, build momentum, and achieve
flexibility to respond to changes in business climate.
• Incorporate Change Management — Best practice companies make change
management-related items a priority. Successful implementations have involved
project sponsors and well-defined communication programs, as well as job-role
redefinition and training.
Successful implementers of e-Procurement software are able to achieve significant
procurement-related savings. Adopters of e-Procurement have been able to renegotiate
contracted rates down by 5 to 10 percent through improved contract compliance,
reduce order requisition costs from $114 per order to $31, on average; shorten
purchase and fulfillment cycles from 8 days to 2 days, and, in some cases, reduce
maverick purchasing by 50%.1
continued on next page
1 Aberdeen Group. “Indirect expense Management: Driving Bottom-Line Benefits.” November, 2001.
Technology
Implement and leverage an e-Procurement solutionBest
Practice12
Procure-to-PayFoundation
Section II
Best Practices
44
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Reduces maverick spend
and human error
45
Benefit Obtained: User Satisfaction
Amount of Benefit: Medium
Rationale: Simplifies procurement process and
eliminates paperwork
Best Practice12
Procure-to-PayFoundation
Implement and leverage an e-Procurement solutioncontinued
IMPLEMENTATION
ACTION STEPS:
1. Develop cross-functional
team of business and
technology employees to
analyze e-Procurement
investment consideration
2. Detail investment
description and
anticipated costs
3. Develop quantitative and
qualitative benefits that the
e-Procurement software
will enable
4. Conduct financial analysis
of costs and benefits
where appropriate
5. Present information to
gain senior management
approval for e-Procurement
implementation
6. Develop mechanism to
track the actual investment
costs and benefits and
compare actual performance
to projected performance
7. Develop change
management process,
including a well-defined
communication plan
8. Select and implement
e-Procurement software
9. Analyze performance to
improve current and future
e-Procurement results
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Significantly reduces procurement costs
and transaction times
MARKET APPLICABILITY: All Companies
Benefit Obtained: Vendor Management
Amount of Benefit: High
Rationale: Eases vendor selection process and
increases data capture
IMPLEMENTATION SUCCESSES and TRENDS
• 85 percent of survey respondents who have implemented an e-Procurement system have beensatisfied with the results.
• 60 percent of survey respondents who have implemented an e-Procurement system have beenable to dramatically reduce the amount of time required to place an order.
Section II
Best Practices
46
47
Summary
Commercial cards are purchasing and payment vehicles used for a company’s
procurement, fleet, and travel and entertainment (T&E) expenditures. For the purposes
of this report, the term commercial card is used to encompass the entire business card
program, including Visa Purchasing cards, Visa Commercial One cards, Visa Fleet cards,
and Visa T&E cards. A commercial card program could include any combination of the
card types listed.
Companies can incorporate commercial cards as one component of their Procure-to-
Pay strategy. It is important to assess use of cards against other purchase and payment
vehicles to maximize the mix of methods used.
The best practices presented in this section contain information that is applicable to
all card programs as well as best practices specific to Visa Purchasing/Visa Commercial
One cards and Visa Fleet cards. T&E card-specific best practices are included in the T&E
best practices section.
Purchasing Cards
The use of cards as a purchasing and payment method can reduce purchase
transaction costs and settlement costs for organizations while substantially reducing
the need for purchase orders. Card statements, which contain multiple transactions per
statement, can substantially reduce the number of invoices and checks processed, and
electronic delivery of card statements further reduces transaction costs. End users are
often pleased with the ease of purchasing provided by a card versus generating and
manually reconciling purchase orders, receipts, and invoices. The primary benefit to
vendors is faster payment of purchases made through a commercial card.
Visa Purchasing card programs were initially introduced as a cost-effective way to
handle high-volume, low-dollar value transactions and to replace the need for petty cash
disbursements. Initial estimates showed that use of the card could reduce internal
transaction costs by approximately 65 percent ($81 to $28).2
As with any reengineering initiative, the success companies have achieved through
card programs has varied based on implementation. Best practice companies
aggressively have targeted appropriate categories for purchasing using the card and
internally have mandated the card and trained users. Leading companies are integrating
the program into their strategic initiatives, such as e-Procurement and Strategic
Sourcing, in order to maximize the benefits of the programs.
2 Lehigh University. Reducing the Transaction Costs of Purchasing Goods and Services. March, 2001
Commercial Card Program
Commercial Card Program
Visa Fleet Cards
The Visa Fleet card program is an important tool for managing variable vehicle
expenses such as fuel, maintenance, and other operational expenses. But a Visa Fleet
card program can also provide valuable information to assist in driver monitoring and
cost allocation and reporting processes.
Implementing fleet card programs enables companies to:
• Gather unique fleet data to improve management reporting, e.g., odometer
readings, fuel purchase detail, vehicle identification number, mileage, time of
purchase. This data enables companies to track scheduled maintenance, mileage,
and compliance with procurement policies.
• Enhance vendor negotiations: By tracking fleet spending, management may
identify preferred vendors and use actual spending volume to negotiate discounts.
• Streamline accounting processes: Companies can remit single payments for all
fleet expenses instead of multiple purchase order invoices and/or expense
reimbursements.
• Monitor corporate policy compliance: Because Visa Fleet card reporting
consolidates all spend (including fuel type, scheduled maintenance, vehicle usage,
and preferred vendor thresholds), companies can monitor compliance with
corporate policies and progress toward negotiated volume thresholds. Exception
reporting can be generated to ensure that cardholders do not use Visa Fleet cards
to make personal or other unauthorized fuel purchases.
• Improve spending controls: Improved reporting and card controls are provided by
Visa Fleet card programs, such as restricting purchases by transaction or billing
cycle limits, fuel types, and MCCs.
• Eliminate use of employees’ credit cards for fleet-related expenses: Companies
can separate employee business and personal spending, free up available credit
by providing company-issued Visa Fleet cards, and facilitate expense reporting.
Section II
Best Practices
48
49
Commercial Card Program
Program Foundation
Best Practice 1
Best Practice 2
Best Practice 3
Best Practice 4
Best Practice 5
Best Practice 6
Best Practice 7
Best Practice 8
Program Management
Best Practice 9
Best Practice 10
Best Practice 11
Best Practice 12
Best Practice 13
Best Practice 14
Best Practice 15
Program Reporting
Best Practice 16
Best Practice 17
Best Practice 18
Determine commercial card product(s) based on needs of the organization
Source, select, and implement a purchasing card program
Source, select, and implement a Visa Commercial One card program
Source, select, and implement a Visa Fleet card program
Align commercial card program objectives with company’soverall Procure-to-Pay strategy
Obtain active senior management promotion of and involvement in the commercial card program
Establish center-led management and administration of thecommercial card program
Develop and disseminate enterprise-wide commercial cardpolicies and procedures
Incorporate a comprehensive commercial card training program
Establish Visa Purchasing/Visa Commercial One cardissuance criteria for optimal distribution to employees
Mandate and enforce use of Visa Purchasing/Visa Commercial One card for all eligible purchases
Maximize use of Visa Purchasing/Visa Commercial One card virtual accounts
Incorporate commercial cards into business continuity planning
Establish parameters for eligible Visa Purchasing/Visa Commercial One card transactions leveraging appropriate controls
Investigate Visa Purchasing/Visa Commercial One cardexpansion to non-typical spend categories to maximize benefits achieved
Share commercial card performance and savings reports withsenior management to promote appropriate use of the card
Use Issuer or card provider analytical tools to review andimprove your commercial card program performance
Use Visa Fleet cards to track expenditures through bothexternal and internal sources
Leading companies select commercial card products that will help the company
meet its Procure-to-Pay goals and objectives. Companies must determine the following
when selecting commercial card products: Issuer (i.e., financial institution or other
Issuer), card provider (e.g., Visa, MasterCard, American Express), and card type
(e.g., Visa Purchasing card, Visa Fleet card, Visa Commercial One card, Visa T&E card).
Prior to implementing a card solution, best practice organizations analyze the costs
and benefits of each program, taking into consideration any product variations among
Issuers. The due diligence should assess the following:
• Issuer:
— Industry reputation
— Current relationship
— Financial arrangement
— Card management and administration tools available through Issuer, including:
- Templates to assist with implementation (e.g., policies and procedures)
- Integration of card data with financials or ERP
- Online account administration
- Online reporting capabilities
- Expense management tools
— Knowledge/experience of card sales personnel and ability to provide
consultative services
— Customer service levels: Service Level Agreements, proactive relationship
• Card Provider:
— Standard transaction cost for use of card (e.g., 2 percent versus 4 percent)
— Merchant acceptance: consider commodity and international acceptance
• Card Type:
— Multiple cards to cover purchasing, T&E, and fleet transactions
— Visa Commercial One card: single card that combines procurement with
T&E, Visa Fleet, and Visa Commercial One card features
continued on next page
Program Foundation
Determine commercial card product(s) based on needs of the organization
Best Practice 1
Commercial Card Program
Section II
Best Practices
50
Benefit Obtained: User Satisfaction
Amount of Benefit: Medium
Rationale: Ensures that the card program meets
the needs of the end users
Best Practice 1
CommercialCard Program
Determine commercial card product(s) based on needs of the organizationcontinued
Visa Commercial One card programs have the following benefits: increased
negotiating leverage and streamlined relationship maintenance with the card provider;
reduced number of card accounts managed, particularly for companies with a high
degree of purchasing and T&E cardholder overlap; and streamlined card administration.
The Visa Commercial One card benefits must be balanced against the following
considerations: complexity of spending controls and reconciliation and single liability
structure requirement.
The following can enhance the success of a Visa Commercial One card implementation:
split liability/diversion billing by MCC code; single, unified method of allocating and posting
card transactions; streamlined receipt retention policies; and tax compliance process.
IMPLEMENTATION
ACTION STEPS:
1. Review goals and
objectives for the
commercial card program
2. Create cross-functional
team of key stakeholders
to participate in card
selection process —
at a minimum, include
both procurement and
A/P personnel
3. Develop request for
proposal (RFP) and
distribute to Issuers
4. Evaluate Issuer responses
against commercial card
goals and objectives and
select Issuer based upon
ability to meet those
goals and objectives
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: Medium
Rationale: Selection of the appropriate program
helps enable savings goals associated with Procure-
to-Pay initiatives
MARKET APPLICABILITY: All Companies
Benefit Obtained: Vendor Management
Amount of Benefit: Medium
Rationale: Thorough review of card program
enables company to select a card that provides
needed vendor acceptance and delivers the most
detailed and accurate spend data
Benefit Obtained: Control
Amount of Benefit: Medium
Rationale: Ensures that the selected card
program has the appropriate controls in place
51
IMPLEMENTATION SUCCESSES and TRENDS
• The top two reasons cited by study participants for selecting a particular issuer were: financialarrangement with Issuer and merchant acceptance.
Leading companies use a thorough sourcing process to select a Visa Purchasing
card program that will help the company meet its goals and objectives. Sourcing a Visa
Purchasing card program can occur at implementation of a new program or at a
transition point when the needs of the company change. Companies must determine
the following when selecting a card program: Issuer (e.g., financial institution or other
Issuer), card provider (e.g., Visa, MasterCard, American Express), and card type (e.g.,
Visa Purchasing card and Visa Commercial One card). Leading companies recognize
the following benefits through implementation of a Visa Purchasing card program:
• Integration of Visa Purchasing card data into internal MIS, Accounts Payable
(A/P), and General Ledger systems
— Streamlines data input
— Improves data quality and accuracy
— Automates mapping of transactions to cost centers
— Online access to cardholder account data
— Consolidation of spend for reporting purposes
(e.g., sourcing, exception reporting)
• Reduced transaction costs for purchasing and payment activities
— Reduces volume of purchase requisitions and purchase orders
— Automates payment to suppliers
— Enables consolidation of transactions for single payment to Issuer
• Increased cardholder satisfaction
— Streamlines procurement process
— Reduces requirement to fill out purchase requisitions and obtain approvals
for typical purchases
— Empowers user to make timely purchases
• Improved control over spend
• Maintains control through use of card restrictions and parameters on front-end
(e.g., credit limits)
• Increases visibility to potential non-compliant purchases through back-end
exception reporting
• Reduced petty cash and check requests, resulting in reduced costs associated
with processing and tracking petty cash and check requests
continued on next page
Program Foundation
Source, select, and implement a Visa Purchasing card program
Best Practice 2
Commercial Card Program
Section II
Best Practices
52
53
Best Practice 2
CommercialCard Program Source, select, and implement a Visa Purchasing card program
continued
Leading companies develop specific and achievable goals and objectives for their
purchasing card programs. These goals and objectives should be consistent with
corporate culture and procurement policies. Best practice companies periodically review
the goals and objectives for continuous improvement purposes.
Prior to implementing a Visa Purchasing card solution, best practice companies
analyze the costs and benefits of each available program, taking into consideration
any product variations from one Issuer to another.
Companies compare purchasing programs based on the following factors:
• Merchant acceptance
• Current Issuer relationship
• Financial arrangement
• Industry reputation
• Card management and administration tools available through Issuer, including:
— Templates to assist with implementation (e.g., Policies and Procedures)
— Integration of card data with financials or ERP
— Online account administration
— Online reporting capabilities
— Expense reporting management tools
• Knowledge/experience of card sales personnel and ability to provide
consultative services
• Customer service levels (e.g., Service Level Agreements, proactive relationship)
Companies compare purchasing cards based upon the following factors:
• Standard transaction cost charged for use of the card
(e.g., 2 percent versus 4 percent)
• Merchant acceptance
continued on next page
Section II
Best Practices
54
Source, select, and implement a Visa Purchasing card programcontinued
Best Practice 2
Commercial Card Program
Benefit Obtained: User Satisfaction
Amount of Benefit: Medium
Rationale: Ensures that the card program meets
the needs of the end users
IMPLEMENTATION
ACTION STEPS:
1. Review goals and
objectives for the Visa
Purchasing card program
2. Create cross-functional
team of key stakeholders
to participate in card
selection process —
at a minimum include
both procurement and
A/P personnel
3. Develop request for
proposal and distribute
to Issuers
4. Evaluate Issuer responses
against Visa Purchasing
card goals and objectives
and select Issuer based
upon ability to meet those
goals and objectives
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: Medium
Rationale: Sourcing for an appropriate card
program ensures the greatest possible cost saving
MARKET APPLICABILITY: All Companies
Benefit Obtained: Vendor Management
Amount of Benefit: Medium
Rationale: Thorough review of card program
enables company to select a card that provides
needed vendor acceptance and provides greatest
data for vendor management and negotiations
Benefit Obtained: Control
Amount of Benefit: Medium
Rationale: Ensures that the selected card
program has the appropriate controls in place
IMPLEMENTATION SUCCESSES and TRENDS
• The top two reasons cited by study participants for selecting a particular Issuer were: financialarrangement with Issuer and merchant acceptance.
• 67 percent of study participants had implemented a purchasing card program to meet theobjectives of transaction cost reduction, settlement convenience, and user convenience.
55
Best Practice 3
CommercialCard Program Program Foundation
Source, select, and implement a Visa Commercial One card program
Sourcing a Visa Commercial One card program can occur when selecting a new
card program or upon deciding to reduce the number of card programs. Visa
Commercial One cards can be used for procurement, travel and entertainment, and
fleet expenses. Leading companies employ a thorough sourcing process for selecting a
Visa Commercial One card program, analyzing the program’s benefits, establishing
program goals and objectives, and determining the appropriate Issuer and card provider
that can best help the company achieve its specific objectives.
Best practice companies employing a Visa Commercial One card program have
recognized the following benefits:
• Increased efficiency and effectiveness of card management and administration
— Improved negotiating position and streamlined relationship management
with the card provider
— Reduced number of card accounts managed, particularly for companies
with a high degree of purchasing and T&E cardholder overlap
— Complete and detailed view of spend through access to aggregate and
individual cardholder account data
• Cardholder satisfaction
— User convenience from having one statement to reconcile
— No confusion of which card to use
• Reduced transaction costs for purchasing and payment activities
— Reduced volume of purchase orders and check payments
— Reduced petty cash and check requests, resulting in reduced costs
associated with processing and tracking the requests
continued on next page
Section II
Best Practices
56
Source, select, and implement a Visa Commercial One card programcontinued
The Visa Commercial One card benefits must be balanced against the following
considerations:
• Program liability structure works optimally with corporate liability
— Some Issuers can help facilitate split-liability, i.e., corporate liability for
purchasing transactions and individual liability for T&E transactions
— Detailed reconciliation process must be put in place to ensure any personal
expenses placed on the card are correctly accounted for and not paid by
the employer
• Spend will have to be categorized (procurement versus travel and entertainment)
to assist in estimation of sales and use tax obligations
— Spend categorization is usually done using information found in Merchant
Category codes (MCCs)
• Issuers may be able to provide greater product functionality on separate
card programs
• While Visa Commercial One card programs are intended to reduce the number
of cards in the hands of employees, in many cases, the same employees do not
make both T&E and indirect procurement purchases
Best practice companies develop specific, achievable, short- and long-term goals for
their Visa Commercial One card programs. They align these goals with their overall business
strategy and ensure that they are consistent with their procurement and travel policies.
Best practice companies periodically review these goals to ensure their achievement.
Leading companies analyze the costs and benefits of each available program, taking
into consideration product variations between Issuers (i.e., financial institutions or other
Issuer) and card providers (e.g., Visa, MasterCard).
Companies compare Issuers based on the following factors:
• Current bank relationships
• Financial arrangements
• Industry reputation
• Card management and administration tools:
— Templates to assist with implementation (e.g., policies and procedures)
— Integration of card data with financials or ERP
— Online account administration
— Online reporting capabilities
— Expense reporting management tools
— Program expansion tools
— Best practices benchmarking tools
continued on next page
Best Practice 3
Commercial Card Program
57
Benefit Obtained: Vendor Management
Amount of Benefit: High
Rationale: Thorough review of card program
enables company to select a card that provides the
needed vendor acceptance and provides greatest
data for vendor management and negotiations
Best Practice 3
CommercialCard Program
Source, select, and implement a Visa Commercial One card programcontinued
• Knowledge/experience of card sales personnel and ability to provide
consultative services
• Customer service levels (e.g., service level agreements, proactive relationship)
Companies compare card providers based upon the following factors:
• Merchant/supplier acceptance
• Standard transaction cost charged to merchants for transaction processing
IMPLEMENTATION
ACTION STEPS:
1. Establish goals and
objectives for the
Visa Commercial One
card program
2. Create cross-functional
team of key stakeholders
to participate in card
selection process —
at a minimum include
both procurement and
A/P personnel
3. Develop request for
proposal and distribute
to Issuers
4. Evaluate Issuer responses
against Visa Commercial
One card goals and
objectives and select
Issuer based upon ability
to meet those goals and
objectives
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Sourcing for an appropriate card
program ensures the greatest possible cost savings
Benefit Obtained: User Satisfaction
Amount of Benefit: High
Rationale: Having a Visa One card program
consolidates management and administration and
eliminates end-user confusion over which card to
use for which type of spend
MARKET APPLICABILITY: All Companies
Benefit Obtained: Control
Amount of Benefit: Medium
Rationale: Ensures that the selected card
program has the appropriate controls in place
IMPLEMENTATION SUCCESSES and TRENDS
• Three participating companies decided to implement a commercial one card solution todecrease employee confusion and take advantage of a standardized technological platform.Through an internal survey of end users, one of the companies determined that end users withmultiple card needs found it confusing to manage separate cards — i.e., trying to figure out whichcard to use. This in turn decreased the card’s appeal and resulted in lower card usage. The simplicity and convenience of its commercial one card program, however, increased thecompany's internal acceptance and satisfaction with the payment mechanism.
• As a result of an acquisition, one company was employing all card programs, includingpurchasing, T&E, Fleet and commercial one cards. Taking advantage of the opportunity toconsolidate and automate the preferred practices of the merged entities, the company found theone card program was an effective means of capturing total spend and intends to move all cardprograms to that platform.
• Two participating companies implemented a commercial one card in an effort to move all low-dollar invoices from invoices and purchase orders to card transactions. Satisfied with thebenefits of their commercial one card programs, the companies are looking for other spendcategories to migrate onto the card. For example, one company is currently looking at moving itsfleet expenditures onto the card.
Companies must first determine whether or not they have a need for a Visa Fleet
card program. Companies that have a pool of vehicles or provide company cars are
candidates for a Visa Fleet card program.
Leading companies that implement a Visa Fleet card program conduct a thorough
sourcing analysis to ensure that the selection of a Visa Fleet card will achieve program
objectives. Companies should consider the following when selecting a Visa Fleet
card program:
1. Assess fleet mix and use of that fleet mix:
• Allocation by vehicle: These companies tend to have a pool of vehicles that have
rotating drivers, perhaps due to shift work or high turnover. The drivers don’t have
personal resources to pay and companies do not want to distribute petty cash.
• Allocation by driver: These drivers are typically management/supervisors,
operations, or sales individuals that have access to a company vehicle. Companies
in this situation also consider expanding the spend permitted on the card beyond
the traditional fleet expenditures to include travel and purchasing needs into a
single card.
2. After completing the initial assessment of the company’s require-ments for a Visa Fleet card program, fleet managers should comparethe features and options available through the various card programs:
• Merchant acceptance: Merchant acceptance is not just an issue of user
convenience. With increased merchant acceptance, costs are reduced as drivers
have a greater ability to select the lowest price fuel and do not need to divert off
the travel path to get to a particular gas station.
• Cost of card or available discounts: Compare fees associated with cards and
available discounts (e.g., discount on price per gallon over a specified volume of
gas purchased).
• Data and reporting: Compare the reporting features available through various
programs and against Visa Fleet card program objectives. Issuer reports provide
the specific information necessary to perform accounting functions, manage
programs, ensure effective negotiations with vendors, and control and audit
expenditures.
continued on next page
Program Foundation
Source, select, and implement a Visa Fleet card program
Best Practice 4
Commercial Card Program
Section II
Best Practices
58
59
Benefit Obtained: User Satisfaction
Amount of Benefit: High
Rationale: End users often find it easier to
use a Visa Fleet card, as there is no need to
process the purchase through an expense report
for reimbursement; high user convenience for
cards that have wide merchant acceptance
Best Practice 4
CommercialCard Program
Source, select, and implement a Visa Fleet card program continued
IMPLEMENTATION
ACTION STEPS:
1. Review goals and
objectives for the Visa
Fleet card program
2. Create cross-functional
team of key stakeholders
to participate in card
selection process — at a
minimum, include fleet
manager and procurement
and A/P personnel
3. Develop RFP and
distribute to Issuers
4. Evaluate Issuer responses
against commercial card
goals and objectives and
select Issuer based upon
ability to meet those
goals and objectives
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Optimizes maintenance schedules,
reduces excessive or inappropriate spending
MARKET APPLICABILITY: Companies With Fleet Vehicles
Benefit Obtained: Vendor Management
Amount of Benefit: Medium
Rationale: Provides additional vehicle data for
use in vendor negotiations
Benefit Obtained: Control
Amount of Benefit: High
Rationale: When cards are assigned to a single
vehicle, it increases ability to audit for
inappropriate usage — e.g., multiple fuel charges
in a single day to a single vehicle raises a flag
• Exception reporting: These reports are used to identify “exceptions” to fleet
policies, practices, and budgets by flagging potentially inappropriate use of the
Visa Fleet cards (e.g., volume of fuel per day exceeded).
• Program controls: Compare the controls available through programs (e.g., ability
to restrict spending by MCCs, ability to require input of an ID number each time
the card is used).
IMPLEMENTATION SUCCESSES and TRENDS
• One company used a card program that included reporting of fuel type. Three percent of itsvehicles required premium fuel; however, reporting demonstrated that 23 percent were actuallypurchasing premium fuel. This data enabled the company to reinforce policy, which directlyreduced unnecessary costs.
• One study participant selected its Fleet card provider based on merchant acceptance. Merchantacceptance was a priority because the company had estimated, based on the hourly wages of adriver, that each time its drivers had to locate an alternate gas station the cost was $33.Therefore, the company chose a Fleet card program with the largest number of gas stationsaccepting the card.
• Through implementation of a card program with broad merchant acceptance, this company wasable to reduce the need for drivers to divert off the travel path to refuel. This directly impactedthe cost of travel, as this company calculated that a 1 percent reduction in miles driven results in a $14.50 savings.
A commercial card program should be consistent with, and implemented as part of,
the company’s overall Procure-to-Pay strategy. Procure-to-Pay strategies typically have
the following objectives: reduce transactions costs, improve vendor management,
increase controls, and enhance user satisfaction. Best practice companies ensure
specific commercial card performance measures are in place to correlate to Procure-to-
Pay objectives. Measurements can include: purchase transaction cost, invoice payment
cost, spend on card, and user satisfaction data.
Additionally, the companies periodically review their card program objectives and
performance for continuous improvement purposes.
Program Foundation
Align commercial card program objectives with company’s overall Procure-to-Pay strategy
Best Practice 5
Commercial Card Program
Section II
Best Practices
60
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Ensuring that commercial card program
goal setting and tracking is performed in conjunction
with Procure-to-Pay performance measures will
facilitate greater management control of objectives
IMPLEMENTATION
ACTION STEPS:
1. Review corporate/
procurement mission
and vision statement;
review current
Procure-to-Pay policy
2. Develop simple commercial
card goals and objectives;
highlight objectives that
can be modified as the
program evolves or as
business needs change
3. Ensure that goals are
measurable and attainable
(e.g., reduction in invoice
volume, increase in card
penetration, reduction of
number of suppliers)
4. Build in flexibility to allow
modification according
to specific division/unit/
country needs
5. Communicate goals and
drivers for each goal or
objective to cardholders
and managers
6. Track these goals for
continuous improvement
efforts; publicize successes
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Leveraging cards as part of an overall
company strategy assists companies in using the
most efficient and cost-effective method for
purchasing and payment
MARKET APPLICABILITY: All Companies
IMPLEMENTATION SUCCESSES and TRENDS
• One study participant had a strategic initiative to reduce the overhead cost of its transactionalprocurement functions and reallocate resources to other parts of the company. Throughimplementation of a purchasing card program, it was able to reduce A/P headcount by 75 percent from 135 to 45 personnel over a four-year span.
• Another study participant was able to meet its company’s productivity goals of reducing manualprocess of paper invoices by increasing the volume of transactions on the card by 40 percent,which enabled its A/P personnel to focus on more strategic activities.
61
Obtaining senior management (e.g., business unit lead, senior or executive vice
president) support of and involvement in the implementation, administration and
championing of the Commercial card program is often critical to maximize the card
program’s benefits. In fact, one-third of the study participants indicated the lack of
senior management support and involvement as the most significant barrier to card
expansion.
Companies have successfully obtained and maintained senior management
involvement in the program by educating them about card use benefits and by
identifying ways senior management can demonstrate their support for the program.
Best practice companies often ask senior management to demonstrate commitment
to the program through the following:
• Integration of card use into business planning: Establishing and tracking
business unit goals for Commercial card use jointly with procurement and the
business units
• Inclusion of card use goals in management bonus plan: Including goals for
Commercial card use within management’s financial rewards program
• Communication: Sending an email or memo to employees advocating or
mandating use of the card and detailing the benefits of the program
• Training: Participating in card program training to display support of and
involvement in the card program
• Card program enforcement: Supporting and enforcing the stipulations of
non-compliance according to program policies and procedures
Finally, some best practice companies have found that an organizational structure
which allows program administrator access to senior management, such as a dotted
line relationship from Accounts Payable to the CFO, can be very effective for obtaining
senior management time and support for the program.
continued on next page
Program Foundation
Obtain active senior management promotion of and involvement in the commercial card program
Best Practice 6
CommercialCard Program
Section II
Best Practices
62
Best Practice 6
Commercial Card Program
Obtain active senior management promotion of and involvement in the commercial card programcontinued
Visa Commercial One card programs have the following benefits: increased
negotiating leverage and streamlined relationship maintenance with the card provider;
reduced number of card accounts managed, particularly for companies with a high
degree of purchasing and T&E cardholder overlap; and streamlined card administration.
The Visa Commercial One card benefits must be balanced against the following
considerations: complexity of spending controls and reconciliation and single liability
structure requirement.
The following can enhance the success of a Visa Commercial One card implementation:
split liability/diversion billing by MCC code; single unified method of allocating and posting
card transactions; streamlined receipt retention policies; and tax compliance process.
IMPLEMENTATION
ACTION STEPS:
1. Develop a cross-
functional team to form
communication initiative to
share benefits of the card
program with
senior management
2. Identify areas in which sen-
ior management or busi-
ness unit involvement can
further promote or enforce
use of the card
3. Develop a plan for
senior management or
business unit involvement
(e.g., communication
through email,
involvement in training)
4. Schedule periodic review
meetings with senior
management to ensure
ongoing participation
and support
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Senior management and business
unit support of the card program encourages appro-
priate use of the card, resulting in anticipated card
program cost savings and process efficiencies
MARKET APPLICABILITY: All Companies
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Involvement of senior management and
business unit leaders in the card program
provides visibility into card program compliance and
discourages misuse of the card
IMPLEMENTATION SUCCESSES and TRENDS
• One large market company was able to obtain CFO involvement in card program communication.During card training, new hires were required to watch a video in which the CFO holds the cardand explains why it is necessary and beneficial to use it.
• The CFO at a high-tech manufacturer has communicated to all employees through an emailmemo that use of the Corporate card is mandated for all cardable purchases.
• One construction company was able to garner business unit support for the card programthrough constant interaction with site managers, utilizing:
— Articles in the corporate newsletter— User satisfaction surveys
63
Center-led oversight facilitates standardization of the commercial card program.
While card requirements and restrictions may vary slightly based upon business unit
procurement needs, the overall program will be consistent across the company. This
best practice approach reduces cardholder confusion and reinforces compliance with a
consistent corporate policy.
The majority of study participants reported centralized management of the
commercial card program. Development of commercial card policies and procedures,
vendor management and Strategic Sourcing, creation of training programs, and
program scorecard creation and management are activities performed centrally.
Large or geographically dispersed companies often have centralized oversight with
programs administered by location-specific representatives. These representatives are
typically responsible for the following: location-specific reporting, reconciliation, training
delivery, and response to end-user inquiries.
Program Foundation
Establish center-led management and administration of the commercial card program
Best Practice 7
CommercialCard Program
Benefit Obtained: User Satisfaction
Amount of Benefit: Medium
Rationale: Improves employee awareness of appro-
priate personnel to contact for questions
and issues
IMPLEMENTATION
ACTION STEPS:
1. Position the commercial
card program in a
centralized function that
has visibility and access
senior management
2. Analyze the need for
centralized management
to be supplemented with
site-specific representatives
3. Communicate the appropriate
points of contact for the
commercial card program to
cardholders; make contact
list available on company
intranet and/or distribute
updates to cardholders
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: Medium
Rationale: Facilitates employee awareness and
understanding of commercial card program which
increases card usage
MARKET APPLICABILITY: All Companies
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Facilitates standardization of card
program; increases employee awareness of
program, which improves understanding of
program importance and potentially increases
spend placed on cards
IMPLEMENTATION SUCCESSES and TRENDS
• Several best practice companies directly attributed the success of their purchasing card programto having dedicated and attentive administrators. One company has credited its administrator formore than doubling the card distribution and usage (from 2,000 to 4,100 users) over a four-yeartime period.
• 65 percent of surveyed companies centralized the card program administration in procurementand 31 percent place it in Finance/Accounts Payable.
Leading companies document commercial card policies and procedures to
communicate the appropriate use of the commercial card to cardholders. The policy
should provide clear guidelines and be widely disseminated. Cardholders are more likely
to use cards for eligible purposes if they understand what the eligible purchases are
and how policy and procedural compliance fits with the overall company strategy.
Companies report a variety of reasons why they have implemented card programs,
and their policies reflect these objectives.
A commercial card policy should contain the following content by commercial
card type:
• Commercial card objectives
• Cardholder responsibilities
• Approving manager responsibilities
• Credit/transaction/spending limits
• Ordering process/eligible purchases
• Record-keeping/reconciliation
• Security and liability
• Auditing procedures
• Restricted transactions
• Dispute resolution
• Lost card procedures
• Cardholder agreement form
• Card activation
• Training
continued on next page
Program Foundation
Develop and disseminate enterprise-wide commercial card policies and procedures
Best Practice 8
Commercial Card Program
Section II
Best Practices
64
65
Benefit Obtained: User Satisfaction
Amount of Benefit: Medium
Rationale: Clear guidelines empower cardholders
to use cards appropriately; use of cards is more
convenient than purchase orders
Best Practice 8
CommercialCard Program
Develop and disseminate enterprise-wide commercial card policies and procedurescontinued
IMPLEMENTATION
ACTION STEPS:
1. Review corporate/
procurement mission and
vision statement; review
current Procure-to-Pay Policy
to understand how
a commercial card meets
policy objectives
2. Develop and disseminate
a policy to address the
commercial card program
selected, including the items
listed to the right
3. Review policy and update
periodically as needed
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Clear guidelines empower
cardholders to use cards appropriately,
ensuring expected savings are achieved
MARKET APPLICABILITY: All Companies
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Policies document and communicate
expectations and control mechanisms to
managers, administrators, and cardholders
Best practice companies develop training materials with relevant information and
mandate that employees receive appropriate commercial card training prior to card issue.
Strong policies and procedures must be established as the foundation for the
training effort. Fundamentals of a training program include goals, type of trainees,
content per trainee, and formats for delivery. The training goals should be matched
to trainee type:
continued on next page
Program Management
Incorporate a comprehensive commercial card training program
Best Practice 9
Commercial Card Program
Section II
Best Practices
66
Trainee Type
Executive
Super User
Approver
Cardholder
Trainee Definition
Designated to be a senior vice president or above
Heavy use of card for purchasing with reconciliationapproval responsibilities
Infrequent need to requisition;primary role to be approval of requisitions
Use of card for purchasing, with little approval capability
Trainee Goals
Card program awareness
Detailed commercial card policies and procedures training
Overview of commercial cardpolicies and procedures anddetailed training on approvalprocesses
Overview of commercial card policies and proceduresand detailed training on eligible purchases
67
Best Practice 9
CommercialCard Program
Incorporate a comprehensive commercial card training programcontinued
Other training materials can include Quick Reference Cards that summarize the
critical training topics and are posted at employees’ desks.
continued on next page
There are multiple training delivery formats. Best practice companies analyze
each format and determine the appropriate mix for the organization and trainee types.
Delivery formats include: virtual training (e.g., webcasts), classroom training, and
self-study. Each delivery format has its advantages and disadvantages.
Delivery Format
Virtual
Self-study (computer
based-training)
Classroom via train the trainer
Advantages
• Enables virtual classroomsetting
• Enables deep buy-in and accountability
• Scalable and repeatable
• Low cost
• Ensures consistent presentation of materials
• Best for geographically dispersed organizations
• Scalable and repeatable
• Low cost
• Training facility not required
• Can be completed attrainee’s own pace
• Enables center-led design and decentralized execution of training program
• Enables face-to-face interaction
• Preferred style of learning
Disadvantages
• Presents new learning style
• Requires knowledge ofintranet technology
• Assumes companies have intranet
• Requires trainee to independently access and complete the training
• Eliminates face-to-facehuman interaction
• Expensive
• Not easily repeatable
• Potential for inconsistent presentation of materials
• Requires training facilities
Section II
Best Practices
68
Incorporate a comprehensive commercial card training programcontinued
Best Practice 9
Commercial Card Program
IMPLEMENTATION
ACTION STEPS:
1. Identify trainee types
2. Match training content and
delivery modes to each
trainee type
3. Execute training program
4. Review the training program
for effectiveness (policy
compliance) and relevance
(end-user evaluations)
5. Periodically update training
program according to
changes in policies and
procedures
IMPLEMENTATION SUCCESSES and TRENDS
• A survey respondent had a dedicated purchasing card training program and directly linked this tothe successful penetration and expansion of the card program, as cardholders understood thebenefits and were empowered to use the card.
• One survey respondent directly attributed increased purchasing card usage to incorporatingpurchasing card training into its new-hire training program.
• During training, one company distributed a “Pink Book” that contained its procurement policy.This brightly colored manual was used as an easily recognizable, quick-reference tool forunderstanding how to use the card.
Benefit Obtained: User Satisfaction
Amount of Benefit: Medium
Rationale: Empowers employees to comply with
policies
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: Medium
Rationale: Reduces costs through compliance
MARKET APPLICABILITY: All Companies
Benefit Obtained: Vendor Management
Amount of Benefit: Medium
Rationale: Increases the likelihood of choosing
approved vendors
Benefit Obtained: Control
Amount of Benefit: Medium
Rationale: Increases the likelihood that
established policies and procedures will be used
69
Benefit Obtained: User Satisfaction
Amount of Benefit: High
Rationale: Ensuring that appropriate personnel
have cards improves satisfaction with procurement
process; individuals who do make purchases appre-
ciate the convenience of the card
Best Practice 10
Commercial Card Program
Leading companies ensure that Visa Purchasing cards are distributed appropriately.
These companies develop criteria for distribution of cards that are consistent with
company culture, policies, and spend parameters for card-eligible purchases. Issuing
cards to the right people and encouraging use of the cards is key to the success of a
Visa Purchasing card program.
Distribution of cards should be wide enough to ensure all regular purchasers of
card-eligible purchases have a Visa Purchasing card or have access to a department-
designated card. Best practice companies identify designated buyers who will use the
card on a frequent basis, typically called “super users.” Super users are individuals who
may be responsible for all purchases for a business unit or facility. In addition, they may
be the primary point-of-contact for a particular type of purchase (e.g., furniture, event
planning, computers). These users often become the largest supporters of the card and
can encourage issuance to additional users. In order to identify regular purchasers,
conduct a review of purchase orders, petty cash distributions, and check requests.
IMPLEMENTATION
ACTION STEPS:
1. Develop criteria for
distribution of cards that
is consistent with company
culture and policies; review
purchase orders, petty
cash distributions, and
check requests to identify
typical purchasers at your
organization
2. Distribute criteria for
card issuance as part
of procurement and
purchasing card policies
3. Distribute cards to
“super users” and other
identified purchasers
4. Solicit feedback from
cardholders and managers
to ensure appropriate
distribution; e.g., if a
cardholder is regularly
making purchases for
another employee,
that employee may
require a card
5. Review activation reports
to identify individuals who
have not activated cards
after issuance; these
individuals are likely to be
Visa Purchasing card-
eligible items through
other methods. Particular
attention should be paid
to this during rollout of
a new card program,
as there may be some
resistance to change
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Distribution of cards to those who
regularly purchase items ensures that the
maximum number of eligible purchases go
through the cards, reducing transaction costs
associated with purchase orders and petty cash
MARKET APPLICABILITY: All Companies
Benefit Obtained: Control
Amount of Benefit: Medium
Rationale: Increases control by placing cards in the
hands of the appropriate employees
IMPLEMENTATION SUCCESSES and TRENDS
• Survey respondents reported that identification of the appropriate purchasers — and distributionof purchasing cards to those individuals — directly led to the success of their card programs.
• Leading companies regularly review inactive card and card activation reports to identify cards that are not being used. Companies reported that this information was used to identify individuals who did not need cards, needed additional education on use, or neededencouragement to transition to a new process.
• One company that gave cards to designated users was able to move 100,000 transactions frompurchase orders to purchasing cards.
Program Management
Establish Visa Purchasing/Visa Commercial One card issuance criteria for optimal distribution to employees
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Increases compliance with criteria for
placing eligible spend on commercial card
IMPLEMENTATION
ACTION STEPS:
1. Regularly communicate
which purchases are
eligible for purchasing
on Visa Purchasing cards
2. Review purchases made
through other methods
(e.g., purchase orders)
to determine whether
purchases should have
been made on a card
3. Notify cardholders and/or
management when
purchases should have
been made through a
Visa Purchasing card
4. Communicate benefits of
and successes associated
with use of cards
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Increased use of the card for eligible
purchases reduces transaction costs associated
with those purchases and overall program costs
MARKET APPLICABILITY: All Companies
Best practice organizations mandate and enforce use of commercial cards.
Consolidating eligible spend onto Visa Purchasing cards improves the organization’s
ability to achieve cost savings and control maverick spend.
Companies should decide how to enforce compliance to their prescribed use of the
purchasing cards. Some companies strongly encourage usage through education and
compliance reporting, while other companies mandate usage and charge those
business units not in compliance with the cost of purchase order generation. Some
companies have elected to reward business units by passing cost savings back to the
business unit. Each company must determine how best to encourage Visa Purchasing
card usage for eligible transactions based upon their culture.
Program Management
Mandate and enforce use of Visa Purchasing/ Visa Commercial One card for all eligible purchase
Best Practice 11
Commercial Card Program
Section II
Best Practices
70
IMPLEMENTATION SUCCESSES and TRENDS
• Survey results indicate that 68 percent of the respondents either mandate or strongly encouragethe usage of their purchasing cards to maximize savings.
• One survey participant distributed purchasing card spending goals to all business units togenerate competition to increase eligible spend placed on the card.
• Another survey respondent reported that encouragement and communication worked with allbut one business unit. To force compliance, the procurement department declined to pay theinvoice and forwarded it to the business unit to figure out how to pay the vendor.
• One survey participant declined purchase requisitions for items that met criteria for purchasewith the purchasing card. This significantly reduced the number of purchase orders beingprocessed at the company and increased eligible spend on the purchasing card.
• Mid-size companies have reported that declining check requests and decreasing petty cash onhand have resulted in increased use of commercial cards for eligible purchases.
• One company mandated use of the commercial card for all eligible spend. If cardholders did notfollow policy, they were given a warning after the first violation and then incurred increasingcharges back to their business units for each additional violation.
71
Best Practice 12
Commercial Card Program
Virtual accounts are commercial cards associated with one department or vendor,
regardless of the particular end user making the purchase. The two most common
examples of virtual accounts are ghost accounts and department cards. Ghost accounts
are master accounts with no associated physical card. A department card is a plastic
card that is assigned to a specific group within the company. With both cards, purchases
are charged to an individual commercial card account number, which can only be
accessed by designated purchasers.
Best practice companies leverage virtual accounts as part of their overall Visa
Purchasing card strategies. Consolidation of spend onto virtual accounts reduces
administration of purchase orders, various card programs (e.g., virtual accounts can be
substituted for supplier cards), and multiple card statements.
Examples of spend categories that are typically handled through virtual accounts:
• Recurring charges through service companies, such as monthly bills for shredding,
cleaning, telephone/pager services, rent, and utilities
• Services, such as temporary services, catering, and copier maintenance
• Events planning expenses, such as hotels and transportation for marketing or
training functions
• Capital items for projects, such as technology equipment
Ghost accounts are a particularly effective and efficient method of payment for
e-Procurement purchases, as they provide settlement convenience: a single Electronic
Funds Transfer (EFT) payment for multiple charges instead of numerous individual
checks. Ghost accounts should be set up for each e-Procurement supplier with high
levels of spend. For both e-Procurement and standard purchasing, this approach
minimizes administrative work because the company will manage fewer accounts,
compared to establishing an account for each buyer.
For ghost accounts, the vendor typically maintains the card number at its location to
be charged at time of each purchase or on a monthly basis. Ghost accounts reduce the
risk of late payments, reduces burden on A/P to pay recurring monthly bills, and
increases vendor satisfaction with timely payment.
continued on next page
Program Management
Maximize use of Visa Purchasing/Visa Commercial One card virtual accounts
Section II
Best Practices
72
Benefit Obtained: User Satisfaction
Amount of Benefit: High
Rationale: Eases both the order placement and
payment processes; increases vendor satisfaction
through timeliness of payments
Maximize use of Visa Purchasing/Visa Commercial One card virtual accountscontinued
IMPLEMENTATION
ACTION STEPS:
1. Evaluate current spend
and identify suppliers or
commodities to target for
virtual card programs
2. Leverage Issuer
experience to implement
and manage a virtual card
program
3. For current suppliers,
coordinate transition to
ghost accounts
4. Determine data
requirements and
communicate to vendor(s)
5. Finalize requirements for
reconciliation purposes
and communicate to
purchaser/cardholder
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: Medium
Rationale: Use of ghost accounts reduces time for
reconciliation and settlement of transactions
MARKET APPLICABILITY: All Companies
Benefit Obtained: Vendor Management
Amount of Benefit: Medium
Rationale: Maintaining a single vendor and/or
commodity on a ghost account allows for improved
tracking of spend with the supplier(s)
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Use of back-end audit maintains the
controls on these purchases; improved controls can
be achieved through reporting on the card account
(e.g., companies can review monthly charges for
variance and month-to-month
variance); enables greater management of
departmental or commodity-based spend
Best Practice 12
Commercial Card Program
IMPLEMENTATION SUCCESSES and TRENDS
• Half of the survey respondents use virtual accounts.
• One study participant has significantly leveraged use of the ghost account program for allpossible recurring expenditures, including catering, telephone, cellular phone, pagers,shredding, and maintenance that significantly improved the reconciliation process and vendornegotiations by placing all spend with each vendor on a single account. The transition alsoresulted in a significant reduction in the number of invoices and purchase orders.
• One survey respondent implemented e-Procurement and ghost accounts with designated vendors(e.g., computer provider). Ghost account use facilitated issue resolution and expedited payment.
73
Best Practice 13
Commercial Card Program
Leading companies incorporate continuity planning into all business operations
and leverage commercial cards as part of their plan. Business disruption causes may
be minor (e.g., system outage) or catastrophic (e.g., natural disaster), yet the use of
commercial cards as part of this process can facilitate continuing business
operations. Visa Purchasing cards and T&E cards can be alternate forms of purchase
and payment for transactions and additionally be used as a cash management tool or
for immediate access to credit. Credit limit increases may necessitate coordinating
with your Issuer.
Study participants regularly reported use of commercial cards to remedy
unexpected circumstances.
Program Management
Incorporate commercial cards into business continuity planning
Benefit Obtained: User Satisfaction
Amount of Benefit: High
Rationale: Enables employees to use Visa Purchasing
cards to handle unexpected business events; reduces
employee stress with resolving these issues
IMPLEMENTATION
ACTION STEPS:
1. Include use of commercial
card in contingency
planning documents as
an alternate form of
purchase and payment
2. Detail commercial card
use in the event of a
business disruption in the
commercial card policy
3. As part of communication
of Visa Purchasing card
successes, tips, and
updates, include use of
card to resolve continuity
or emergency issues
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: Medium
Rationale: Reduces need to process emergency
cash advances and check requests
MARKET APPLICABILITY: All Companies
Benefit Obtained: Control
Amount of Benefit: Medium
Rationale: Enables employees to manage business
needs despite unforeseen circumstances
IMPLEMENTATION SUCCESSES and TRENDS
• One New York City-based study participant reported that use of its commercial card allowed it tofacilitate business continuity when the events of September 11 impacted its purchasing andpayment technology infrastructure.
• At one company video equipment did not arrive in a timely fashion for use at a marketing event — employees were able to lease video equipment locally using a purchasing card and the marketing event continued as planned.
One of the most critical steps in establishing a Visa Purchasing card program is to
define well-thought-out parameters, such as identification of the appropriate commodity
and spend limits that encourage ease-of-use but allow for appropriate control.
Leading companies clearly define eligible commodities and spend targets for
Visa Purchasing card use. Companies surveyed differ by the commodity types eligible
for their card programs. Commodity-type allowance ranges from only office supplies, to
all indirect spend of a certain dollar value, to all capital and expense items. Companies
also differ by their established card spend targets, ranging from all items under $250
to all items under $5,000.
To determine the appropriate purchasing parameters, a company should undergo a
spend-analysis process. To begin, companies should analyze their A/P data to identify
spend patterns such as average spend and number of transactions by commodity.
Where possible, high-volume transactions or recurring transactions should be
transitioned to purchase through the card program. Companies should also analyze
current approval requirements (e.g., signature approvals, purchase requisitions) for
commodities and dollar amounts, to determine the items for which back-end audit
procedures can be leveraged to maintain controls. Finally, leading companies leverage
Issuer experience and knowledge in determining eligible purchases.
Once the commodities for card usage are determined, a spend target should be set.
Spend targets should be set at a dollar amount that enables cardholders to purchase
items that are frequently purchased in their eligible commodity groups.
Organizations should set credit limits that strike a balance between control and
ease-of-use. No single credit limit will be appropriate for every organization. Even within
organizations, different business units and levels of employees may have different credit
limits associated with their individual card accounts. Initial setting of credit limits should
incorporate an analysis of monthly purchase volumes, so the cardholder will be able to
purchase as required. Limits should be reviewed and adjusted on a periodic basis.
Finally, best practice companies optimize use of MCC blocking: they ensure that
appropriate purchases are not declined due to an MCC block but also restrict purchases
that are outside of company policy, such as purchases at jewelers or casinos.
continued on next page
Program Management
Establish parameters for eligible Visa Purchasing/Visa Commercial One card transactions leveragingappropriate controls
Best Practice 14
Commercial Card Program
Section II
Best Practices
74
75
Benefit Obtained: User Satisfaction
Amount of Benefit: Medium
Rationale: Clear guidelines empower the
cardholders to use cards appropriately
Best Practice 14
Commercial Card Program
Establish parameters for eligible Visa Purchasing/Visa CommercialOne card transactions leveraging appropriate controls continued
IMPLEMENTATION
ACTION STEPS:
1. Review spend and number
of transactions for each
commodity, division, and
role. Review current spend
and commodities on cards
2. Identify the high-end
dollar amount for typical
purchases; identify the
dollar amount for most
frequent purchases
3. Select commodities and
dollar amounts to target
for card program
4. Set card spend targets for
the various commodities,
divisions, and/or roles;
card spend targets should
be slightly higher than the
cost of the most frequent
purchases
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Conducting a thorough analysis of
spend to be placed on purchasing cards ensures
that goods and services are purchased through
the most cost effective method
MARKET APPLICABILITY: All Companies
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Spend parameters provide clear
guidelines for what items should be purchased
through cards
IMPLEMENTATION SUCCESSES and TRENDS
• One mid-size manufacturing company established a purchasing card spend target for allmanufacturing purchases up to $1,000. This step significantly reduced the number ofrequisitions processed by each manufacturing facility.
• Another study participant established spend targets of $1,000 within the manufacturing facilityand $5,000 for engineers, as the engineering group regularly purchased larger dollar items.
• One large corporate company places 60 percent of its procurement transactions, accounting for12 percent of its $11.4 billion of annual spend, on its purchasing card.
• Another large corporate company places 49 percent of its $30.5 billion of annual spend on itspurchasing card.
• One company reviewed credit limits monthly during pilot and rollout and transitioned to quarterlyreview on an ongoing basis.
• One study respondent identified that procurement increases in the summer, so limits weretemporarily increased for that period of time.
The use of cards as a payment method can reduce purchase transaction costs and
settlement costs for organizations. Companies tend to focus on using cards only for
high-transaction, low-dollar items. While use of cards for this purpose provides
significant benefit, companies should also investigate expansion of use into other
spend categories, including recurring payments (e.g., phone, utilities), temporary
services, and computers.
To identify the spend categories that will provide the greatest benefit through
transition to a card program, look at ongoing vendor relationships and select vendors
with whom you have high transactions/spend or recurring payments. Issuers can assist
with analysis of A/P file, vendor targeting, and incorporation of data. Issuers also
provide services to help companies identify which suppliers within the company’s
vendor base already accept cards as a form of payment.
Recognizing the advantage of using Visa Purchasing cards as a payment method,
leading companies often require that their preferred vendors accept Visa Purchasing
cards as a form of payment. Companies also may use the following creative techniques to
encourage card acceptance: Identify large local companies that have implemented cards
and investigate use of the same vendors; develop a consortium relationship and leverage
the combined purchasing power of the group to encourage vendor acceptance of cards;
and incorporate card acceptance in the request for proposal (RFP) or bid process.
continued on next page
Program Foundation
Investigate Visa Purchasing/Visa Commercial One card expansion to additional spend categories to maximizebenefits achieved
Best Practice 15
Commercial Card Program
Section II
Best Practices
76
77
Benefit Obtained: User Satisfaction
Amount of Benefit: Medium
Rationale: Employees often find purchasing items
with cards easier and faster than completing a
requisition to generate a purchase order
Best Practice 15
Commercial Card Program
Investigate Visa Purchasing/Visa Commercial One card expansion to additional spend categories to maximize benefits achievedcontinued
IMPLEMENTATION
ACTION STEPS:
1. Review categories of
spend to identify target
areas for transition to card
program (e.g., recurring
charges, services,
temporary services,
projects, raw materials)
2. Request Issuer
conduct a supplier/
merchant matching to
identify which of your
vendors accept payment
by credit card to identify
additional commodities for
transition to card program
(i.e., The Visa Supplier
Matching Service)
3. For those vendors who
do not currently accept
cards as a method of
payment, request that they
begin to accept payment;
if necessary, use creative
methods detailed to
the right
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Increases ability of Visa Purchasing cards
to reduce transaction costs by eliminating additional
purchase orders and processing of paper invoices
MARKET APPLICABILITY: All Companies
Benefit Obtained: Vendor Management
Amount of Benefit: Medium
Rationale: Placement of additional spend
categories on cards enables reporting by vendor
through card program
Benefit Obtained: Control
Amount of Benefit: Medium
Rationale: By increasing the volume and
commodities purchased through the card,
companies achieve greater visibility to spend
and increased control in those areas
IMPLEMENTATION SUCCESSES and TRENDS
• One mid-size company leveraged its significant spend with local vendors to require theiracceptance of cards for payment.
• One company used its card program to expand spend to recurring payments for phone services,pager services, copier maintenance, shredding, coffee, flowers, catering, etc. Due to thefinancial success of this initiative, management continues to investigate opportunities to expandspend and has incorporated the requirement for acceptance of commercial cards in RFPs.
• Survey responses illustrate spend for a variety of commodities:
— Two mid-size manufacturing companies use the card for over 75 percent of hardware/software purchases
— One large corporate finance company uses the card for 100 percent of spend with temporaryemployees and contractors
— One large corporate services company uses the card for 80 percent of spend on packagingand shipping
Leading companies have recognized that fostering ongoing senior management
support (e.g., business unit lead, senior or executive vice president support) through
regular communication of card program performance can maximize benefits of the
card program.
Companies have successfully maintained senior management support by
developing regular and ongoing communication of the activities and successes of
the card program through an executive-level report, which can contain the following:
• Process metrics: Purchase order volume and trend, invoice volume and trend,
travel and entertainment volume and trend, Visa Purchasing card usage and trend
• Savings metrics: dollars saved through expanded use of the commercial card
• Lost savings: dollars lost through non-compliance with card policies and
procedures (e.g., maverick spend, low-dollar check payments)
• Current initiatives underway: high-level descriptions of efforts and
expected benefits
Companies have used innovative methods to share this information with senior
management. This includes creating unique presentations, assigning business unit
liaisons, and actively communicating successes through internal newsletters.
In addition to simply communicating successes, organizations have actually shared
their savings with their internal business customers to encourage further compliance
with policies and procedures.
continued on next page
Program Reporting
Share commercial card performance and savings reports with senior management to promote appropriate use of the card
Best Practice 16
Commercial Card Program
Section II
Best Practices
78
79
Best Practice 16
Commercial Card Program
Share commercial card performance and savings reports with senior management to promote appropriate use of the cardcontinued
IMPLEMENTATION
ACTION STEPS:
1. Develop cross-functional
team to form
senior management
communication initiative
2. Proactively identify
compelling and relevant
card program metrics
and review with senior
managers to determine
appropriateness
3. Develop communication
initiative with related-tools
(e.g., webcasts, report
layouts)
4. Adjust initiative to reflect
feedback as received
5. Schedule periodic review
meetings with senior
management to share
information and ensure
active participation
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Frequent communication of successes
and opportunities for improvement provides senior
management with the incentive to continue
support of cost saving card program activities
MARKET APPLICABILITY: All Companies
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Frequent communication of savings
from compliance and lost savings from non-
compliance with card program policies and
procedures encourages senior management
to promote compliance
IMPLEMENTATION SUCCESSES and TRENDS
• One organization tied management’s bonus objectives to achievement of procurement-relatedgoals. Because of this, the procurement department regularly reported its progress relative togoals and successes to the other business units in the organization.
• Another survey participant shared procurement performance numbers, such as cost avoidanceand cost savings, quarterly with his peers to obtain ongoing support of initiatives.
• One large market company’s Head of procurement is a member of the company’s seniormanagement team and thus provides procurement performance information at weekly planningand status meetings that include the company’s president.
• One study participant’s card program administrator provided to the Director of Finance a monthlyreport that contained major projects, training status, and department successes and savings.
Best practice companies use program expansion analysis tools and reporting
solutions offered by their card provider or Issuer to enhance the performance of
their commercial card programs. Card providers and Issuers offer a range of tools to
their clients to assist in the ongoing identification of savings opportunities and in
information management such as card program performance. These tools can be
categorized as follows:
• Online card program reporting tools can help companies make more informed
business decisions, streamline operations, and improve their bottom line.
Such tools often offer standard reports and customized reporting capabilities
that facilitate:
— Spend analysis
— Program administration
— Travel management
— Tax reporting
• ROI tools allow companies to estimate the financial benefits from implementing
or expanding a card program. These tools aid in quantifying the benefits of card
program growth, such as net process savings, which reflect any costs associated
with the implementation or expansion of the program
• A/Panalysis tools determine opportunities to grow the card program by identifying
vendors and spend categories in which card potential is not being met. Such tools
give a company a view of its spend and areas for card growth by looking at:
— Current spend by payment method
— Current check spend with card-accepting merchants,
categorized by transaction size
— Current card program compliance by vendor, business unit, or cost center
• Benchmarking tools assist companies in comparing the performance of their
Procure-to-Pay functions and commercial card program against best practice
companies to identify opportunities for strategic and tactical improvement
continued on next page
Program Reporting
Use Issuer or card provider analysis tools to review and improve your commercial card program performance
Best Practice 17
Commercial Card Program
Section II
Best Practices
80
81
Benefit Obtained: Vendor Management
Amount of Benefit: High
Rationale: Reporting tools allow a company to
review spend with key suppliers and use this
information for effective negotiations
Best Practice 17
Commercial Card Program
Use Issuer or card provider analysis tools to review and improve your commercial card program performancecontinued
IMPLEMENTATION
ACTION STEPS:
1. Meet with the Issuer
to discuss the tools
offered by the Issuer
and card provider
2. Work with the Issuer to
evaluate areas of the card
program requiring support
and identify which tools
assist in addressing
those needs
3. Work with the Issuer
to implement and
utilize the tools
4. Set quantifiable goals for
realizing the opportunities
identified by the tools
5. Continue ongoing
communication with the
Issuer to track progress
against the goals
6. Conduct periodic reviews
to identify new vendors to
target for expansion
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Reporting tools can simplify accounting
processes by enabling system integration of
transaction data; such tools can also reduce the
manual process of card statement reconciliation.
Card program analysis tools aid in identifying
potential process savings associated with card
program expansion
MARKET APPLICABILITY: All Companies
Benefit Obtained: Control
Amount of Benefit: Medium
Rationale: Visibility into cardholder spend is
increased through use of card reporting tools,
in particular through analysis of exception reports.
A/P analysis tools can track business unit
compliance with card program policies by
identifying spend mandated/strongly encouraged
for card use that is being paid by check
IMPLEMENTATION SUCCESSES and TRENDS
• One middle market company wanted to expand its card program in order to replace manualpayment processes with electronic and was able to use the results of the A/P analysis tool toidentify card program expansion targets to bring its spend on the card to its desired 25 percentof total spend benchmark.
• One large market manufacturing company implemented an initiative to pay all transactionsunder $1,000 with a card. The company wanted a mechanism to track compliance with itspolicy. It was able to use the A/P analysis tool to identify the business units that had the greatestcompliance success and those with the greatest leakage. The company was able to educatethose with the greatest leakage about the policy to increase compliance.
• ROI tools can typically quantify process savings from $15 to $70 per transaction due to cardexpansion based on how efficient processes are.
Benefit Obtained: Vendor Management
Amount of Benefit: Medium
Rationale: Enhances the ability to manage
suppliers and negotiate better pricing by keeping
closer record of fleet spending through reporting
IMPLEMENTATION
ACTION STEPS:
1. Assess need to track
internal expenditures
if a maintenance facility
or fuel pumps are
maintained internally
2. Coordinate with Issuer,
fuel supplier, and
equipment vendor
(e.g., manufacturer of
fuel pump) to set up
acceptance of the Visa
Fleet card through
internal sources
3. Establish a fee-based
relationship for internal
purchases (e.g., monthly
fee or per-transaction fee)
and fee percentage for
external purchases
Benefit Obtained: User Satisfaction/
Process Efficiencies
Amount of Benefit: High
Rationale: Vehicle operators find it easier to use a
Visa Fleet card for payments rather than use a T&E
card and process an expense report for the fuel or
maintenance purchase. Maintenance providers find
the use of a Visa Fleet card is simpler than traditional
paperwork used to allocate the cost to the vehicle
MARKET APPLICABILITY: Companies with fleet vehicles and internal maintenance and/or fuel facilities
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Provides a single tool for the internal
accounting of costs associated with the operation
and maintenance of a vehicle
Traditionally, Visa Fleet cards are used for transactions at external vendors.
However, many companies also have vehicle maintenance and operating needs that
are met through internal sources (e.g., company-owned fuel pumps). Typically, these
transactions are tracked through internal processes.
To address this concern, leading companies are implementing a process to use
Visa Fleet cards for purchases of fuel and maintenance from internal company sources.
For example, if a company has a business unit that provides maintenance on company
vehicles, this is a cost that should be allocated to the vehicle. This forward-thinking
approach enables companies to capture and track the true total cost of operating and
maintaining a vehicle through the Visa Fleet card program.
An additional benefit is the ability to maintain company-owned, unmanned fuel
pumps. These internal fuel pumps can be set up to accept only the Visa Fleet card.
Again, the total cost of the fuel used for operating the vehicle will also be captured.
Program Reporting
Use Visa Fleet cards to track expenditures through both external and internal sources
Best Practice 18
Commercial Card Program
Section II
Best Practices
82
IMPLEMENTATION SUCCESSES and TRENDS
• One company reports tracking external and internal fleet expenditures with the fleet card and the associated benefits of the comprehensive data it provides on each vehicle. Only one reporting tool is now required to analyze the total cost of ownership and operation of each vehicle.
• One study participant set up an internal repair shop for vehicle repair. The fleet card was used as the method of payment for internal repairs and provided significant assistance with internalaccounting for that repair shop.
Summary
The Procure-to-Pay process section describes the innovative practices that
companies use to support and enhance their procurement and payment functions. How
companies design and manage their process activities is critical to optimizing the
benefits of their Procure-to-Pay initiatives.
The process section covers all activities in the following areas:
• Sourcing
• Order placement
• Payment & settlement
• Reconciliation
• Control
• Reporting
Leading companies create value-added vendor relationships that meet their crucial
business requirements. They benefit from selection and monitoring of preferred vendor
relationships, design of beneficial contract terms, and interaction with suppliers using
new processes and technology such as e-Auctions.
Companies streamline their goods and services ordering process through practices
such as reducing the number of required approvals and decreasing the number of
purchase orders generated for orders. Through automation of the receipt and payment
of goods and services, companies have achieved benefits and efficiencies in payment
and settlement.
When reconciling invoices and statements, leading companies have automated
the receipt and validation of invoices and designed an optimal tax liability strategy.
These activities are supported and checked by a thorough and efficient process and
spend controls.
Leading companies ensure the effectiveness of their overall program and process
functions through the use of comprehensive data capture and reporting techniques.
This enables them to monitor their overall Procure-to-Pay function and seek opportunities
for improvement.
Procure-to-Pay Process
83
Section II
Best Practices
84
Procure-to-PayProcess
Sourcing
Best Practice 1
Best Practice 2
Best Practice 3
Order Placement
Best Practice 4
Best Practice 5
Best Practice 6
Payment & Settlement
Best Practice 7
Best Practice 8
Best Practice 9
Reconciliation
Best Practice 10
Best Practice 11
Best Practice 12
Control
Best Practice 13
Reporting
Best Practice 14
Best Practice 15
Best Practice 16
Optimize number of suppliers by selecting and monitoringvendors through a formal vendor management program
Incorporate Visa Purchasing/Visa Commercial One cardacceptance into preferred vendor contract terms
Utilize e-Sourcing tools such as e-RFX and e-Auctions tosource suppliers and gain savings on one-off items
Limit the number of approvals required to place an order
Minimize the use of paper purchase orders for all purchasing card-eligible purchases
Integrate the Visa Purchasing/Visa Commercial One card into the e-Procurement system as a method of payment
When commercial cards are not used, employ three-waymatching to reduce the number of approvals required prior to payment
Replace manual check payments with electronic payments
Use the Visa Purchasing/Visa Commercial One card to payinvoices received in Accounts Payable
Develop solutions that support the reporting and payment ofsales and use taxes
Work with your Issuer to receive commercial card statementselectronically with cost centers and G/L codes pre-defined tofacilitate end-user reconciliation
Outsource high-volume, specialized payment processes
Determine control strategy
Monitor procurement performance via a scorecard thatincludes cost, quality, and time components
Gain a comprehensive view of spend by integrating datafrom multiple sources (e.g., e-Procurement, travel, ERP, Visa Purchasing cards)
Leverage SIC and MCC codes for categorization of spend andpurchasing data
85
Best Practice 1
Procure-to-PayProcess
Leading companies have centrally administered, corporate-wide vendor
management programs to guide selection and ongoing management of vendors.
The program they design is often the cornerstone of a Strategic Sourcing effort.
Strategic Sourcing was the most frequently cited Procure-to-Pay initiative underway
by our survey respondents. Seventy-seven percent of respondents believe that they can
improve their Strategic Sourcing activities.
The interest in Strategic Sourcing is likely due to an understanding of the savings
potential of a well-designed and executed vendor management program. Our research
indicates that 78 percent of those companies, who have at least 70 percent of spend
under contract, believe that they are able to achieve significant supplier discounts. Those
companies that do not believe they achieve significant supplier discounts have only 37
percent of spend under contract.
Best practice vendor management programs consist of the following components:
• Vendor management program objectives:
— Strategic (e.g., number of contracts, use of minority- and woman-owned
businesses)
— Financial (e.g., percent of spend under contract, annual spend savings
per year)
• Contract term guidelines (e.g., when to utilize volume guarantees, contract length)
• Preferred vendor criteria:
— Product criteria (e.g., product performance, parts)
— Service level criteria (e.g., order replenishment turnaround,
maintenance timing)
— Fully loaded cost of doing business with a vendor (e.g., freight, taxes, etc.)
— Vendor automation criteria (e.g., ordering, invoicing, reporting)
— Collaboration expectations (e.g., order tracking, inventory levels, demand
forecasting, input into product design process)
— Commercial card acceptance
• Vendor performance monitoring and reporting against key criteria
continued on next page
Sourcing
Optimize number of suppliers by selecting and monitoring vendors through a formal vendor management program
Section II
Best Practices
86
Benefit Obtained: User Satisfaction
Amount of Benefit: Medium
Rationale: One objective of vendor management is
to obtain end-user vendor service expectations and
then monitor and report on user satisfaction with
preferred vendors’ performance
Optimize number of suppliers by selecting and monitoring vendors through a formal vendor management program continued
IMPLEMENTATION
ACTION STEPS:
1. Interview key stakeholders
to define company
objectives, scope, expected
benefits, and work plan
to support the vendor
management program
2. Present vendor
management program
charter to senior executives
to obtain program buy-in
3. Create cross-functional
team of key stakeholders
(e.g., A/P, procurement,
other procurement groups)
to develop vendor
management program
components
4. Once the program
components have been
determined, select initial
commodity types to target
for spend, supplier
analysis, and potential
contract negotiation
5. Continue to extend
analysis and vendor
rationalization effort
to additional commodity
types according to defined
vendor management
program objectives;
monitor existing preferred
vendor performance
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Enables supplier rationalization that
can increase supplier discounts and reduce cost of
“spot-buy” sourcing activities and maverick spending
MARKET APPLICABILITY: All Companies
Benefit Obtained: Vendor Management
Amount of Benefit: High
Rationale: A corporate-wide, centrally organized
vendor management program is the critical
component to successful vendor management
Benefit Obtained: Control
Amount of Benefit: Medium
Rationale: By having a well communicated and
disseminated program in place, companies increase
controls by ensuring employees make use of the
company-approved vendors, limiting rogue spending
Best Practice 1
Procure-to-PayProcess
IMPLEMENTATION SUCCESSES and TRENDS
• 79 percent of survey respondents determine their company’s preferred suppliers centrally,allowing them to understand aggregate supplier usage and improve negotiation efforts andvendor performance.
• One survey respondent changed the name of their procurement organization to Strategic Sourcingand Contracts to represent their focus on delivering value-added activities to their company.
• Several survey participants utilize cross-functional, commodity type-specific teams ofprocurement resources, business resources, and, where appropriate, third-party experts to conduct supplier analysis, rationalization, and contract negotiation.
• One large corporate survey participant has gained senior management and end-user support for vendor consolidation by demonstrating clear, substantial savings.
• One survey participant has the goal by year-end to consolidate 80 percent of its spend with1,500 vendors. Additionally, this company conducts annual Vendor Days to educate and align its vendors to the procurement goals for the year and vendor performance expectations.
87
Best Practice 2
Procure-to-PayProcess
IMPLEMENTATION
ACTION STEPS:
1. Include Visa Purchasing
card/Visa Commercial One
card acceptance in
preferred vendor selection
criteria
2. Review with vendors
rationale for the
requirement that they
accept Visa Purchasing/
Visa Commercial One cards
3. Finalize details of card
utilization and reporting
requirements
The utilization of cards as a payment method can reduce purchase transaction
costs and settlement costs for organizations. Card purchases do not require a
purchase order and payment of card statements, which have multiple transactions
per statement, can substantially reduce the number of paper invoices processed.
Additionally, end users are often pleased with the ease of use of a card versus the
requirement to generate a purchase order. The primary benefit to vendors is faster
payment of card purchases.
Recognizing the advantage of using Visa Purchasing cards as a payment method,
leading companies often require that their preferred vendors accept Visa Purchasing
cards as a form of payment. Also, where appropriate, they often work through the
details of vendor acceptance of virtual accounts, which are accounts set up in order to
charge transactions with one supplier/commodity-type to one account regardless of the
end user making the purchase. Finally, companies work with vendors to define the
transaction information, such as Level III data, that would like to receive from the
vendors to supplement their reporting and sourcing needs.
Sourcing
Incorporate Visa Purchasing/Visa Commercial One cardaccount acceptance into preferred vendor contract terms
Benefit Obtained: User Satisfaction
Amount of Benefit: Medium
Rationale: End users often find purchasing items
with cards much easier and faster than completing
a requisition to generate a purchase order
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Utilization of Visa Purchasing cards
reduces transaction costs by eliminating the creation
of purchase orders and processing of paper invoices
MARKET APPLICABILITY: All Companies
Benefit Obtained: Vendor Management
Amount of Benefit: Medium
Rationale: Vendor spend data is more accessible
through Visa Purchasing cards and/or commercial
one card is accessible
IMPLEMENTATION SUCCESSES and TRENDS
• 50 percent of the survey respondents who electronically requisition goods use the purchasing card as a form of payment for those orders. On average, they pay 30 percent of their transactions with a card.
• The three most frequently cited objectives of a purchasing card program by survey participantswere transaction cost reduction, settlement convenience, and user convenience. Implementationof these best practices facilitates achievement of these objectives.
• Several survey participants had the vendor commercial one card embedded in their order entrysystem, which provided further settlement convenience.
Leading companies are beginning to utilize e-Sourcing tools to automate and
improve their Strategic Sourcing process. The greatest benefits achieved through
e-Sourcing are reduced pricing of up to 30 percent, decreased vendor negotiation cycle
time, improved product/service quality, and improved decision-making. Seventeen
percent of survey respondents indicated that they have implemented an e-Marketplace/
e-Auction capability and an additional 22 percent responded that they plan to make
such an investment in the next two years.3
e-RFX tools automate and streamline the process of negotiating new supplier
agreements and renegotiating existing contracts. These tools handle more than just an
electronic request for quotation (RFQ) — they enable buyers to manage the creation,
packaging, and dissemination of RFQs, requests for proposals (RFPs), or requests for
information (RFIs) to prospective bidders. They also enable buyers to negotiate product
specifications and other terms and conditions to compare their responses to select the
best deal.
e-Auctions can be utilized to acquire new goods or dispose of excess inventory or
assets. Reverse auctions let organizations set a price ceiling they are willing to pay for
goods or services, which suppliers then can bid down, against each other, to fulfill.
Commerce networks — also known as e-Marketplaces, e-Markets, or e-Procurement
hubs — are Web-based business centers or sections of online business communities
designed to manage catalog content, broker transactions, and facilitate communication
between buyers and suppliers.
Commonly known e-RFX and e-Auction tools in the marketplace today include
Ariba’s Enterprise Sourcing, Commerce One’s Auction, B2e Markets’ B2eSourcing,
Clarus’ Auctions, and FreeMarkets’ QuickSource.
continued on next page
3 Aberdeen Group. “e-Procurement: Finally Ready for Prime Time.” March, 2001
Sourcing
Utilize e-Sourcing tools such as e-RFX and e-Auctions to source suppliers and gain savings on one-off items
Best Practice 3
Procure-to-PayProcess
Section II
Best Practices
88
89
Benefit Obtained: User Satisfaction
Amount of Benefit: Medium
Rationale: Drive improved quality and
product availability
Best Practice 3
Procure-to-PayProcess
Utilize e-Sourcing tools such as e-RFX and e-Auctions to source suppliers and gain savings on one-off itemscontinued
IMPLEMENTATION
ACTION STEPS:
1. Develop a business case
to project potential savings
and understand investment
that can be afforded
2. Define company objectives
for use of online RFX and
auction capabilities
3. Research commerce
networks and software
vendors to understand
their pricing, product
capabilities, and service
as compared to company’s
requirements
4. Select the process
and tool that will meet
company’s objectives
and ROI targets
5. Pilot selection with less
complex RFQs and/or
purchases
6. Expand the program
based on a channel
analysis that determines
which products and
services lend themselves
to selected online models
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: These tools often achieve better pricing
by enabling uniform price comparisons across
suppliers and increasing competition as a result
of a broader reach; additionally, procurement
productivity is enhanced by reducing administrative
time spent on creating and issuing RFQs and
negotiating with suppliers
MARKET APPLICABILITY: All Companies
Benefit Obtained: Accountability
Amount of Benefit: High
Rationale: Enable better vendor selection
decisions by imposing a structured process
to vendor negotiation
Benefit Obtained: Control
Amount of Benefit: Medium
Rationale: Automation provides better control
through bid comparisons and bid management
IMPLEMENTATION SUCCESSES and TRENDS
• Of the survey respondents that indicated they have implemented e-Marketplace/e-Auctioncapabilities, 38 percent of them are very satisfied with the technology, with the remainder beingsomewhat satisfied largely because they were still in a pilot phase of their implementation.
• One large corporate survey participant has used e-Auctions as a replacement for some one-offpurchase order transactions. They estimate that they will save $400 million using this practicenext year.
Leading companies design an approval process that balances the requirement to
exercise procurement controls with the desire to minimize the cost of a transaction.
Survey participants indicated that receiving approvals was the most time-intensive
activity when placing an order.
Companies often decide that low-dollar purchases ordered from an approved
vendor’s catalog do not need additional approvals during the ordering process.
However, large-ticket purchases and specialty items, such as IT equipment, often
require additional approvals due to their dollar size and unique characteristics.
With respect to Visa Purchasing card transactions, companies typically do not require
approvals prior to placing an order with the card and prefer to reconcile the card
statements on the back end by reviewing exception reports for non-compliance.
Ultimately, each company must match its approval process design to its culture.
Our research has shown that typical authority levels are:
continued on next page
Order Placement
Limit the number of approvals required to place an order
Best Practice 4
Procure-to-PayProcess
Section II
Best Practices
90
Type of Purchase
Indirect goods via a purchase requisition
IT purchases
Service contracts
Purchasing card transactions
Authorized Amounts
Up to $500
Up to $2,000
Up to $50,000
Up to $300,000
Over $300,000
Over $500
Up to $2,000
Up to $100,000
Up to $300,000
Over $300,000
Set by card parameters
Authority Levels
None required
Manager
Director
Vice President
CFO, CEO
IT Manager
Manager
Director
Vice President
CFO, CEO
All contracts over $20,000 must be reviewed by Legal.
Not applicable, although cardholder’s supervisor isrequired to sign all reconciled card statements.
91
Benefit Obtained: User Satisfaction
Amount of Benefit: Medium
Rationale: End users desire that their orders be
delivered to the vendor promptly
Best Practice 4
Procure-to-PayProcess Limit the number of approvals required to place an order
continued
IMPLEMENTATION
ACTION STEPS:
1. Review or document
current approval processes
2. Perform an analysis that
balances the need for
efficiency with the level of
control desired, e.g., review
average dollar value of
transactions, materials
purchased, capitalized
items, etc.
3. Conduct analysis to
determine opportunity to
revise approval process
4. Develop training around
revised approval process
that includes the business
justification for the change
5. Roll out the new process
and review/update on
regular basis
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Optimizing the number of approvals can
reduce the cost of placing an order with a vendor
by approximately $7 to $8 dollars4
MARKET APPLICABILITY: All Companies
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Designing an approval process with
appropriate checks and balances ensures the
desired control is included in the process
To accelerate the approval process, best practice companies often create approval
business rules in their electronic procurement and requisition systems to enable
automated and efficient approval workflows. Based on the requisitioner and item type,
these business rules are able to determine which approvals, if any, are required. These
rules should be updated regularly and/or linked to a human resources system that
holds the most up-to-date, pre-approved spend levels by person, usually based upon
titles and departments.
Additionally, while many spending authority limits are determined by level,
companies will give those persons in their departments who frequently order goods,
typically an administrative assistant, higher spending limits so that they can order for
their entire department.
4 Gartner Group. e-Procurement: A Blueprint for Revolution or Hype? February, 2000
IMPLEMENTATION SUCCESSES and TRENDS
• No approvals were required by survey respondents:
— for purchases under $100, 44 percent
— for purchases under $500, 33 percent
— for purchases under $1,000, 21 percent,
reducing the cost to process purchases at these companies.
• Many of the study participants do not require procurement department approval when an item isordered from a preferred vendor and has the appropriate number of business unit approvals.Procurement is only involved if items desired require sourcing, reducing the overall approvaleffort and streamlining the procurement process.
Benefit Obtained: User Satisfaction
Amount of Benefit: High
Rationale: End users find the process of using a Visa
Purchasing card much faster and easier than com-
pleting purchase orders; end users feel empowered
to quickly obtain goods necessary to do their jobs
IMPLEMENTATION
ACTION STEPS:
1. Examine current spend
payment-type; develop
a recommendation for
purchases that are better
placed on the card due to
their volume, vendor, or
dollar amount
2. Determine best way to
achieve compliance with
recommended card use,
based on company culture
3. Communicate purchasing
card usage policy to
end users
4. Monitor and report on
purchasing card usage,
including exception
reports: same account,
same vendor, same day;
lost savings; etc.
Continue to encourage
policy compliance
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Utilization of Visa Purchasing cards
reduces the costs associated with purchase order
creation and invoice processing by 65 percent
MARKET APPLICABILITY: All Companies
Research indicates that an order placed using a paper purchase order costs
$81.23, whereas an order placed via a Visa Purchasing card only costs $28.27.5
Recognizing the tremendous cost savings through placing orders on Visa Purchasing
cards, many companies have tried to minimize the use of purchase orders for
purchasing card-eligible purchases.
To minimize purchase orders, companies must first determine which transactions
are Visa Purchasing card-eligible. Some companies make this decision based upon
commodity type, while others determine this based upon the dollar size of the
transaction and/or the frequency of a certain transaction type.
Companies must also decide how to encourage compliance with the prescribed
use of the Visa Purchasing card. Some companies strongly encourage usage through
education and compliance reporting, other companies mandate usage and charge
those business units not in compliance with the cost of the purchase order generation.
Each company must determine how best to encourage Visa Purchasing card usage for
eligible transactions based upon its culture.
Order Placement
Minimize the use of paper purchase orders for all purchasing card-eligible purchases
Best Practice 5
Procure-to-PayProcess
Section II
Best Practices
92
IMPLEMENTATION SUCCESSES and TRENDS
• Recognizing the savings from reducing purchase orders through increased purchasing cardusage, one survey participant has mandated card usage for all purchases under $5,000. Toenforce compliance, the A/P department will identify non-compliant purchases and send a letterto those purchasers, warning that future non-compliant purchases will not be paid.
• Another survey participant, who mandates purchasing card usage for those purchases less than $500, will charge the non-compliant cost center the cost of a purchase order on the second non-compliant purchase and thereafter.
• A survey participant who has not established any purchasing card usage guidelines tracks andreports on purchasing card usage by department. Each department’s leader has a target level ofpurchasing card usage within their management bonus plan. It is up to that department leaderto determine how to meet the usage requirement.
5 Lehigh University. Reducing the Transaction Costs of Purchasing Goods and Services. March, 2001.
93
Best Practice 6
Procure-to-PayProcess
Best practice companies strive to achieve end-to-end Procure-to-Pay process
automation. These companies implement e-Procurement software to streamline and
automate their requisition, approval routing, and order-placement activities.
To automate the payment of an electronically ordered product or service,
companies can integrate the Visa Purchasing/Visa Commercial One card as one
effective method of payment. Card integration can be more efficient than check
payments as process steps such as invoice receipt and processing, manual
reconciliation, and check printing can be eliminated.
Best practice companies generally implement ghost cards (account numbers not
associated with a physical card) with their e-Procurement software. These cards are
assigned to a specific department or, more commonly, a specific vendor.
Below is a typical process companies have used to integrate the Visa Purchasing/
Visa Commercial One card into their e-Procurement system:
• Consult with the Issuer to format the card transaction file for integration into the
e-Procurement system; the card transactions will enter the system as if they were
electronic invoices
• e-Procurement vendors paid by card should be advised not to mail a
paper invoice
• As payment information is received, the system will mark the order and payment
as reconciled if the invoice amount is within a specified dollar or percentage
threshold of the purchase order (to account for shipping and taxes)
In addition to process efficiencies, using Visa Purchasing/Visa Commercial One cards
to pay e-Procurement purchases reduces risk of late payment to vendors and assists in
vendor management as spend by supplier can be consolidated on one card account.
continued on next page
Order Placement
Integrate the Visa Purchasing/Visa Commercial One card into the e-Procurement system as a method of payment
Section II
Best Practices
94
Benefit Obtained: Vendor Management
Amount of Benefit: Medium
Rationale: Assists with spend data capture by
vendor through payment with ghost cards assigned
by supplier
Integrate the Visa Purchasing/Visa Commercial One card into the e-Procurement system as a method of paymentcontinued
IMPLEMENTATION
ACTION STEPS:
1. Determine e-Procurement
suppliers to investigate for
payment via card through
the system
2. Develop cross-functional
team of business and
technology employees
to analyze the costs
and benefits of card
payment to the selected
e-Procurement suppliers
3. Present analysis to senior
management for approval
of integrating the card as
a form of payment into the
e-Procurement system
4. Notify suppliers of the
decision to pay via card
5. Develop a joint
implementation plan
with the Issuer
6. Implement use of the Visa
Purchasing card with the
e-Procurement system
7. Train e-Procurement
buyers on the new
payment process
8. Track actual savings
relative to plan and
adjust as needed
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Significantly reduces payment
process costs
MARKET APPLICABILITY: All Companies
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Enforces card payment for electronic
purchases
Best Practice 6
Procure-to-PayProcess
IMPLEMENTATION SUCCESSES and TRENDS
• Of the survey respondents who have implemented an e-Procurement system, on average,27.5 percent of their spend on e-Procurement software is being paid by card to reduce paymentprocess costs.
• One large market company has set up ghost accounts by vendor to pay for electronically procuredgoods. In doing so, it has been able to gain improved visibility into spend by vendor and to enablegreater sourcing savings.
95
Best Practice 7
Procure-to-PayProcess
In an automated environment, best practice companies conduct three-way
matching between the purchase order, the packing slip, and the invoice. If all
documents match within a designated threshold, the invoice is authorized for payment.
This minimizes the time A/P spends reviewing invoices, enables the department to
manage by exception, and significantly reduces manual activity associated with invoice
and receipt retention.
The vendor should send A/P the invoice electronically. Leading companies are
beginning to explore the viability of an Electronic Invoice Presentment and Payment
(EIPP) solution as well as e-Receiving packages. Central or desktop receiving should
have entered the packing slip into the system and resolved any delivery issues at the
time of receipt. The purchase order initiated the transaction via an e-Procurement or
ERP and should already be in the system.
Some enabling tools for three-way matching include:
• e-Procurement
• ERP systems (e.g., procurement and A/P functions)
• Bar coding
• Scanners to create electronic invoices and receipts
continued on next page
Payment & Settlement
When commercial cards are not used, employ three-way matching to reduce the number of approvals required prior to payment
Section II
Best Practices
96
When commercial cards are not used, employ three-way matching to reduce the number of approvals required prior to paymentcontinued
Best Practice 7
Procure-to-PayProcess
Benefit Obtained: User Satisfaction
Amount of Benefit: Medium
Rationale: End users do not have to solicit
signatures prior to payment
IMPLEMENTATION
ACTION STEPS:
1. Incorporate formal
receipt and three-way
matching into policies
and procedures
2. Train end users and
Procure-to-Pay employees
on formal receipt and
receiving
3. Track internal and
vendor three-way
matching performance
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: Medium
Rationale: Reduces settlement and payment
cycle time
MARKET APPLICABILITY: All Companies
Benefit Obtained: Vendor Management
Amount of Benefit: Medium
Rationale: Vendor scorecard metrics often measure
delivery and matching performance, including
percent of POs that could not be matched to invoice,
delivery timing, quantity discrepancies, etc.
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Ensures that invoices paid are valid
IMPLEMENTATION SUCCESSES and TRENDS
• One survey respondent used bar coding integrated into the company’s ERP system to facilitatereceipt and three-way matching.
• Two study participants reported use of scanners for documentation of receipts. For one company,this enabled the electronic transmission of receipts, which improved the processing time ofreceipts. The other company processed a large number of expense reports each month — as aresult, there were significant cost savings through reduced document storage needs.
97
Best Practice 8
Procure-to-PayProcess
Best practice companies minimize the effort spent on manual payments. eMarketer
estimates that processing an invoice manually costs approximately three times as much
as an automated payment. Additionally, automated payments help increase cash flow,
reduce transaction costs, and facilitate managing exceptions.6
Mid-size and large corporate companies can automate payments by:
• Creating a software feed into an Excel invoice template
(e.g., QuickBooks, MS Money)
• Using ghost accounts dedicated to suppliers
• Implementing ACH/EFT
• Implementing EIP
• Utilizing EDI or XML
Payment & Settlement
Replace manual check payments with electronic payments
IMPLEMENTATION
ACTION STEPS:
1. Review vendors, invoices,
and payment methods
from A/P and G/L ledgers
2. Identify appropriate
vendors for electronic
payments; factors for
inclusion are number of
transactions, size of
transactions, supplier
sophistication, and
complexity of payment
terms (e.g., multi-currency)
3. Determine appropriate
type of automated
payment mechanism
4. Implement solution.
Monitor success and
continue to review
opportunities for
increasing electronic
payment partnerships
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Replaces expensive and time-
consuming methods of payments; improves
cashflow management
MARKET APPLICABILITY: All Companies
Benefit Obtained: Vendor Management
Amount of Benefit: Medium
Rationale: Strengthens vendor relationship by
providing funds immediately and increasing
technology touchpoints
IMPLEMENTATION SUCCESSES and TRENDS
• Survey findings indicate that 26 percent of payments are currently automated.
• Gartner estimates that 40 percent of B2B payments will be automated by 2004.7
• eMarketer estimates that online invoicing costs $1.65, while manual payments cost $5.00.8
• One survey respondent has automated 70 percent of payments, which represented best-in-class.
6 eMarketer. The Electronic Payments Report. October, 2001.
7 Gartner Group. e-Procurement: A Blueprint for Revolution or Hype? February, 2000.
8 eMarketer. The Electronic Payments Report. October, 2001.
Many companies are realizing the benefits associated with Visa Purchasing/
Visa Commercial One card use in the A/P department. Those benefits include
improved company compliance to commercial card program policy and increased
process efficiencies.
Best practice companies establish guidelines for commercial card use and work to
ensure compliance to policy. Card-use policy typically includes the definition of spend
types and purchase amounts most appropriate for payment with the card. Companies
also develop a list of suppliers that are strongly encouraged or mandated for card use.
This list can be developed by providing the Issuer with a list of suppliers that can be
analyzed through Visa’s Supplier Matching Service to identify those suppliers that
accept commercial card payment.
Companies distribute their commercial card use policies to all cardholders, but in
order to prevent “leakage” and increase compliance with policy, many companies are
identifying and paying, within A/P, invoices that should have been paid by the card.
For the purchase order-based purchases, A/P also provides the buyer, if they are a
cardholder, with card policy information to re-educate them on how to use the card or,
if they are not a cardholder, with information on how to obtain a card.
The cards used in A/P departments are typically department cards that are
assigned to an individual such as the A/P manager or an A/P technician. The monthly
spend limit may be higher than that of average cardholders to allow for the higher
volume of spend anticipated on the card. In addition to more traditional spend types,
A/P departments also use the card to pay for spend categories such as hardware,
software, MRO, temporary services, and telecommunications.
continued on next page
Payment & Settlement
Use the Visa Purchasing/Visa Commercial One card to pay invoices received in Accounts Payable
Best Practice 9
Procure-to-PayProcess
Section II
Best Practices
98
99
Benefit Obtained: User Satisfaction
Amount of Benefit: Medium
Rationale: Allows A/P to increase policy
compliance and re-educate cardholders on
appropriate card use, without requiring
cardholders to pay the received invoice with the
card themselves, which may delay payment
Best Practice 9
Procure-to-PayProcess
Use the Visa Purchasing/Visa Commercial One card to pay invoices received in Accounts Payable continued
IMPLEMENTATION
ACTION STEPS:
1. Develop and distribute
commercial card use
guidelines
2. Measure compliance with
policy; determine if card
use guidelines can be
better met through having
a card in A/P
3. Identify the individual to
whom to assign the card;
design control parameters
such as monthly spend
limit, MCC restrictions, and
card use audit process
4. Implement the A/P card
by establishing the account
and conducting cardholder
training
5. Determine whether or not
followup with buyers will
occur to encourage use
of the card at the time
of purchase
6. Periodically review card
use guidelines in A/P;
update policies accordingly
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Increases process savings through
displacement of check payments
MARKET APPLICABILITY: All Companies
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Encourages A/P to more closely
monitor and improve card compliance
IMPLEMENTATION SUCCESSES and TRENDS
• One survey participant established a ghost card in A/P to reduce the number of one-time vendorset-ups, decrease working capital pressures, and increase card policy compliance.
• A software company has one cardholder and one ghost card in A/P. The ghost card is used topay three vendors: promotional items, office supplies, and catering. The plastic card is used forinvoice payments under $1,000 in support of the company’s mandate that every transactionunder $1,000 be paid with the card.
• One study participant has implemented 50 ghost accounts; each account is used for purchasesfrom a specific supplier. This has provided a low-cost method to increase card spend and hasfacilitated the capture of enhanced transaction data.
Leading organizations understand and manage their businesses within the
labyrinth of tax regulations imposed by local, state, and federal jurisdictions.
Understanding anticipated tax liabilities is a key factor in developing sound ROI
evaluations, business case assessments, and managing overall spend. As companies
implement automated procurement processing technologies and adopt commercial
card products and programs it is also an appropriate opportunity to implement solutions
that support the reporting and payment of sales and use taxes. In this survey,
businesses reported using software solutions like Vertex, TaxWare, and InfoSpan to
collect and manage tax-related information.
Best practice companies endeavor to understand the liabilities associated with
underpayment.
The most successful tax strategies ensure collaboration between commercial card
program and corporate tax administrators. Generally, the most accurate and auditable
results have been obtained in programs where taxes are calculated without cardholder
involvement.
Leading organizations develop a tax compliance methodology that combines
the amount of electronic transaction data delivered to the program administrator
with assumptions regarding the tax consequences of certain types of purchases.
For example, some programs assume that if the transaction data shows that the
cardholder and vendor are located within the same state, the transaction was
correctly taxed. Programs make this assumption because in most jurisdictions the
vendor would charge tax unless presented with a valid exemption certificate.
Tax determinations between cardholders and out-of-state vendors rely on a variety
of approaches, such as enhanced transaction data to substantiate tax paid or certain
characteristics of the out-of-state vendor. After eliminating the exempt transactions and
transactions where sales tax was paid, use tax is accrued on the remaining
transactions. Commercial card transaction receipts are retained until the state’s
authority to audit expires.
Finally, best practice companies implement a process that documents the
transactions where sales tax was collected by the vendor, identifies purchases of items
exempt from tax, and calculates the use tax accrual on taxable purchases where tax
was not charged by the vendor.
continued on next page
Reconciliation
Develop solutions that support the reporting and payment of sales and use taxes
Best Practice 10
Procure-to-PayProcess
Section II
Best Practices
100
Best Practice 10
Procure-to-PayProcess
Develop solutions that support the reporting and payment of sales and use taxescontinued
IMPLEMENTATION
ACTION STEPS:
1. Partner with corporate tax
to understand procurement
tax liability
2. Implement a tax-tracking
mechanism and train
users
3. Continually monitor
program compliance
and adjust accordingly
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Tax record-management processing and
appropriate tax accrual calculation
MARKET APPLICABILITY: All Companies
Benefit Obtained: Control
Amount of Benefit: Medium
Rationale: Provides visibility over tax liability
101
IMPLEMENTATION SUCCESSES and TRENDS
• 86 percent of study participants have implemented strategies and accounting systems designedto expedite tax reconciliation and accrual and move responsibility away from the individualemployee. These companies no longer consider reconciliation of sales and use tax a time-intensive activity.
• One study participant worked with the company’s corporate tax department to design a purchasing card statement and receipt retention process that augmented the company’sexisting sales and use tax compliance and reporting capabilities. Through accurate reportingand thorough record keeping, the company has been able to effectively estimate and pay itstaxes and comply with IRS regulations.
Best practice companies streamline the reconciliation process by minimizing the
time spent receiving statements and allocating transactions to G/L codes and cost
centers. Companies can work with their Issuers to determine the best mechanism for
automating this process according to their specific needs.
Automated statement delivery enables cardholders to receive statements faster
and in a format that can be more easily updated than statements sent by mail. Typically,
to receive a statement electronically, companies will do one of the following:
• Download an electronic statement from the Issuer’s web site
• Receive the data via email
• Receive data feeds according to a predefined schedule or based upon
transaction volume
To further automate the reconciliation process, companies predefine a G/L code
and cost center code for the card payment transaction. Predefinition assists
cardholders in reconciliation by providing a “best guess” allocation that cardholders can
adjust as needed prior to submitting a statement for approval.
G/L code predefinition rules can be based on criteria such as vendor name,
cardholder and, most commonly, merchant category code. Cost centers are typically
predefined based on the cardholder. As business units/cost centers may allocate the
same type of spend to a different G/L, the G/L predefinition mapping can be specific to
a business unit or cost center. Companies should work with their Issuers to implement
the predefinition mapping best suited to their needs, as well as to design a
maintenance schedule of the rules.
continued on next page
Reconciliation
Work with your Issuer to receive commercial card statements electronically with cost centers and G/L codes pre-defined to facilitate end-user reconciliation
Best Practice 11
Procure-to-PayProcess
Section II
Best Practices
102
Benefit Obtained: User Satisfaction
Amount of Benefit: High
Rationale: Facilitates cardholder reconciliation
efforts
Best Practice 11
Procure-to-PayProcess
Work with your Issuer to receive commercial card statements electronically with cost centers and G/L codes pre-defined to facilitate end-user reconciliation continued
IMPLEMENTATION
ACTION STEPS:
1. Determine and implement
an automated statement
delivery mechanism with
the Issuer
2. Work with Issuers to
develop G/L code and
cost center mapping
and incorporate it into
electronic statement
information
3. Incorporate the revised
reconciliation process
into cardholder training
and card procedures
information
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Reduces the amount of time spent on
card payment reconciliation and reduces errors
associated with manual processing
MARKET APPLICABILITY: All Companies
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Ensures allocation of the correct
G/L codes to track spend and improve the
budgeting process
103
IMPLEMENTATION SUCCESSES and TRENDS
• 54 percent of surveyed companies have implemented automated delivery of electronic cardstatements to minimize the most time-intensive activities reported: buyer reconciliation andassignment of cost center.
• Several survey respondents linked predefinition of codes with success of reconciliationautomation efforts and purchasing card programs.
• Implementation of an automated reconciliation system facilitated the management of spendthrough a commercial one card program.
• One survey respondent that predefined G/L codes reduced invoice payment transaction costsfrom its computed industry benchmark average of $2.50 to $1.90.
Best practice companies understand their core competencies and find that certain,
non-strategic business activities can be outsourced cost effectively. Outsourcing can
yield the following benefits:
• Improve company focus on strategic activities
• Gain access to world-class capabilities and consistent best practices
• Reduce or control operating costs
• Increase availability of capital funds
• Gain access to short-term resources
• Obtain assistance for a function that is specialized or difficult to manage
Outsourcing is a strategic management tool for organizational change. It is a
long-term business strategy that should be developed with a clear sense of the
competencies that make the company unique and give it strength in the market,
such as the skills and expertise that allow a company to create unique, leading-edge
products and services.
Outsourcing is simply the “make versus buy” decision that organizations have
always had to make. Today, however, the number and capability of external suppliers
has exploded, offering specialized solutions for every conceivable aspect of a
company’s operations. Additionally, technology has made it easier than ever to integrate
the operations of separate companies into a cohesive and seamless whole. Finally,
increased competition has forced every organization to re-examine and challenge every
aspect of its operations.
A successful outsourcing strategy identifies functions and activities for which the
company has neither a critical strategic need nor special capability and then makes
smart, strategic decisions to source it from a leading provider. Best practice companies
have examined their payment core competencies and often outsource management
functions, including:
• Freight consolidation
• Check printing
• Invoice scanning
• Temporary services
continued on next page
Reconciliation
Outsource high-volume, specialized payment processes Best
Practice 12
Procure-to-PayProcess
Section II
Best Practices
104
Benefit Obtained: Vendor Management
Amount of Benefit: High
Rationale: Increases the importance of vendor
management since a business process is no longer
in-house
Best Practice 12
Procure-to-PayProcess Outsource high volume, specialized payment processes
continued
IMPLEMENTATION
ACTION STEPS:
1. Define core competencies
and potential areas to
outsource
2. Create a business case
that defines outsourcing
goals and outlines impact
on organization
3. Select outsourcing
vendors; include service
level agreements and
fee ceilings
4. Determine if personnel
can be redeployed
5. Reengineer processes
to include outsourced
function
6. Conduct change
management program
to gain acceptance
7. Proactively manage
vendors to ensure
they provide defined
service levels
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Can result in significant cost savings for
high-volume or specialized functions
MARKET APPLICABILITY: All Companies
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Enables a specialist to focus on its core
competency
105
IMPLEMENTATION SUCCESSES and TRENDS
• One survey respondent outsourced freight payables. Outsourcing enabled greater leverage and discounts received with freight spend and ensured that all freight billings were valid.
• Additional Deloitte research and client work indicates that best practice companies outsourcemanagement of invoicing and payment for temporary services, where use of contingentworkforce is high.
Best practice companies define a consistent control strategy that increases
visibility and minimizes fraud, while ensuring these control and audit goals are aligned
with company needs and overall strategy.
High-profile bankruptcies have highlighted the importance of internal audit and
independent review of procurement, A/P, and individual business units. Corporate
culture should support the ability to question the appropriateness of company practices.
A control strategy should include the following components:
• Types of transactions to be reviewed
• Groups responsible for review
• Acceptable thresholds/exception triggers and profiles
• Frequency of audits
• Sampling methods (e.g., statistics sampling)
• Proper authorizations and verifications
• Record retention
• Compliance reporting
• Tax issues
The strategy should balance visibility, effort required, and processing efficiency.
Controls can provide significant impact in an organization. Aberdeen estimates that
maverick spend accounts for 10 percent of purchases in an organization. For a billion
dollar company that purchases $400,000,000 in goods and services, $40 million of
spend can occur outside of controls.9
9 Aberdeen Group. Indirect Expense Management: Driving Bottom-Line Benefits. November, 2001.
Control
Determine control strategyBest
Practice 13
Procure-to-PayProcess
Section II
Best Practices
106
IMPLEMENTATION
ACTION STEPS:
1. Define the control strategy
2. Ensure policies and
procedures embody the
control strategy, including
procurement, purchasing
card, and A/P policies
3. Educate end users on
control policies
4. Monitor and evaluate
compliance
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Enables increased visibility to spend
data and business practices
MARKET APPLICABILITY: All Companies
IMPLEMENTATION SUCCESSES and TRENDS
• Although 73 percent of companies surveyed listed employee misuse as a top three controlconcern, at 65 percent of companies surveyed this was addressed through implementation ofaudit policies that have checks in place for original receipts, approval signatures, and employeemisuse, which improved companies’ audit capabilities.
• Two mid-size companies reported improved controls through use of card reporting tools for audit.
Best Practice 14
Procure-to-PayProcess
107
Best practice procurement departments monitor and improve performance using
various cost and process measures. Metrics help drive behavior and should be clear,
measurable, and actionable. Performance targets should be achievable and based
upon internal and external benchmarks. Some categories include:
• Department measures, such as strategic goals of department and percent of
company spend impacted by procurement
• Cost measures, such as dollars saved and percent of vendors rationalized
• Quality measures, such as purchase orders matched and number of complaints
• Time measures, such as cycle time for sourcing
These metrics can be used to create a comprehensive scorecard to capture
transaction costs, measure performance against goals, and identify opportunities for
improvement. Additionally, communication of goals and progress motivates employees to
achieve goals.
Reporting
Monitor procurement performance via a scorecard that includes cost, quality, and time components
IMPLEMENTATION
ACTION STEPS:
1. Define appropriate
metrics for procurement
and its practitioners —
this can include category
metrics, such as overall
department, cost,
quality, and cycle-time
2. Define targets using
internal and external
benchmarks — targets
can include items
such as achieving
budget objectives, user
community satisfaction,
rationalization of vendors,
percent of spend on
negotiated contracts,
and percent
of on-time delivery
3. Monitor and evaluate
performance
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Monitors company savings
MARKET APPLICABILITY: All Companies
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Allows the company to manage by
information versus beliefs
IMPLEMENTATION SUCCESSES and TRENDS
• One survey respondent creates an annual scorecard with five to eight metrics that measureproductivity, sourcing effectiveness, and service. The company develops scorecards with externalbenchmarks and reviews them on a quarterly basis with senior management, driving continuousimprovement.
• One survey respondent creates a business plan every year that includes scorecard measures forcustomer service, control objectives, and cost savings targets.
Leading procurement organizations consolidate commodity spend data available
through multiple sources. A/P data often provides the most detailed spend reports.
Leading companies leverage additional data available from vendors, Issuers, and travel
agencies to ensure a comprehensive view of spend for vendor negotiation and
reconciliation purposes.
Companies can consolidate spend data via the following tools:
• Access and Excel databases
• A/P, G/L, and purchase order reporting tools
• Data mart/data warehouse
Once data is consolidated, companies can use data analysis to identify trends,
manage vendors, and ensure compliance with procurement policies.
Benefit Obtained: Vendor Management
Amount of Benefit: Medium
Rationale: Provides a holistic view of the
procurement process
IMPLEMENTATION
ACTION STEPS:
1. Understand payment
data sources (e.g.,
e-Procurement, travel, ERP,
commercial card, etc.)
2. Define the information that
should be consolidated by
understanding information
available through A/P
as well as information
available from vendors,
travel agents, and Issuers
3. Select the data
repository to consolidate
data sources
4. Combine data into
repository
5. Determine reports
necessary to analyze
findings
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Enhances Strategic Sourcing efforts by
examining comprehensive data
MARKET APPLICABILITY: All Companies
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Provides visibility over all sources
of spend
IMPLEMENTATION SUCCESSES and TRENDS
• One survey respondent initiated its Strategic Sourcing efforts by creating a spend analysis. The spend analysis integrated data from multiple sources and formed the foundation for itsStrategic Sourcing successes.
Reporting
Gain a comprehensive view of spend by integrating data from multiple sources (e.g., e-Procurement, travel, ERP, purchasing cards)
Best Practice 15
Procure-to-PayProcess
Section II
Best Practices
108
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Provides comprehensive, standardized
data summaries
Best Practice 16
Procure-to-PayProcess
Best practice companies use SIC and MCC codes to classify spend and provide
summarized reporting. Issuers and vendors provide this information with commercial
cards to facilitate reconciliation with G/L codes. Companies often associate SIC codes
with vendors and MCC codes with transactions in their ERP systems to provide a view of
commodity-level spend.
IMPLEMENTATION
ACTION STEPS:
1. Define spend
classification method
1. Partner with Issuers,
vendors, and other
external vendors to
receive SIC and MCC
information
1. Incorporate SIC and
MCC information into
the ERP system or spend
data repository
1. Analyze spend and
card use using SIC and
MCC codes
Benefit Obtained: Vendor Management
Amount of Benefit: Medium
Rationale: Assists in classifying and consolidating
vendor spend data
MARKET APPLICABILITY: All Companies
109
IMPLEMENTATION SUCCESSES and TRENDS
• One survey respondent added SIC codes to its vendor file in a Strategic Sourcing initiative. It enabled the company to reduce RFP time by 50 percent.
Reporting
Leverage SIC and MCC codes for categorization of spend and purchasing data
Section II
Best Practices
110
Summary
Travel and entertainment (T&E) is considered to be the second largest controllable
indirect spend in an organization and possibly the most visible.10 Travel management can
be complicated because of diverse issues, such as rate structures, negotiated rates, last-
minute bookings, geographically dispersed travelers, and varying travel patterns.
Consequently, use of travel management programs is on the rise. As travel volume
increases, the importance of managing travel and its associated issues escalates.
Although many of the same principles of effective Travel and Entertainment
management have remained the same, such as use of T&E card programs to help
manage spend and generate time and cost savings, there have been noticeable changes
in overall T&E strategy. Current market conditions have had a significant impact on
business travel. Many companies are reevaluating their business travel needs and are
leveraging new communication-based technologies to reduce the need to travel for
training and internal meetings. Many companies have also instituted major T&E policy
changes on a short-term basis, such as requiring pre-approval for all business travel.
Companies have begun to encourage increased travel-related self-service by employees
through implementing in-house, Web-based booking tools and meeting-planning
software.
The relationships between companies and suppliers have also changed significantly
over the past three to five years. Airline vendors are beginning to examine their fee and
commission arrangements with travel agents. Companies have enhanced their ability to
negotiate discounts through improved ability to capture spend data and move market
share to other vendors. Companies have also begun to take advantage of the weakened
economic state of many of the leading air, hotel, and car vendors and reopened contract
negotiations. Conversely, vendors are more carefully monitoring company volume
guarantees.
The best practices described in this section encourage companies to have a travel
management discipline that will be successful regardless of changing economic
conditions. The best practices stress the implementation of sound fundamentals in
travel management and organization and include innovative yet practical tools to enable
companies to achieve additional cost savings and benefits.
10 What CFOs and other finance managers can do to bring expenditures back down to earth.CFO.com, Boston: December 18, 2002.
Travel and Entertainment (T&E)
111
Travel andEntertainment
Section II
Best Practices
112
Organization
Best Practice 1
Best Practice 2
Best Practice 3
Card Program
Best Practice 4
Best Practice 5
Best Practice 6
Best Practice 7
Sourcing
Best Practice 8
Order Placement
Best Practice 9
Control
Best Practice 10
Reporting
Best Practice 11
Best Practice 12
Best Practice 13
Best Practice 14
Institute a centralized travel management function
Develop and distribute company-wide travel policies
Coordinate event planning through travel management function
Source, select, and implement a T&E card program
Establish T&E/Visa Commercial One card issuance criteria for optimal distribution to business travelers
Mandate and enforce use of the T&E/Visa Commercial Onecard for all eligible purchases
Maximize use of T&E/Visa Commercial One card virtual accounts
Optimize number of suppliers by selecting and monitoringvendors through a formal vendor management program
Implement in-house, Web-based booking tool
Establish well-defined expense report audit parameters
Standardize and pre-populate T&E/Visa Commercial One cardexpense reporting
Standardize and automate data interfaces between expensemanagement and accounting applications
Capture, report, and analyze comprehensive, company-wide travel data
Implement post-trip exception reporting and distribute lostsavings report
Best Practice 1
Travel andEntertainment
Best practice companies have centralized the travel management function to
achieve the following benefits:
• Improve travel coordination efforts
• Enhance negotiating strength
• Ensure consistent development and application of travel policy
• Streamline communication with vendors
• Increase user satisfaction from a centralized service
• Ensure consistent and comprehensive reporting
The majority of study participants reported centralized travel management. At a
minimum, the development of travel policies and vendor negotiations and management
should be centralized. Other activities that can be centralized include:
• Travel policy management
• Travel policy communication (e.g., newsletters, web site)
• T&E card administration
• Management of travel agent(s) of any type:
— Outsourced
— In-house
— Location-specific
• Management of in-house travel web site
• Customer service management (e.g., reservation booking, responses to inquires)
• Travel and entertainment reporting
continued on next page
113
Organization
Institute a centralized travel management function
Benefit Obtained: User Satisfaction
Amount of Benefit: Medium
Rationale: Improves employee awareness of appro-
priate personnel to contact for questions and issues
Institute a centralized travel management function continued
IMPLEMENTATION
ACTION STEPS:
1. Identify the size and scope of
travel volume (e.g., number
of travelers, city pairs)
2. Determine travel
management activities and
reporting structure and divide
responsibilities according
to required skills
3. Staff the travel management
function with individuals
who are knowledgeable in
the travel industry to ensure
the greatest benefits are
achieved through the
program; alternatively, train
those responsible for the
travel management function
on travel industry-specific
reporting, tools, negotiation
techniques, and processes
to ensure staff have
expertise necessary to
perform successfully
4. Determine and develop
common tools to support the
travel management function
(including vendor database,
card management policies,
data extracts from ERP
system to track spend,
dedicated web site, and
travel index/guides)
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Centralized travel and consolidation of
spend reduces costs and improves discounts
MARKET APPLICABILITY: All Companies
Benefit Obtained: Vendor Management
Amount of Benefit: Medium
Rationale: Improves vendor relationships and
enhances management of travel vendors;
information collected in this function supports
the contract negotiation process
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Improves the ability to track and
analyze travel spend at centralized location
IMPLEMENTATION SUCCESSES and TRENDS
• 70 percent of our survey participants have a centralized travel management function. Two-thirdsof the participants have this function reporting to the Finance or procurement departments.
• One study participant transitioned to centralized travel management, which consolidated spend andallowed the company to decrease the number of travel agencies servicing the company to one. Themove to a single travel agency reduced rates and streamlined the vendor relationship effort.
Best Practice 1
Travel andEntertainment
Section II
Best Practices
114
Best practice companies develop company-wide T&E policies and communicate
them in ways that maximize compliance. The policy should be clear, easily accessible,
and widely disseminated. Enhancing travelers’ understanding and buy-in to the policy
improves compliance, diminishes policy-related conflicts at the point of booking, and
increases benefits associated with compliance. Leading companies ensure that T&E
policies are aligned with overall Procure-to-Pay objectives and are actively endorsed by
senior management.
Travel policies should contain the following topics:
• Objectives
• Summary responsibilities
• Travel approval process
• Designated travel agency
• Air travel policies
• Auto travel policies
• Rental car travel policies
• Other out-of-town expense policies
• Other business expense policies
• Reimbursable expense guidelines
— Air travel
— Car rental
— Personal vehicle use
— Lodging
— Meals/business entertainment
— Spousal travel expenses
• Non-reimbursable expenses
• Reimbursement process
• T&E card
— Cardholder benefits
— Cardholder responsibilities
— Credit limits, restrictions/
controls
— Liability associated with
the card
— Restricted transactions
— Dispute resolution
— Lost card procedures
— Cardholder agreement form
— Card activation
• Policy violations
• Safety and security measures
continued on next page
Organization
Develop and distribute company-wide travel policyBest
Practice 2
Travel andEntertainment
115
Benefit Obtained: User Satisfaction
Amount of Benefit: Medium
Rationale: Improves employees’ ability to access
travel policy requirements and restrictions; empowers
employees to make appropriate travel decisions
Develop and distribute company-wide travel policycontinued
IMPLEMENTATION
ACTION STEPS:
1. Develop a policy that is
consistent with company
culture and needs by
reviewing current policies,
surveying employees to
gain user insights, and
reviewing current travel
spend data (e.g., hotels,
airlines, rental car
agencies, and cellular
phone carriers)
2. Gain senior management
approval and participation
to demonstrate corporate
sponsorship
3. Present the policy in a
user-friendly format that
guides travelers through
the entire process; include
answers to frequently
asked questions (FAQs)
4. Make the travel policies
available through new hire
orientation; maintain the
travel policies on a
company intranet
5. Communicate updates to
the policy and related
successes of the program
on an ongoing basis; issue
periodic traveler tips that
focus on key elements of
the T&E policies
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: Medium
Rationale: Increases compliance with use of pre-
ferred vendors, thereby leveraging the established
discounts and increasing the ability to maintain or
gain additional discounts through those vendors
MARKET APPLICABILITY: All Companies
Benefit Obtained: Vendor Management
Amount of Benefit: Medium
Rationale: Increases compliance with use of
preferred vendors, providing travel management
function with greater ability to assess vendor pricing
performance and greater leverage with vendors to
improve performance and pricing (e.g., concierge
services, upgrades, travel incentives)
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Provides employees with understanding
of travel restrictions, mandates, and policy updates;
employees that are aware of and understand
policies are more likely to follow them
IMPLEMENTATION SUCCESSES and TRENDS
• Three study participants noted that regular communication of travel “tips” for non-complianceareas improved employee compliance with the policy (e.g., in email or through companynewsletters).
• One mid-size study participant not only reviewed and updated his company’s travel policiesperiodically, but also communicated the changes to travelers. This review and communicationprocess resulted in a reduction of the travel budget by one-third over the last three years, whichequated to a reduction from $9 million to $6 million.
Best Practice 2
Travel andEntertainment
Section II
Best Practices
116
Best practice companies ensure that the travel management group incorporates or
acts as a business partner with other corporate organizational entities with sizeable T&E
spend including sales and marketing, recruiting, and training.
Coordination between company event decision-makers and the travel management
function will ensure travel-related vendor contracts and benefits — such as travel discounts,
reduced fares, and reduced accommodation fees — are incorporated into all business travel
and event decisions. Coordinated efforts ensure that all event planners understand travel
management issues and policies, while giving the travel management function added
visibility over all travel spend, exposing additional negotiation opportunities.
Tools that can further facilitate event planning include:
• Appropriate use of commercial cards (e.g., increased credit limits for sales and
marketing, recruiting, and training)
• Event planning automation tools by vendors such as Certain Software, CEO
Software, Inc., Cvent Inc., Dean Evans & Associates, and Isis Corp.
Organization
Coordinate event planning through travel management function
Best Practice 3
Travel andEntertainment
117
IMPLEMENTATION
ACTION STEPS:
1. Identify the size and scope of
the organization’s other travel
planners (e.g., event planning
may be a responsibility under
travel management or may
require dedicated staff work-
ing in coordination with travel
management)
2. Determine the optimal level
of coordination between
travel/event related activities
(e.g., contract reviews and
negotiation, budgeting/
forecasting of travel spend,
reporting, etc.) and travel
management, including the
reporting required to support
the coordination effort
3. Communicate the need to
coordinate events through
travel management in the
travel policies
4. Train those responsible for
the coordination effort
Benefit Obtained: User Satisfaction
Amount of Benefit: Medium
Rationale: Ability for event planners to leverage
Travel Management and/or Travel Agency expertise
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Information collected from all travel-relat-
ed functions creates greater leverage for contract
negotiations with travel vendors to reduce costs
MARKET APPLICABILITY: All Companies
Benefit Obtained: Vendor Management
Amount of Benefit: Medium
Rationale: Increased vendor relationship
management possible and ability to apply
spend toward quotas for discounts
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Improved ability to track event
planning and other unique travel spend as a
subset of overall firm travel spend; increases
ratio of spend through preferred vendors
IMPLEMENTATION SUCCESSES and TRENDS
• One survey participant arranged all conferences through the travel function — this enabled the company to capture hotel and airline spend data and incorporate it into contract negotiations,improving his position to negotiate better pricing.
• One survey respondent has plans to implement event planning software that will enableemployees and guests to enroll in a conference and link with the in-house Web booking for airlineand hotel reservations, enabling better coordination, directing travelers to preferred vendors, andreducing time spent booking travel.
Travel and entertainment (T&E) cards are a very effective tool for managing travel-
related spend, reducing cash advances, and providing travelers with an easy, fast, and
safe method of payment while on the road. Even for businesses with low volumes of
travel, T&E cards should be considered. Leading companies recognize the following
benefits through implementation of a T&E card program:
• Reduced cash advances, resulting in improved cash management and reduced
costs associated with processing and tracking cash advances
• Integration of T&E card data into internal MIS, expense reporting, Accounts
Payable (A/P), and General Ledger (G/L) systems
— Streamlined expense report administration
— Reduced expense report cycle time
— Improved travel data quality and accuracy
• Improved traveler convenience and safety
— Decreased concerns regarding funds while traveling
— No need to use personal cards for travel
— No need to carry large cash advances while traveling
— Online access to cardholder account data
• Improved access to funds for international travel
— Converts funds to U.S. dollars on T&E statement
— Reduces currency conversion rates as card transaction rates are typically
better than those available at stores providing this service
— Cash access provides money in local currency
Leading companies develop specific and achievable goals and objectives for their
T&E card programs. These goals and objectives should be consistent with corporate
culture and travel policies. Best practice companies periodically review the goals and
objectives for continuous improvement purposes.
Leading companies utilize a thorough sourcing process to select a T&E card
program that will help the company meet goals and objectives set for the program.
Sourcing a card program can occur during the implementation of a new program or at a
transition point when the needs of the company change. Issuers are vendors and
should be included in the standard vendor reviews to ensure that they continue to
provide services that meet program objectives.
continued on next page
Card Program
Source, select, and implement a T&E card programBest
Practice 4
Travel andEntertainment
Section II
Best Practices
118
Best Practice 4
Travel andEntertainment Source, select, and implement a T&E card program
continued
Prior to implementing a T&E card solution, best practice companies analyze the
costs and benefits of each available program, taking into consideration any product
variations from one Issuer to another.
Companies compare T&E programs based on the following factors:
• Merchant acceptance
• Current relationship
• Financial arrangement
• Industry reputation
• Card management and administration tools available through Issuer, including:
— Templates to assist with implementation (e.g., Policies and Procedures)
— Integration of card data with financials or ERP
— Online account administration
— Online reporting capabilities
— Expense reporting management tools
• Knowledge/experience of card sales personnel and ability to provide consultative
services
• Customer service levels (e.g., Service Level Agreements, proactive relationship)
Companies compare T&E Issuers based upon the following factors:
• Standard transaction cost charged for use of the card
• Merchant acceptance
continued on next page
119
Best Practice 4
Travel andEntertainment
Section II
Best Practices
120
Benefit Obtained: User Satisfaction
Amount of Benefit: High
Rationale: T&E cards provide significantly improved
travel convenienceIMPLEMENTATION
ACTION STEPS:
1. Review Travel Policy and set
goals and objectives for the
T&E card program; consider
any cultural implications
(e.g., employee desire for
reward programs)
2. Create cross-functional
team of key stakeholders
to participate in card
selection process —
at a minimum, include
procurement, travel
management, and A/P
personnel
3. Develop request for
proposal and distribute
to Issuers
4. Evaluate Issuer responses
against commercial card
goals and objectives and
select Issuer based upon
ability to meet those goals
and objectives
5. Leverage Issuer
experience and expertise
for implementation of the
T&E card program (e.g.,
policies, recommended
reports)
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Allows for the most efficient and cost
effective method of purchasing and paying for travel-
related services; card programs reduce need for cash
advances, which improves cash management and
reduces processing and tracking costs; also provides
improved efficiency in expense report processing and
expense management
MARKET APPLICABILITY: All Companies
Benefit Obtained: Vendor Management
Amount of Benefit: High
Rationale: Implementation of a T&E card provides
improved data quality and accuracy for vendor
management and negotiations
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Card programs facilitate a degree
of control through card features and through
back-end audit and exception reporting
IMPLEMENTATION SUCCESSES and TRENDS
• 69 percent of our survey respondents have implemented a T&E card program. The primaryreasons for selection of the Issuers were merchant acceptance followed by reporting capabilities.
• Six of the survey participants reported that one of the greatest benefits of the card program wastraveler convenience, as travelers did not have to wait for cash advances to begin travel.
• Several companies reported that transitioning to T&E cards provided them with improved dataaccess for vendor negotiation purposes.
Source, select, and implement a T&E card programcontinued
Leading companies ensure that T&E cards are distributed appropriately. These
companies develop criteria for distribution of cards that are consistent with company
culture, policies, and spend parameters for card eligible purchases. The use of T&E cards
can reduce costs associated with processing cash advances and check requests.
Some companies distribute T&E cards to all travelers and others distribute cards
only to regular travelers. To identify individuals who require T&E cards, companies
review cash advance requests and expense reports. Companies should also review
travel volume and needs of various business units (e.g., sales) and roles when
identifying travelers. T&E cards can be a significant benefit to employees who may not
have an established credit history.
For employees who do not travel regularly (typically only once a year or less) or for
recruits/interns who may be involved in limited short-term travel, companies may want
to investigate the use of virtual accounts or central billing accounts to handle airline,
hotel, and car rental costs.
Card Program
Establish T&E/Visa Commercial One card issuance criteria for optimal distribution to business travelers
Best Practice 5
Travel andEntertainment
121
IMPLEMENTATION
ACTION STEPS:
1. Develop a criteria for
distribution of T&E cards
that is consistent with
company culture and
policies; coordinate with
managers to determine
profile of a typical traveler;
review expense reports and
cash advances to identify
individuals who should
have T&E cards
1. Prior to any travel for a non-
cardholder, managers should
determine whether the
employee will have ongoing
travel responsibilities — if the
employee does, then the
manager should consider
issuing a T&E card to the
employee
3. Regularly review inactive
T&E card reports; determine
whether employee is using
his/her own card to pay for
travel-related expenses; if so,
encourage use of the card;
if not, reevaluate the need
for the employee to have
the card
Benefit Obtained: User Satisfaction
Amount of Benefit: High
Rationale: Improves travelers’ ability to pay for
travel-related expenses, reduces travelers’
concerns over access to funds while traveling,
and alleviates need for travelers to use personal
funds or credit for business travel
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Encourages all travel-related expenses
to be purchased with the T&E card, reducing
transaction costs associated with cash advances
and check equests
MARKET APPLICABILITY: All Companies
Benefit Obtained: Vendor Management
Amount of Benefit: Medium
Rationale: Optimal distribution of T&E cards
increases eligible spend on the cards, providing
improved reporting of actual travel spend for
vendor management
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Increases control through consolidation
of spend — allows for improved reporting and
reconciliation of travel spend
IMPLEMENTATION SUCCESSES and TRENDS
• Best practice companies have increased their issuance of T&E cards by monitoring expensereports and identifying travelers who pay exclusively out-of-pocket. A majority of the companiessurveyed reported that use of T&E cards significantly reduces the need for cash advances.
• One company issued cards to all employees who needed to travel and mandated use of the card.That company was able to achieve a 29 percent discount on its $3.5 million travel spend.
IMPLEMENTATION
ACTION STEPS:
1. Develop policies
and procedures as a
foundation to compliance
2. Mandate T&E card use
and communicate benefits
to cardholders
3. Encourage card use by
training cardholders on
proper use
4. Regularly communicate
benefits and successes of
the T&E card program
5. T&E card administrators,
travel managers, and/or
Accounts Payable should
monitor compliance; review
expense reports to identify
exceptions; leverage
exception reporting tools
available through Issuers
6. Based on culture, distribute
non-compliance reporting
to non-compliant traveler,
direct supervisor, and/or
management
7. Based on culture, take
steps to enforce use for
continued non-compliance
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Increases compliance, reducing travel
costs and trip planning effort; reduces the level of
effort required to gather travel spend information
MARKET APPLICABILITY: All Companies
Benefit Obtained: Vendor Management
Amount of Benefit: High
Rationale: Can help strengthen vendor
relationship due to increased use, and improved
data can be used for future contract negotiations
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Enables company-wide, centralized
visibility to spend data and supports effective
reporting for audit and control purposes
IMPLEMENTATION SUCCESSES and TRENDS
• A large corporate study participant mandated and enforced use of the corporate T&E card,increasing spend on the card and enabling reduced fees through the Issuer. On average, surveyparticipants that mandated T&E card use also appeared to achieve higher discounts throughtravel vendors. For air travel, the average discount was 26 percent compared with 13 percent forcompanies that did not mandate T&E card use.
• Of the survey participants that mandated T&E card use, only 20 percent felt the need tocontinue to provide cash advances. Of the survey participants that did not mandate use of theT&E card, 55 percent continued to fund cash advances to their employees.
• A mid-size company mandated use of the corporate T&E card for all airfare to reduce controlconcerns associated with travel booked but not taken. Through implementation of this program,the company achieved better tracking of unused travel and was able to reduce thousands ofdollars of unused airfare credit.
Best practice companies mandate and enforce use of T&E cards. Consolidating
travel payments into a single-payment vehicle improves a company’s ability to capture
and analyze data for vendor negotiations and compliance reporting (e.g., tracking of
progress against volume guarantees and use of preferred vendors). T&E card use also
facilitates automated pre-populated expense reporting. Additionally, use of a T&E card
helps minimize the need for cash advances. One-third of the survey participants
mandated usage of their T&E cards.
Companies use a variety of techniques, based upon their corporate culture, to
enforce use of the card. A typical method is distribution of exception reporting to non-
compliant travelers and their supervisors. Some companies reported that employees
are given initial warnings for non-compliant behavior (e.g., email, voice mail, in person).
Should the traveler continue to spend outside of policy, the company would not
reimburse those expenses.
Card Program
Mandate and enforce use of the T&E/Visa Commercial One card for all eligible purchases
Best Practice 6
Travel andEntertainment
Section II
Best Practices
122
Best Practice 7
Travel andEntertainment
123
Virtual accounts are commercial cards associated with one department or vendor,
regardless of the particular end user making the purchase. The two most common
examples of virtual accounts are ghost accounts and department cards. Ghost accounts
are master accounts with no associated physical card; the account number is typically
maintained with a single vendor. A department card is a physical card that is assigned to a
specific group within a company. In both cases, purchases are charged to an individual
commercial card account number, that can only be accessed by designated purchasers.
Best practice companies use virtual accounts as part of their overall T&E card
strategy. For example, companies set-up ghost accounts with their contracted travel
agents for T&E spend, most commonly airline spend, and they use department cards to
cover T&E spend for infrequent travelers or non-employees, e.g., contractors or recruits.
The advantages of T&E virtual accounts include:
• Convenience for those who have not yet received a T&E card or do not meet the
company’s guidelines to receive a T&E card, such as:
— New hires/recent college graduates
— Potential hires
— Contractors
— Foreign employees/new immigrants
— Employees who are infrequent travelers based on annual T&E spend or
number of trips per year
• Reduction of costs associated with individual employee reimbursement
of travel spend
• Elimination of employee burden to cover travel expenditures during the period
between when they are incurred and reimbursed
• Reduction of late payments to the vendor or Issuer
Best practice companies receive and pay virtual account bills centrally.
They establish controls to validate purchases or reconcile card statements through
department/employee verification of their expenses. These companies also mandate the
use of virtual accounts and ensure that travelers and the travel agency understand the
company’s travel and expense policies, preferred suppliers, and negotiated rates.
Best practice companies use and consolidate the virtual account card data with
other T&E data (e.g. from the travel agency, hotels, car rental agencies, and other
internal reporting systems) in order to get a complete view of spend for improved
reporting and negotiating power with vendors.
continued on next page
Card Program
Maximize use of T&E/Visa Commercial One card virtual accounts
Benefit Obtained: User Satisfaction
Amount of Benefit: High
Rationale: Eases both the order placement and
payment processes; increases vendor satisfaction
through timeliness of payments; and decreases
employee debt burden
Maximize use of T&E/Visa Commercial One card virtual accountscontinued
IMPLEMENTATION
ACTION STEPS:
Department Cards
1. Evaluate current T&E spend
and T&E buyer profiles
2. Identify groups of T&E
purchasers to which to
assign department cards
(e.g. by department,
function, or related
activities, etc.)
3. Use Issuer experience to
implement and manage
T&E department cards
4. Transition current
purchasers/cardholders
to T&E department cards
5. Determine data
requirements and
communicate to vendor(s)
6. Finalize requirements
for reconciliation purposes
and communicate to
purchasers/cardholders
Ghost Accounts
1. Evaluate current T&E spend
and identify categories to
target for ghost accounts
2. Use Issuer experience to
implement and manage
T&E ghost accounts at
vendor(s)
3. Set-up current purchasers/
cardholders on T&E ghost
accounts at vendor(s)
4. Determine data
requirements and
communicate to vendor(s)
5. Finalize requirements for
reconciliation purposes
and communicate to
purchaser/cardholder
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: Medium
Rationale: Use of ghost accounts reduces time
for reconciliation and settlement of transactions
MARKET APPLICABILITY: All Companies
Benefit Obtained: Vendor Management
Amount of Benefit: Medium
Rationale: Maintaining a single T&E expense on
a ghost account allows for improved tracking of
spend with the supplier
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Use of back-end audit maintains
the controls on these purchases; improved controls
can be achieved through reporting on the card
account (e.g., companies can review monthly
charges for variance and month-to-month variance);
enables greater management of departmental
or travel spend
IMPLEMENTATION SUCCESSES and TRENDS
• In addition to issuing individual T&E cards for frequent travelers, one company has set up 85virtual travel accounts with its contracted travel agent for each of its departments. These virtualtravel accounts pay for the air travel of each department’s infrequent travelers, includingemployees with less than $500/year of T&E expenses. By setting up these virtual accounts, thecompany is able to control T&E expenses centrally and manage the T&E card program moreeffectively by concentrating on high-spend users.
• Two mid-market companies have issued T&E cards for non-air travel and require all air travel tobe booked through the company’s virtual travel account with its contracted travel agent. Thesecompanies have benefited from central control, real-time access to travel data, and end-usersatisfaction. End users are relieved of the debt burden of air travel expenses.
Best Practice 7
Travel andEntertainment
Section II
Best Practices
124
Leading companies have a centrally administered corporate-wide travel and
entertainment vendor management program to guide selection and ongoing
management of vendors. A vendor management program is often a cornerstone of a
Strategic Sourcing initiative, which focuses on supplier, base rationalization, and
discounted rate achievement.
Best practice travel vendor management programs consist of the following
components:
• Establish travel vendor management program objectives:
— Strategic (e.g., improving services to traveling employees through advanced
reporting and reconciliation tools)
— Financial (e.g., percent of spend under contract, annual spend savings
per year)
• Develop contract term guidelines (e.g., contract length, volume guarantees,
and how to optimize monitoring efforts — analyze current travel, city pairs,
hotels — consider negotiating volume guarantees when switching from one
provider to another)
• Establish preferred vendor criteria:
— Service level (e.g., 24/7 availability, emergency assistance,
on-call consultation)
— Fully loaded cost of doing business with a vendor (e.g., freight, taxes)
— Vendor automation (e.g., ticketing, invoicing, reporting)
— Collaboration expectations (e.g., fare evaluation, hotel service and compara-
tive cost assessments, dining recommendations, corporate event planning)
• Develop vendor scorecards and targets for travel suppliers — including travel
agency — and implement vendor performance monitoring
continued on next page
Sourcing
Optimize number of suppliers by selecting and monitoring vendors through a formal vendor management program
Best Practice 8
Travel andEntertainment
125
Benefit Obtained: User Satisfaction
Amount of Benefit: Medium
Rationale: One objective of vendor management is
to obtain feedback from end users on vendor service
expectations and then monitor and report on user
satisfaction with preferred vendors’ performance
Optimize number of suppliers by selecting and monitoring vendors through a formal vendor management program continued
IMPLEMENTATION
ACTION STEPS:
1. Analyze traveler
preferences, company
travel trends, common
geographic destinations,
company travel policies,
and projected travel
budgets to prepare
baseline requirements
2. Develop and present travel
vendor management
program charter (company
objectives, scope, expected
benefits, and work plan) to
senior executives to obtain
program buy-in
3. Create cross-functional
team of key stakeholders
to develop travel vendor
management program
4. Develop change
management program
that introduces and
provides assistance
to internal participants
5. Perform ongoing spend
and supplier analysis
6. Continue to evaluate
vendor management
program objectives
and monitor existing
preferred vendors
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Enables supplier rationalization that can
increase supplier discounts and reduce cost
of “last-minute” booking and reservations
MARKET APPLICABILITY: All Companies
Benefit Obtained: Vendor Management
Amount of Benefit: High
Rationale: Corporate-wide, centrally designed
vendor management provides a structure for
measuring and monitoring vendor performance
Benefit Obtained: Control
Amount of Benefit: Medium
Rationale: Optimizes travel costs and selection
of preferred vendors and facilitates management
of vendor performance
IMPLEMENTATION SUCCESSES and TRENDS
• Survey respondents were able to achieve an average airfare discount of 17 percent, with areported range of 5 to 29 percent.
• Best practice companies track and maintain comprehensive data for travel vendor negotiations.Study participants reported the ability to achieve significant discounts by tracking nights stayedat hotels and city pairs for air travel. These companies used this data to guarantee volume andto monitor status of volume throughout the year.
Best Practice 8
Travel andEntertainment
Section II
Best Practices
126
Over the last few years, online procurement has increased significantly, especially
with respect to travel-related purchases. In 2000, U.S. online consumers were believed
to have purchased $12.2 billion of leisure travel over the Internet (68 percent of which
was airline tickets). By 2004, Forrester Research predicts that $28.9 billion will be
spent online for travel. As employees and companies have become more comfortable
with using the Internet for booking travel, many companies are moving to online travel
booking of business travel as a company policy.
Best practice companies are turning to Web-based travel booking tools, applications
that companies implement on an intranet site or through a travel agency (e.g., GetThere/
Sabre, Apollo). Implementation of an in-house, Web-based travel reservation tool can
improve a company’s ability to balance and manage business travel requirements with the
traveler’s personal preferences. Web-based application selection criteria should include:
• Reporting capabilities
• Ease of integration
• Ease of use
The software can be modified based on company policy. Rules are built into the tool
that can restrict users to specific vendors or allow users to evaluate vendor offerings
that benefit budget and/or travel schedule. As reservations are completed, Web-based
applications can require the completion of reason codes to explain an expenditure that
is outside of company policy.
Benefits of implementing an in-house, Web-based booking tool include:
• Provides better positioning to discontinue time-based contracts (e.g., annual
travel management service contracts) and transition to transaction-based
contracts with travel agencies
• Enables user self-service/user empowerment
• Improves use of preferred travel vendors
• Reduces cost of service and maintenance
• Enables travel agents to provide high value-added services such as complex
travel and travel modifications
• Improves access to travel and entertainment data
By 2004, Forrester Research predicts that $28.9 billion will be spent online for travel.11
continued on next page
11 Forrester Research. Travel Data Overview: On-Line Leisure Travel Soars Even Higher. August, 2001.
Order Placement
Implement in-house Web-based booking toolBest
Practice 9
Travel andEntertainment
127
Benefit Obtained: User Satisfaction
Amount of Benefit: High
Rationale: Empowers users as they are able
to manage their travel requirements within
corporate guidelines, budget requirements,
and personal preferences
Implement in-house, Web-based booking toolcontinued
IMPLEMENTATION
ACTION STEPS:
1. Define reservation
management processes
and policies for travelers
2. Develop definition of how
the company will utilize,
pay, and manage selected
travel agency services
3. Define Web-based tool
application requirements
(e.g., reporting capabilities,
ease of use, ease of
integration, adaptability of
rules for company policy)
4. Select and implement
Web-based booking tool
5. Develop plan for use of
information retrievable
from the tool and tie to
sourcing activities (e.g.,
tracking volume, spend
by vendor, city pairs)
6. Develop a training
program that explains
the application features,
functions, and operation
requirements
7. Analyze performance
to review adoption rate
and develop initiatives
to increase
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: Medium
Rationale: Reduces cost of travel agency
relationship, facilitates vendor rationalization
and management, and allows users to select
most cost-effective options
MARKET APPLICABILITY: All Companies
Benefit Obtained: Vendor Management
Amount of Benefit: High
Rationale: Aggregation of travel spend improves
ability to manage vendor relationship
Benefit Obtained: Control
Amount of Benefit: Medium
Rationale: Company can restrict users to specific
vendor relationships; facilitates ability to create
exception reports
IMPLEMENTATION SUCCESSES and TRENDS
• 40 percent of companies surveyed have implemented an in-house, Web-based booking tool. An additional 10 percent plan to implement one in the next two years. 80 percent of those who implemented one were either very satisfied or somewhat satisfied with their selected tool.
• On average, companies that utilize an in-house, Web-based booking tool have been able to book53 percent of their transactions through the tool.
• One study participant reported reducing travel agency transaction costs from $45 for telephone-assisted booking to $15 per online transaction by implementing a Web-based booking system.
• One company achieved its goal of booking 60 percent of travel through an internal, Web-basedbooking system within the first few months of implementation. The company used a variety oftechniques to encourage the shift to the Internet, including publication of reduced transactionfees, distribution of lost savings reports, distribution of non-compliance reports, anddevelopment of incentive programs (e.g., randomly awarding airline tickets to employees whobooked through the Web-based tool).
Best Practice 9
Travel andEntertainment
Section II
Best Practices
128
Best Practice 10
Travel andEntertainment
129
IMPLEMENTATION
ACTION STEPS:
1. Define audit strategy,
including exception triggers
2. Create policies and
procedures that embody
the audit strategy,
including procurement,
T&E, and A/P policies
3. Train auditor on audit
strategy and procedures
4. Monitor and evaluate audit
strategy and execution
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: Medium
Rationale: Statistical sampling significantly reduces
processing costs, while catching and reducing
“maverick” spend
MARKET APPLICABILITY: All Companies
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Improves the efficiency and accuracy of
the control process; added controls allows the
organization to proceed without undue fears of mis-
use or fraud
IMPLEMENTATION SUCCESSES and TRENDS
• 65 percent of study participants have an audit strategy that targets employee misuse, accurate approval signatures, and original receipts using statistical sampling as well as adefined dollar threshold.
Auditing T&E information is vital for measuring compliance to travel policies. Best
practice companies define clear audit parameters to ensure timely, efficient, periodic
reviews are made to evaluate the compliance or non-compliance with T&E policies.
Along with being clearly defined, audit policies should align with the overall
organization’s strategy. Audit staff should be trained to effectively execute audits.
The audit strategy should include the following components:
• Department responsible for review
• Acceptable thresholds/exception triggers and profiles
• Frequency of audits
• Sampling methods (e.g., statistical sampling)
• Proper authorizations and verifications
• Record retention
• Compliance reporting
• Correction at point of audit
The audit strategy should balance visibility, effort required, and processing efficiency.
Control
Establish well-defined expense report audit parameters
Best practice companies seek out ways to minimize low-value tasks of their
employees. One of the most time-consuming administrative tasks required of traveling
professionals is travel expense reporting. According to Aberdeen, the average employee
spends about 30—45 minutes to complete a manual expense report, with a cost of
approximately $45 to process it on the back end. An automated report, pre-populated
with card data on the other hand, can be completed in 10—15 minutes (a 67 percent
improvement from manual reporting) and reduce the processing costs by 80 percent.
Additionally, the system helps reduce reconciliation errors associated with manual data
entry and encourages T&E card use compliance.12
In order to reduce the costs associated with expense reporting, companies have
begun to implement automated expense reporting systems. These systems provide an
automated form that can be accessed from the user’s desktop and allow for integration
with the data feed from the T&E card provider.
When the user accesses the system, he receives an expense report that has been
pre-populated with T&E card data. Fields are created for allocation to cost centers and
entry of out-of-pocket expenses. After completion, the form is electronically routed using
workflow rules (included with the system) for automated manager approval and
subsequent delivery to the Accounts Payable department for reconciliation and
reimbursement. Receipts are forwarded to A/P in a separate envelope.
Twenty-six percent of companies surveyed have implemented an enterprise-wide,
pre-populated expense reporting solution, which is better than the nine percent industry
average. While automated expense reporting is viewed as an innovative T&E best
practice, it has not been as widely adopted as predicted. This low adoption has been
attributed to other Procure-to-Pay solutions such as e-Procurement, Strategic Sourcing,
and ERP implementations that have eclipsed automated expense reporting in priority.
Additionally, the market for automated expense reporting solutions was less mature
than it is today and did not provide companies with an extensive amount of functionality
required to justify the implementation. The results of the survey indicated that
companies will begin to adopt these tools more rapidly going forward.
continued on next page
12 Aberdeen Group. Expense Management Automation. March, 2001.
Reporting
Standardize and pre-populate T&E/ Visa Commercial One card expense reporting
Best Practice 11
Travel andEntertainment
Section II
Best Practices
130
Benefit Obtained: User Satisfaction
Amount of Benefit: High
Rationale: Users appreciate the ease, convenience,
and time-savings of pre-populated expense reports
Best Practice 11
Travel andEntertainment
Standardize and pre-populate T&E/ commercial one card expense reportingcontinued
In addition, compared to five years ago, the number of companies offering expense
reporting solutions has grown dramatically. ERP and e-Procurement vendors have
developed automated expense reporting solutions and marketed them as “second-wave”
initiatives. Other third-party products have developed strategic alliances with card
providers and software companies to provide more robust functionality.
Mid-size companies that do not necessarily have the resources to spend and
implement an expense reporting solution have explored cost-optimal alternatives such
as outside hosting of the expense reporting package or creation of in-house, automated
expense templates.
IMPLEMENTATION
ACTION STEPS:
1. Evaluate third-party
expense reporting
packages for ability to
meet functionality and
integrate with existing
platform
2. Work with Issuers to
receive automated feed,
define cost center codes,
and create workflow rules
3. Pilot expense reporting
package within a business
unit to optimize solution
and build initial momentum
4. Develop and deliver
comprehensive training
program to ensure
user acceptance and
satisfaction with
the product
5. Roll out expense reporting
package, including
comprehensive training
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Significantly reduces cycle time,
data input, and input errors
MARKET APPLICABILITY: All Companies
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Pre-population of data increases control
over data and reduces possible data input errors
131
IMPLEMENTATION SUCCESSES and TRENDS
• In addition to the 26 percent of study participants that have already implemented an enterprise-wide expense reporting solution, 36 percent plan to implement one in the next two years.
• One large corporate participant reported the average time to complete a pre-populated,automated expense report is two minutes — this is a 93 percent improvement from the industryaverage for completing a manual report.
• 100 percent of the companies that implemented an enterprise-wide solution expressedsatisfaction with their products and the associated cost savings.
Benefit Obtained: User Satisfaction
Amount of Benefit: Medium
Rationale: Improves timely reimbursement
IMPLEMENTATION ACTION
STEPS:
1. Map data requirements
(e.g., cost center, employee
information, spend
information) to ensure
accurate interface
1. Develop and thoroughly
test interface prior to
deployment
1. Work with audit department
to develop new process for
reviewing and improving
expense reports
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Reduces cycle time, manual data input,
and potential for errors
MARKET APPLICABILITY: All Companies
Benefit Obtained: Control
Amount of Benefit: Medium
Rationale: Reduces mistakes generally attributed
to human error
IMPLEMENTATION SUCCESSES and TRENDS
• 58 percent of study participants listed manual entry of expense data into the A/P system as oneof the most time-intensive activities during the reconciliation process.
Leading companies have developed automated interfaces between their expense
management applications and their ERP or accounting applications. This step
significantly streamlines the reconciliation process by removing the time-intensive
activity of manually entering expense report data in the A/P and G/L systems.
The automation of this interface is often done in collaboration with the implementation
of an automated expense reporting solution.
Understanding what was spent, the entity or cost center responsible for the
expense, the timing of the expense, and the management of the payable is a significant
step in encouraging cost-management collaboration between the accounting and travel
management functions. Well-planned and tested interfaces reduce errors and
processing time, enable timely payment, and provide decision-makers a view of
consolidated and consistent information.
Although the need to audit for approvals and original receipts will still exist, the
focus of the audit will shift from validating accurate data entry to ensuring appropriate
cost allocation of expenses.
Reporting
Standardize and automate data interfaces between expense management and accounting applications
Best Practice 12
Travel andEntertainment
Section II
Best Practices
132
Best Practice 13
Travel andEntertainment
133
Best practice companies identify the appropriate internal and external sources for
travel data to facilitate comprehensive data management. Access to comprehensive
data is critical to effective vendor negotiations and Travel and Entertainment policy
compliance tracking.
Information sources include:
• Travel agency
• T&E card
• Expense reports
• Vendors (e.g., hotels, airlines)
• Web-based booking tool
Companies should capture travel data in a central data location. The data should
consist of per-trip information on costs, vendors, dates, and locations. It should be
collected in an easy-to-analyze format, which includes the ability to sort by different
variables. For some companies, this may be as simple as aggregating the data into a
Microsoft Excel spreadsheet. Mandating and enforcing use of a single travel agency
or T&E card provides improved access to data in a single repository.
Data can be used for vendor negotiations, continuous improvement, and exception
reporting. Common analysis may include a review for patterns and exceptions in areas
such as:
• Airline city pairs
• Spend with T&E suppliers
• Airline credits with each airline
• Top volume suppliers during a given period of time
• Cash advances taken through T&E card for companies that permit cash access
on cards
• Merchant Category Code (MCC) exception reporting
continued on next page
Reporting
Capture, report, and analyze comprehensive, company-wide travel data
Capture, report, and analyze comprehensive, company-wide travel datacontinued
IMPLEMENTATION
ACTION STEPS:
1. Identify all internal and
external sources of data
(see information sources
above); meet with all travel
planners to identify any
other travel data collection
resources
2. Work with sources to
retrieve data (e.g., data
feeds, spreadsheets,
queries)
3. Consolidate data into
single reporting mechanism
(this will depend on
technological sophistication
and format of the data)
4. Determine cost-effective
method for continuous
update of data (e.g.,
may range from weekly
download and merge to
fully integrated system)
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Comprehensive data enables greater
ability to negotiate discounts, reducing overall
travel costs to the firm
MARKET APPLICABILITY: All Companies
Benefit Obtained: Vendor Management
Amount of Benefit: High
Rationale: Comprehensive information will
better support vendor negotiations and vendor
consolidation
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Enables the firm visibility to
comprehensive spend data and supports effective
reporting, allows for the evaluation of travel
compliance by region, business unit, period,
or policy, and improves decision-making
IMPLEMENTATION SUCCESSES and TRENDS
• Study participants that consolidated data from multiple sources averaged a 19.6 percent discounton airline rates. This is significantly greater than the overall study average of 9.7 percent.
• One study participant transitioned to mandated use of the T&E card for all travel-relatedexpenses, which enabled greater visibility to comprehensive spend data from a single location,thereby improving spend information and analysis capabilities. Where additional detail wasrequired, the company leveraged data supplied through the Travel Agency.
Best Practice 13
Travel andEntertainment
Section II
Best Practices
134
Leading organizations use exception reporting to track, communicate, and resolve
non-compliance issues. “Maverick” or “rogue” spend by employees can significantly
impact costs as non-compliant spend does not take advantage of negotiated rates.
A post-trip report contains information about expenses incurred for completed
travel (by business unit, traveler, etc.) over a given time period. The travel management
function should review reports to monitor expenses and lost savings and, as needed,
investigate policy violations. By tracking post-trip information, organizations are able to
track non-compliance and deliver related lost savings information to non-compliant
individuals and their managers to encourage compliance.
Reconciliation
Implement post-trip exception reporting and distribute lost savings report
Best Practice 14
Travel andEntertainment
135
IMPLEMENTATION
ACTION STEPS:
1. Define critical metrics
for post-trip reporting
(e.g., travel expenses by
business units, hotels,
airlines, car rentals
used, etc.)
2. Track metrics using
reporting system
determined by available
technology and reporting
sophistication
3. Utilize exception reporting
to identify travelers who
are violating policy
4. Communicate with
violators to determine
underlying causes (e.g.,
frequent flyer miles,
last-minute booking, etc.)
5. Train non-compliant
employees on travel
policies (e.g., show lost
savings report, develop a
quick-reference card for
travel policies, etc.)
6. Track individuals’ non-
compliance over time for
additional communication
and follow-up
Benefit Obtained: Cost Savings/
Process Efficiencies
Amount of Benefit: High
Rationale: Reduces costs over time as compliance
improves by exposing lost savings and encouraging
compliance
MARKET APPLICABILITY: All Companies
Benefit Obtained: Control
Amount of Benefit: High
Rationale: Communication of costs and benefits
improves compliance over time
IMPLEMENTATION SUCCESSES and TRENDS
• Approximately half of the survey participants utilize post-trip exception and post-trip lost savingsreports.
• Two large corporate companies utilized internal, Web-based booking systems, which requiredemployees to type in reasons for booking travel outside of company policy; reporting through theWeb-based tool was used in non-compliance reporting.
• Another large corporate company generated and distributed non-compliance reports amongbusiness units to encourage compliance.
© 2005 Visa U.S.A. Inc. V13093-11-04ppp