Implementing Purchase Cards

Procurement cards Guide Guidance Paper Version 1.5.
1
NePP Status: Final 01/04/2008
Implementing
procurement
cards
A guide for public
sector managers
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Procurement Cards Guide Guidance Paper Version 1.5.1
www.ticon.uk.com 0207 836 1999 01/04/2008
Introduction:
Procurement cards
are the quickest
route to e-
procurement
process savings for
the public sector.
This introduction
explains how they
work and the
benefits they can
bring.
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transaction. This fee can be negotiated with

Introduction: About one of the banks providing card acceptance
solutions.
procurement cards Where do the benefits come from?
What is a procurement card? Procurement card programmes create benefits
Procurement cards are a purchasing solution for organisations by making purchasing quicker
that allows buyers to make use of cards to and easier. Traditional purchasing processes
make purchases. The cards look and feel like a that use paper require buyers to complete time
personal bank card, and cardholders use them consuming requisitions and approvals before
to make purchases in the same way: face to orders can be sent to suppliers. Once the
face, over the internet, via phone or via fax. goods have been received another round of
Procurement cars are different from personal time consuming processes are normally
bank cards, however, because the purchases undertaken in order to approve invoices, make
are accrued and managed on a corporate payments and enter data into the financial
level, allowing managers to control the activity ledger. Using procurement cards removes the
of buyers either on a personal level or by need for completing paper forms and allows
department or across the whole organisation. buyers to concentrate on productive work
rather than filling out the paper forms
A procurement card programme is a traditionally required to make purchases.
programme that co-ordinates the use of a
number of procurement cards across an Even if an organisation uses an e-ordering
organisation. A procurement card programme solution, they can benefit from using
allows buying organisations to receive monthly procurement cards, because procurement
reports for all the cards in a programme in an cards can be used as a method to consolidate
electronic file. This means that the buying invoices (multiple transactions will be
organisation can determine spend activity by processed as a single payment) and to provide
individual cardholder, department and supplier. electronic data and management information.
Procurement card programmes are commonly This information can be used to identify new
deployed using a card management contracting opportunities and to take control of
information solution to help reconcile the bank spend and provide an audit trail for purchases
file into the financial ledger and to help made by individual buyers.
categorise spend and report on buyer activity.
Time savings
How does a procurement card work? How is the time saved expressed as an
Card programmes allow the supplier’s card efficiency? In 1999, the National Audit Office
processor to make the payment to the supplier, (NAO) completed a piece of research to
usually within four days. The cardholder’s identify the average value of the time saved
issuing bank notes the payment in a monthly when using the GPC to pay for a transaction.
statement and once paid, the funds are passed They estimated that the value of the time
to the suppliers bank, usually via a clearing saved was on average £28 per transaction. A
house. So instead of a supplier waiting for the study by Deloitte for the NePP in 2004
buyer to instruct the buyer’s bank to make a estimated the saving to be £33 per transaction.
payment into their bank, the supplier’s bank Both these estimates were derived by
advances the money to the supplier, because calculating the time it would take to undertake
the buyer’s card has effectively pre-authorised a transaction from purchase to pay using paper
the payment. In return for the advance the forms. Some time was also included to account
supplier pays a small fee called the Merchant for errors and omissions.
Service Charge (MSC). Typically this fee will
be between 1.75% and 3.0% of the cost of the
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Whatever the figure chosen by other Using procurement cards will create some
organisations, each buying organisation should automatic cashable savings because they do
undertake their own research to determine the not require the organisation to raise paper
likely effect that a procurement card will have orders or reconcile each invoice by hand,
on their organisation, and use this research to however, the majority of savings will be
determine a ‘per transaction’ estimate of realised in the shape of staff time. For these
savings. savings to become cashable it will be
necessary to reduce the wage costs of the
Understanding the market organisation, either by employing fewer
Prior to approaching a bank about a temporary staff or by reducing the number of
procurement card programme it is important to full time equivalent (FTE) employees. For more
understand how the procurement card market information on realising the benefits of
works. In the UK there are three major card procurement cards see “Running a programme
acceptance brands, Visa, American Express 3: Identifying and recovering the benefits” on
and MasterCard. This means that the majority page 41.
of suppliers who can accept payments by card
will accept cards carrying one of these brands. Defining the success of a procurement card
Six Visa issuing banks have been contracted scheme?
by the OGC to provide the Government It is essential for an organisation to consider
Procurement Card (GPC) using the Visa their vision of success before implementing a
network. Under this contract, the issuing banks procurement card programme. Will the aim be
can provide all public sector bodies with a to gain efficiencies? If so, how much of this
purchasing card solution that does not charge efficiency is planned to be cashable and how
any fees for processing transactions or issuing much is planned to be non-cashable? Making
cards. Additional charges may accrue for a clear statement of the programme’s goals is
services such as consulting, cash transactions crucial to delivering a successful procurement
and advanced management information. For card programme. This statement should be
more information on how to buy a procurement part of a structured business case. For more
card programme and GPC, see “Buying a information on business cases see “Business
solution 1: procurement cards” on page 23. case 1: Analysis” on page 6.
Intangible benefits Procurement cards need to be viewed in the

Procurement cards are flexible tools that can context of the full range of e-procurement
be used for a wide variety of purposes, for technologies. Procurement cards will need to
example using procurement cards for implemented as part of a wider e-procurement
emergency purchasing has proven to be very strategy. This will require the development of a
effective. GPC procurement cards were used comprehensive strategy for their use,
by staff attending the Buncefield oil depot fire including, knowing which suppliers and which
and staff attending the 2005 July bombings in processes are appropriate for use with
London. Procurement cards have given procurement cards. Once the transactions
officers who deal with emergencies the means have been made management information
to make immediate purchases in order to from the various sources needs also to be
protect and support members of the public. It is collated in order to help procurement
not possible to quantify this sort of benefit in managers gain valuable procurement
financial terms, but the positive aspects of information.
using a procurement card in this way are
obvious.
Realising the benefits
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Business
case:
Three steps to
building a business
case for
procurement cards,
including spend
and process
analysis, savings
estimates and
building the final
case.
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transform frequent, lower value purchases, but

Business case 1: organisations can use them to achieve benefit
in a wide variety of scenarios.
Analysis Bank staff and external consultants can help
define a strategy for using cards if needed.
The need for a business case
A procurement card programme will commonly Analysis
need the approval of the senior staff Assuming that an organisation wishes to
responsible for efficiency, the director of transform the processes used to purchase
finance and the head of audit. In order to gain lower value, high volume goods, it will be
their support it will be necessary to provide necessary to complete some basic analysis to
these officers with a business case for using identify the purchases that need to be
procurement cards. The business case will changed. This analysis can be broken down as
need to identify the scope of the programme follows: invoice analysis, process analysis and
and what affect the cards will have on the acceptance analysis.
existing purchasing processes. The business
case must also provide information on the Step 1: Invoice analysis
costs associated with the programme including Using the payments made from the
additional software, implementation and organisation’s finance system it is possible to
maintenance. identify how many invoices the organisation is
processing in certain value bands. A typical
Assessing the opportunity profile of invoices by value will be as follows:
To identify the opportunity for using
procurement cards it is important to
understand which of the purchases currently
> £5,000 3%
being made using paper-based processes
could be made using a card. In order to know
which transactions can be transferred to cards, £1,000 - £5,000 7%
it is important to understand the following:
1. The strategy for using cards.
2. Which transactions fall within the defined £500 - £1,000 10%
strategy.
3. What process is currently being used to
complete these transactions. £100 – £500 30%
Strategy
Procurement cards are a flexible tool, they can < £100 50%
be used to pay a large number of small
suppliers or a small number of large suppliers Fig 1, Correlation between invoice value and volume of invoices
depending on the strategy determined by the
organisation. Procurement cards can also be The diagram above shows the likely ratios of
used for common lower value purchases, or for lower value invoices to high value invoices in a
infrequent, high value items. They can be used typical public sector organisation. The pool of
as part of corporate e-enablement programme invoices that will be available for use with a
for many buyers or for ‘emergency only’ procurement card will be dictated by the
purchases with one or two buyers. The wide transaction limits that an organisation might
variety of uses ascribed to procurement cards place on their card programme. Count the
demonstrates the need for a strategy for using number of invoices in bands from £100 to
procurement cards. The most common
strategy for using procurement cards is to
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£5,000 to identify the number of invoices that combining the invoice analysis and the process
the organisation processes in each value band. analysis the organisation can draft a priority list
for the transactions that are most appropriate
to procurement cards, with frequent and highly
> £5,000 60% inefficient transactions at the top of the list and
infrequent inefficient transactions at the bottom
of the list.
£1,000 - £5,000 18%
Typical transactions that can be moved to
procurement cards are as follows:
£500 - £1,000 10% • Frequent lower value transactions.
• Transactions made by staff working off-
site, e.g. maintenance staff.
£100 - £500 10% • Travel and subsistence transactions.
• Internet purchases.
<£100 2% • ‘One off’ transactions with suppliers who
don’t need to be included in the financial
system’s database of suppliers.
Fig 2, The total value to an organisation of invoices in spend bands
• Cheque payments.
• Temporary staff payments.
Figure 2 shows a typical assessment of the • Cash transactions / imprest accounts.
cumulative value of the invoices being
processed by a public sector organisation. The Step 3: Acceptance analysis
diagram clearly shows that the total value of Having identified and prioritised the key
the spend in transactions under £100 is likely transactions that the organisation needs to
to be around 2% of the organisation’s transfer to procurement cards, it is necessary
expenditure. However, as we see in figure 1, to determine how many of the organisation’s
invoices in this value band accounts for around suppliers are able to accept payment from a
half the invoices processed by the card. Different suppliers will accept different
organisation. cards, but banks and card companies may be
able to help identify which suppliers accept
Step 2: Process analysis payment using their card schemes. It may also
Process analysis is a ‘mapping’ process that be worth approaching some of the suppliers
allows an organisation to understand how who are creating the priority transactions to
purchasing data flows through the identify whether they accept cards and which
organisation, from initial requisition within a cards they accept. Understanding which
department to logging a payment onto the suppliers accept payment by card is important
financial ledger. Staff undertaking process because it will help the organisation
analysis must thoroughly research the understand how many transactions can be
progress of each department’s purchasing moved to procurement cards immediately. This
processes in order to generate a analysis will also identify which suppliers it will
comprehensive flowchart of the different be beneficial to encourage to accept card
methods used to raise orders, process payments in the future
transactions, make payments and reconcile the
transactions. Process analysis will help an The spend and process analysis tasks detailed
organisation determine whether a transaction above are not just appropriate to procurement
can be transferred to procurement cards and cards but can be used to identify the potential
will also highlight the most inefficient savings for any e-procurement initiative.
processes in place within the organisation. By Initiatives such as e-invoicing, e-ordering and
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marketplace can all benefit from invoice and

process analysis. It is also critical to
understand what role other technologies such
as e-invoicing are going to play alongside
procurement cards. Both technologies are
used to increase the efficiency of invoice
processing and each has their own strengths
and weaknesses. In a case where an
organisation is considering using both
technologies, it is important to assess how
each technology will affect the organisation.
The business case for each technology must
not ‘overlap’ by claiming time savings from
improving process associated with using each
technology on the same transactions.
In addition to providing a clear understanding

of the existing procedures, process and invoice
analysis will provide organisations with a clear
understanding of how to change the existing
procurement processes, providing a critical
insight to the challenge of change
management.
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orders to suppliers. However, savings should

Business case 2: not be limited to these costs alone, for
example, giving cards to buildings
Estimating the maintenance staff might reduce the number of
journeys made to source stock or file
savings paperwork, the cost savings associated with
travel can be directly attributed to the
procurement card programme.
Estimating time savings
In order to estimate the time savings likely to
Contract compliance
be gained from using procurement cards it is
If a contract for a good or service has been put
necessary to examine key, regularly
in place, using a procurement card can help to
performed, tasks in the purchasing process.
identify when buyers have chosen to purchase
See table 1 below for an example of the
from an off-contract supplier. Knowing who is
common tasks that timings can be calculated
making the purchase, will help procurement
for.
staff to enforce the contract, which will in turn
secure savings. For more information on
The amount of time that can be saved when
managing contract compliance, see “Running a
reconciling transactions will be significantly
programme 2: Securing contract compliance”
affected by the use of a reconciliation solution
on page 39.
that will upload data to the financial ledger and
may also provide managers with a suite of
Early settlement discounts
tools to manage card data and categorise
Cash flow is critical to suppliers of all sizes, but
spend. Therefore if time savings in the
especially to small and medium enterprises
reconciliation process are being attributed to
and is a common reason for small businesses
functionality available in a planned integration
to fail. Choosing to pay by card can help
tool, the costings for purchasing and
suppliers by providing them with prompter
implementing this tool need to be included in
payment. Even the standard thirty day term for
any business case.
payment of invoices can cause problems for
suppliers if the total value of these invoices are
Time savings can only be recovered as
large. Late payments can cause even greater
cashable time savings if either temporary or full
problems. Where cash flow becomes a
time staff are removed from the organisation.
problem, suppliers will be forced to borrow
Non-cashable savings can be recovered by
money in order to avoid running out of money.
applying a per transaction efficiency saving, or
Borrowing money is expensive, which is why
by allocating staff to a citizen facing service. If
some suppliers are prepared to offer early
the intention is to recover cashable savings, it
settlement discounts. Discounts of 5% are not
will be easier to recover savings in
uncommon but will need to be negotiated on
departments where a higher volume of
an individual basis with each supplier.
common tasks are concentrated amongst
fewer individuals. Tasks that are undertaken
Other benefits
infrequently within departments will require
As well as the time and cost savings, cards
significant effort to consolidate to a level that
have a number of ‘intangible’ or ‘indirect’
will allow for staff numbers to be reduced.
benefits that have no measurable efficiency in
terms of savings, but can be included in a
Cost savings
business case to show how the organisation
As well as generating time savings, cards can
will benefit from having a procurement card
generate cost savings for an organisation.
programme. Intangible benefits include:
Typically cost savings will focus on the costs
associated with printing, postage and faxing
Greater transparency of spend
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Organisations that are still using paper % of Workload = the proportion of an

processes to conduct purchasing will have individual’s workload attributed to the task
limited knowledge of which buyers in which
departments are making purchases, including This data will provide managers with a good
how much they are spending and what the understanding of how much time will be saved
money is being spent on. Procurement cards by staff once procurement cards are in place.
will bring some awareness to the activities of
buyers and departmental spend.
Management information
A procurement card programme, when used in
conjunction with reconciliation software that
provides reporting tools, can be used to report
on a wide range of procurement activities,
including departmental, category, cardholder
and programme wide reporting. Reporting
allows project managers to see where
progress is being made, to track the use of
cards and to identify whether the programme is
meeting the targets set out in the business
case.
Time savings table

In order to estimate the savings to be made
from using a more efficient buying and
reconciliation process, a timing comparison
should be made. Timings recorded for
common tasks in the paper based purchasing
process and timings for common tasks in the
new procurement card process should be
compared to estimate a per transaction time
saving.
Below is an example of some of the steps that

can be compared between a traditional paper
process and the process for using procurement
cards. The processes described below are
indicative of some of the most common tasks
in a purchase process. Due to the diversity of
tasks in different purchasing processes, this
listing should not be seen as comprehensive.
Once a list of tasks has been agreed, the table
can be given to buyers or staff who process
invoices to complete the three blank columns.
Time = the time taken to complete a task

Frequency of task = the amount of times a task
is completed in a period of time (usually a
week)
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Table 1: Estimating savings from procurement card transactions

Non procurement Procurement
Frequency % of Estimated Frequency % of
card transaction Time card transaction
of task Workload time of task Workload
process process
Selecting suitable Selecting a
supplier suitable supplier
Raise a requisition Order by phone
Manually update
Requisition approval
transaction log
Allocation of each
Raise a purchase
card transaction –
order
electronic
Allocation of each
Purchase order
card transaction –
approval
manual
Filing copies of
requisitions and
orders
Pack and post order
Check supplier
acknowledgement
Procurement
Non procurement card
card reconciliation reconciliation
process process
(monthly)
Allocating Checking
commitment in the cardholder
ledger system statement
Queries with
Checking supplier
cardholder
advice note
statement
Approval of
Allocating accrual in
cardholder
the ledger system
statement
Checking card
Checking supply
summary
invoice
statement
Allocating invoice Approval of card
actual cost in the summary
ledger system statement
Allocation of card
Queries with invoice
summary
details
statement
Reconcilitation of a
query
Creating a BACs or
cheque payment per
supplier
Reconciliation of a
supplier statement
Total
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Actual Savings
Business case 3: Savings can now be calculated on a per
annum basis over three years. This allows for
Building the case set up costs and a staggered increase in the
number of card transactions to make an
Having completed the necessary analysis and estimate of the savings available over a three
determined appropriate time savings for tasks year period.
it will be possible to build a detailed business
case for implementing a procurement card Quick business case
programme. A comprehensive business case
1. Identify the top 100 suppliers by the volume of invoices
should including the following sections. they issue.
Be careful not to include suppliers that are expected to
Strategy be involved in any existing e-procurement initiative, such
The strategy should detail the reason for as marketplace.
implementing procurement cards and the
2. Call the suppliers to find out if they accept payment by
success that the organisation seeks to achieve card.
from their use. Be sure you know which card you intend to use, or make
sure you find out which brand of card the supplier can
Scope of the programme accept.
The scope of the programme is defined by the
3. Add up the number of transactions from all the card
total number of transactions that are expected enabled suppliers to determine a total number of
to be transferred to procurement cards transactions that can be put onto to cards immediately.
Transactions from suppliers that don’t take payment by
Time savings card can be added to the list, but an additional cost for
The time savings attributable to the use of a supplier adoption will need to be accounted for.
procurement card. Timings can also be given a 4. Multiply the total number of transactions by an
monetary value by estimating the amount of estimated value for the time saved on each transaction
time saved per transaction and then giving it a (£5 - £30) to create a total number of savings
fiscal value according to the equivalent cost in Remember to increase the saving if the organisation will
time for an administrative staff member. This use some automatic reconciliation software.
will generate a ‘per transaction’ cost saving 5. Estimate the cost of software and other set up fees
which can be multiplied by the number of (£3k - £30k).
transactions that are expected to be Other costs needs to include consulting fees for
transferred to a procurement card. integration and any project management time.
6. Estimate the cost of maintaining the procurement card

Cost savings programme.
The savings made from postage, fax etc. How much staff time is it going to take each month to
reconcile the statements and how much time will it take
Costs – setup to manage the programme.
The cost of software, implementation,
7. Multiply the total estimated savings by 3 (to create a
consulting, project management and training three year plan) and subtract the set up costs as well as
required to implement a programme. the total maintenance costs for three years.
This will give you the business case for an ‘instant’
Costs – management procurement card programme that requires no supplier
On going software costs, as well as any adoption. Of course, additional savings may become
available from encouraging suppliers to use procurement
maintenance and management fees that will cards or choosing to use alternative suppliers who accept
be incurred. procurement cards.
An online business case can be completed at:

www.purchasingcard.info
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Handling
objections:
How to manage
some common
objections to using
procurement cards,
including, fraud,
spend control and
management
information.
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cases, sufficient motivation to prevent

Handling objections fraudulent use of cards.
This fact is borne out by the following statistic:
1: Controlling fraud in all the commercial (public and private sector)
schemes that Visa operates across Europe,
A common perception regarding procurement including GPC, only 0.000007% of the
cards is that their use will encourage transactions made in these schemes have
employees to make fraudulent transactions been subject to claims for employee fraud.
and that this fraud cannot be countered or
controlled using cards. Details of how to However, where fraud does occur a
manage these concerns are covered below procurement card actually provides a valuable
audit trail and information about individual’s
Getting used to not having preventative purchasing activity making it far more likely
controls that fraud will be identified and that any culprit
Despite procurement cards being seen as an is caught.
effective method of procurement by many
auditors in the UK public sector (the GPC Anti-fraud measures and existing
scheme has over 750 programmes), some purchasing processes
managers still associate cards with fraud. Fraud must also been viewed in the context of
Although there were over 2.8 million existing paper procedures. Anti-fraud
transactions placed using the GPC in 2005, measures used in standard purchasing
there is still a perception that because procedures rely on the separation of duties,
transactions are audited after the purchase has whereby each order is required to be approved
been made that the cards can be used to by a separate individual prior to being sent to
commit fraud and that using procurement the supplier. Where procurement cards are in
cards means relinquishing the preventative use this protection is only available when cards
controls usually associated with purchasing. are used in conjunction with paper processes
or additional software solutions.
In fact, using procurement cards does not
mean relinquishing controls, rather, using However, it is worth noting that the fraud
procurement cards just means taking a prevention measures commonly used with
different approach to preventing fraud. Buying paper transactions are not sophisticated, and
organisations can use a range of technical circumnavigating them is relatively easy for
controls to restrict cardholder activities. For those who are determined to defraud an
more information on card controls see organisation. For example, approvals of orders
“Handling objections 2: Spend controls” on commonly use stamps and signatures which
page 16. Aside from these controls, much of can often be forged.
the responsibility to purchase within the
policies of the buying organisation lies with the Protecting against fraud when making cash
cardholder. payments is also difficult. Using procurement
cards as a replacement for petty cash prevents
In order to prevent fraud cardholders need to fraud, monitors transactions more effectively
be reminded of the corporate procurement and protects the employees from the risks
policies, the corporate procurement associated with handling cash.
procedures and their duty in complying with
these rules. Informing cardholders about the Procurement cards are not one hundred per
data that will be provided by the bank in the cent ‘fraud-proof’, however, using procurement
monthly statements and the consequences of cards will provide more accurate, easily
using the card fraudulently are, in almost all accessible information on an individual’s
spending. A traditional paper based process
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will provide a paper trail that is unlikely to be

stored centrally and is unlikely to provide
information on the individual buyer. Therefore,
if a procurement card programme is correctly
set up and regularly monitored, the controls
and data available to both prevent fraud and
identify fraud are significantly greater than the
controls and data that usually exist in paper
based processes.
Finally, if an organisation is subjected to fraud

through the use of their procurement cards,
banks have insured themselves against fraud
and will reimburse the organisation for fraud
committed by an employee using a card where
the goods or funds are not recoverable.
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the whole programme. This means that

Handling objections cardholders can be blocked from making cash
withdrawals or making any purchases from
2: Spend controls companies offering financial services. It should
be noted, however, that merchant category
Whilst some senior managers will accept that blocking is a relatively ‘blunt’ tool for controlling
cards are able to control fraudulent spend, they spend. For example, blocking financial
still believe that by making transactions easier services companies does not prevent a
they will lose control of spending and that cardholder from purchasing financial services
budgetary control will suffer from the use of from a supplier that has categorised
procurement cards. However, procurement themselves in another category, for example
cards programmes can use a number of Tesco. Blocking only restricts the cardholder
technical controls in order to manage spend from using the card with those suppliers that
and retain budgetary control. have chosen to categorise themselves as
providers of financial services. Alternatively,
Understanding controls should a supplier such as Tesco choose to
Each procurement card can be given a spend categorise themselves as a provider of
limit according to a single transaction and financial services, a card holder blocked from
according to a cumulative monthly spend. using this category would not be able to
purchase anything in a Tesco store, regardless
1. Programme limit – the maximum to be spent of whether the item was a financial service or
on a whole procurement card programme in not. A list of merchant categories can be found
any given month. below. This categorisation is used by both Visa
2. Department limit – the maximum to be spent and MasterCard.
by a department using procurement cards in
any given month Merchant Category Descriptions
3. Cardholder limit – the maximum to be spent Auto Rental
by a cardholder in any given month Automotive Fuel
4. Transaction limit – the maximum to be spent Books and Periodicals
in any single transaction. Building Materials
Building Services
When a purchase exceeds a limit, the card is Business Clothing and Footwear
rejected at the point of purchase*. However, Cash withdrawals
there is a balance that needs to be struck Catering and Catering Supplies
when using technical controls. If the limits on a Cleaning Services and Supplies
card are too aggressive then a card will not get Clubs/Associations/Organisations
the use it was designed for. Equally, limits Computer Equipment and Services
need to be set so that risk can be managed by Estate and Garden Services
the organisation. Financial Services
Freight and Storage
Merchant category blocking General Retail and Wholesale
Additionally, spend can be blocked according Hotels and Accommodation
to the type of supplier in use. When a supplier Leisure Activities
signs up with a bank to become a card Mail Order / Direct Selling
acceptor they are asked to categorise Mail Order and Courier Services
themselves using a standard for merchant Medical Supplies and Services
categorisation. When issuing cards the Miscellaneous
purchasing card programme manager can Miscellaneous Industrial/Commercial Supplies
chose to restrict any of the categories for use Office Stationery Equipment and Supplies
either by the individual card holder or across Personal Services**
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Print and Advertising

Professional Services
Restaurants and Bars
Staff – Temporary Recruitment
Statutory Bodies
Telecommunication Services
Training and Educational
Travel
Utilities and Non Automotive Fuel
Vehicles Servicing and Spares
Non-technical controls
Using procurement cards does not prevent
managers from using traditional purchasing
control procedures such as approval of
purchases. A full range of procedural control is
available to organisations using procurement
cards. The only aspect of purchasing that
changes with procurement cards is that
discovery of bad practice by cardholders will
occur at the end of the month, after the
purchase has been made. Whilst this may
seem to run against the grain of traditional
procurement practice, organisations using
approvals can use the approval log to identify
non-approved transactions and act
accordingly.
* Point of purchase blocks rely on the

merchant having a dial up link to the issuing
bank.
** Personal Services cover services such as

counseling, childcare, investigative services
and funeral and crematorium services.
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data has been approved by HMRC as

Handling objections sufficient evidence for VAT reclaim for all
transactions under £5,000. Transactions above
3: Management this threshold require a VAT receipt for
evidence.
information Level 3, or Line Item Detail (LID) Level.
LID suppliers can provide a more complete
It is common for procurement managers to
data set on the purchases made with a
express concern about the quality of
supplier. This will include details of each item
information provided by procurement card
purchased in a transaction and the amount of
schemes. This is because the majority of
VAT paid on each item, rather than a summary
procurement card merchants don’t provide line
of VAT paid for on all the items in a
item detail (LID) on purchases. LID is common
transaction. HMRC have approved LID data as
in marketplaces and other e-procurement
sufficient evidence for VAT reclaim regardless
systems and can be used as VAT evidence.
of the value of the transaction.
LID is also used by procurement managers to
categorise spend, identify contracting
Table 2: Details of data provided by different
opportunities and manage demand.
suppliers
INFORMATION LID SUMMARY STANDARD
Understanding data levels REQUIRED
Each month, the bank will provide the
Customer’s card no. √ √ √
organisation with a electronic file containing all
Expiry date √ √ √
of the transaction data from the organisation’s
Order Date √ √
purchasing card programme. The data will be a Customer’s Reference √ √
collation of all the information generated by the Supplier Order √ √
suppliers that have been used by the Reference
Product code √
programme’s cardholders during the previous
Commodity code (refer √ √
month. Depending on the type of terminal that to sep. list)
the supplier uses to process card transactions, Product Description √
different information will be provided in the Quantity √
buying organisation’s monthly bank file. The Unit of Measure (i.e. √
different ranges of information are known as each, 5, etc)
data levels. Unit Cost √
Discount (for this item) √
Level 1, or Standard Level Net (ex vat) Total of the √ √
line
Level 1 data is equivalent to the information √ √
VAT rate (usually
that a buyer would normally expect to see on a 17.5%)
credit card statement. This means that no VAT Total transaction √
data is included with level 1 data and in order discount
Total transaction value √ √ √
to reclaim VAT from HMRC on the transaction, (inc. VAT)
it is necessary to retain paper receipts to be Total Transaction VAT √ √
used as evidence of having paid VAT. Amount
Level 2, or Summary Level Unfortunately, the majority of suppliers provide

Suppliers with equipment capable of providing only level 1 data, because the cost of the
level 2 data, will provide the same information equipment required to be a level one supplier
as suppliers providing level 1 data, in addition is significantly less than the equipment needed
they will provide the total amount of VAT that for providing advanced data levels such as
has been paid on each transaction. Level 2
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level 3. Managing concerns about data levels

are covered below.
Option 1: use only LID enabled suppliers

If staff are particularly concerned about the
management information being provided into a
card programme, then an organisation can
make a conscious decision to restrict the use
of the programme to those suppliers providing
level 3 data because the information provided
is more valuable to the buying organisation.
Whilst this may restrict the use of the cards,
many organisations feel this is the most
appropriate use for their cards.
Option 2: accept that level 1 data is better

than no data
Alternatively, the organisation may choose to
enable as many transactions as possible, and
will therefore choose to work with level 1
enabled suppliers. Whilst this will certainly
broaden the scope of any programme, it will
also reduce the amount of information
available and require the organisation to collect
paper receipts to evidence the VAT
expenditure on level 1 transactions.
However, organisations also need to ask

themselves what other plans are in place to
gather the data from these transactions, if they
are not going to be placed on a procurement
card? If there are no plans to use an e-
procurement system for purchases with level 1
suppliers, it is worth using this low-cost
solution, to enable the transactions.
Transactions processed using level 1 data will

certainly create opportunities for making
efficiency savings and will also bring
opportunities for controlling spend and
consolidating invoices.
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procurement card programme the problem will

Handling objections still be there for cash transactions.
4: Cards and Managing procurement cards

Procurement card programmes will require a
finance significant amount of administration.
Cardholder’s contract spend will need to be
monitored, the number of times limits are
It is not uncommon for managers responsible
reached will need to monitored, users will need
for invoice processing to look at cards
to be trained, their training will need to be
mistrustfully. This is because they believe that
logged and cards will need to be returned if
cards will make the life of buyers easier, but
they are not being used sufficiently. All of these
will leave the finance department with extra
tasks have to rest somewhere in the
work. This is due to the amount of daily
organisation, and because the card transaction
management required in a card programme,
data will be sent to the finance department, the
the fact that card programmes go against the
responsibility can often be given to finance.
grain of commitment accounting and the
number of level 1 transactions that need
Commitment accounting
manual intervention in order to process the
Commitment accounting is an accounting
VAT reclaim.
principle that has become available through
the use of electronic finance systems.
Understanding VAT reclaim
Commitment accounting allows an
Because level 1 card transactions do not
organisation to quantify their outgoings and
provide any VAT evidence in the transaction
incomings and generate a financial statement
data, it is necessary to provide HMRC with
at any time, giving finance staff the knowledge
evidence of the VAT paid on the transaction
of whether a department is overspending
before this VAT can be reclaimed. This means
against a budget. Procurement cards prevent
the buyer gathering a paper VAT receipt from
this form of instant accounting because
the supplier and passing it to the finance
expenditure is effectively being collated by the
department for the data to be keyed into the
issuing bank ready to be sent to the
financial ledger.
organisation at the end of the month. This
means that any financial statement created
This process entails the buyer collecting a VAT
using the accounts software can only be made
receipt at the point of sale, retaining the receipt
monthly in order to be 100% accurate. Again,
and passing it on to the finance department
this problem is not unique to cards, and any
along with any transaction log at the end of the
imprest accounts that exist in the organisation
month. Managing this process can be
will not be accounted for within a financial
demanding and frustrating as receipts are
statement.
often lost and not all suppliers provide VAT
receipts as a matter of course. For example,
It is possible to combat some of this concern
the large super markets don’t always provide
by creating a weekly commitment accounting
VAT receipts from their tills, VAT receipts are
scenario, either by asking for weekly
instead written out by hand at the enquiries
statements from the issuing bank, or by
desk. The problem becomes even more
collating transaction logs on a weekly basis.
pronounced when orders are placed with these
However, asking for weekly statements will
suppliers over the internet, as this can require
probably incur extra costs from the bank, and
the buyer to visit the store in order to collect a
managing transaction logs on a weekly basis is
valid VAT receipt. It is worth noting that this
likely to create additional work. Alternatively, it
problem is not unique to procurement cards
is possible to overcome the problem entirely by
and if organisations choose not to implement a
using web based transaction logs that are
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linked to the finance system. Provided the logs Once a programme is established, it will be
are kept up to date, a full financial statement possible to review the activity in the
can be generated at any time. The setting up programme, gather evidence on the time taken
and monitoring of such a solution will obviously to manage VAT records, process weekly
require additional resource and expense. transaction logs and monitor cardholder
activity. This work can be compared against
The problem is that in almost all cases these the manual processing of invoices. Using this
issues will have to be handled by the finance evidence will help to identify whether additional
department. It is therefore easy to understand time savings are being made, or whether a
why some finance managers might view process could be improved. Remember, the
procurement card programmes a little non-fiscal benefits of procurement cards may
sceptically. However, all of this ‘extra’ work has be sufficient to the organisation to warrant their
to be offset against the benefits of using a implementation.
procurement card. The task of approving each
individual invoice for payment and logging that Use level 3 enabled suppliers
payment on the financial ledger will, in the If the challenge of using procurement cards to
majority of instances, be more time consuming process level 1 transactions, is estimated to be
than reconciling the VAT for level 1 too burdensome then it may be better to use
transactions. Cards will also remove the task of the cards with suppliers who are level 3
generating payment files, setting up BACS enabled. However, this will restrict the
transactions and dealing with payment queries programme and will likely create work in
from suppliers. Provided efficient processes supplier adoption as the organisation seeks to
are put in place, procurement cards will reduce move suppliers up to being level 3 merchants.
time spent managing payments and will also
free up buyer’s time.
Even if the estimates for times savings to be

gained from using a card are deemed to be
minimal, there is still a strong argument for
using the cards to gain control and visibility of
the organisation’s spend in areas where none
was previously available.
Resource the management of a

In order to counter the concerns of managers
who believe that procurement cards will create
extra work within their departments; it will be
necessary to work with them to determine what
tasks need to be completed and who will be
responsible for these tasks. Resources need to
be made available to the departments to
complete this work. If this means providing
more resource than was originally estimated, it
may be a sacrifice worth making in order to get
a programme up and running.
Take an informed approach to benefits

realisation
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Buying a
solution:
Details of how to
buy a procurement
card solution and
card management
software.
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managing the solution. So, if the solution

Buying a solution 1: requires a large number of cards with complex
spend and control limits, as well as
procurement cards departmental charge points then it is likely that
this will create a significant amount of work for
What is a card service? bank staff. If the amount of funds that the
Its important to understand what a card service organisation plans to place through the
is so that it can be purchased effectively. At its solution are not significant, the bank may wish
most basic, a card service is a service offered to charge the organisation for any specialist
by a bank (the issuing bank) that allows an services they require. This is because the bank
organisation to make use of the bank’s card earns money based on the value of the
network (Visa, MasterCard etc) to make transactions passing through the programme,
purchases with suppliers on that network. As rather than on a ‘per transaction’ basis.
well as the managed payment service, the
bank will oversee the secure distribution of Account management
cards, the provision of monthly statements and Another critical aspect of any procurement
insurance against theft or fraud. The bank may card programme is the amount of resource and
offer a number of additional services, including support being offered by the bank. In some
the provision of software and the opportunity to cases banks may offer additional functionality,
have branded cards that feature the buying a better rebate percentage or better technology
organisation’s logo. in place of a dedicated account manager.
Depending on the buying organisation’s
Below is a diagram tracing the route of a priorities, additional services may be preferable
payment between a cardholder and their bank to a dedicated account manager, but
and supplier and their bank. organisations need to have a thorough
understanding of the support that will be made
Goods
available to them from the bank.
The GPC framework agreement

The first agreement for GPC was signed in
Buyer 1. Order Supplier
1997, between the OGC and Visa. The first
agreement was available only to Central
Government Departments. The second
contract, signed in 2002, can be used by all
7. Payment
6. RFP
2. RFP 3. Payment public sector bodies. Under this agreement the
issuing banks can provide all public sector
bodies with a purchasing card solution for no
4. RFP
cost, for a guaranteed minimum set of terms
Issuing Bank Supplier’s Bank and conditions.. The latest contract has
5. Payment recently been extended until 2010.
Figure 3, the payment process using a card. The agreement has been made with six of the
(RFP = request for payment)
Visa issuing banks. This means that any public
Working with the issuing banks sector body can approach one of the GPC
Banks are able to arrange different pricing issuing banks and ask them to provide the
models and provide more advanced solutions GPC service, without any need for a tender.
for different programmes. There are a range of The contact details for the GPC issuing banks
factors that will affect the cost of managing a are listed at the end of this document. For
solution for the banks. Bank costs will be more details on the GPC contract and to
incurred around setting up the solution and
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download the latest GPC annual report, visit

www.purchasingcard.info.
Non-GPC schemes
If an organisation wishes, they can chose to
approach any card issuing bank to negotiate a
contract for the supply of a procurement card
solution. Choosing a non-GPC solution will
offer an organisation different functionality and
the option to use MasterCard. However, this
needs to be weighed against any likely cost
and the demands of completing an OJEU or
other tender when a well managed agreement
already exists.
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individual cards, departments or the scheme

Buying a solution 2: as a whole are progressing against targets for
use.
Card management How much do the tools cost?
information tool Tools can vary in price, with the most basic
tools costing several thousand pounds per
annum and the most expensive tools costing
What do the tools do?
around twenty thousand pounds per annum.
Management tools offer varying degrees of
OGCbuying.solutions, in partnership with
functionality. The most basic tools only provide
PCCL, have made an arrangement on behalf
a method for transferring data from the bank
of all GPC users to make available an online
file directly into the organisation’s finance
reporting tool. This offering is expected to be
system. More advanced tools provide the
available by April, 2007. The basic software,
ability to codify the spend that is being put
which will cost nothing will have some
through a scheme. Some examples of coding
reporting functionality. Additional functionality
are as follows:
will be available at a cost and , for more
information, please check the
1. Spend on a card can be coded by the
OGCbuying.solutions website in early 2007 for
identity of the supplier the transaction was
updates. As well as the software providers,
placed with. This can be done using the basic
some banks have also developed their own
merchant categorisation used by the card
solutions and provide these for no or limited
company, or transactions with frequently used
cost, it is worth asking your card issuer or
suppliers can be set up to be allocated to
potential issuers if they are able to provide any
different cost centres.
management information functionality.
2. The cardholder information can be used to
Embedded cards and software solutions
code spend by a number of other factors such
In addition to card management information
as job type, department or project.
systems, it is possible to use cards in
conjunction with electronic order processing
3. Both the cardholder data and the spend
software, including purchase order payment
classification data can be used to allocate the
tools included in ERP systems and stand alone
spend to the organisation’s own pre-
procurement tools such as marketplace, or
determined spend categories.
specialist procurement tools built around
procurement cards. When using these
Tools can also include functionality to manage
solutions, single cards are linked to a software
approvals, and workflow. These tools are used
tool that allows users to raise orders and send
to allow cardholders and their managers to
the order to a supplier in an encrypted e-mail.
have the ability to confirm that each purchase
The card is used as a payment mechanism by
on a statement is correct and has been made
the supplier and the cost of the purchase is
appropriately.
settled with the card issuer in the normal way.
Other tools may include the ability to manage
Is there an alternative to using an
job costings and VAT reconciliation (for
integration tool?
transactions completed using level two and
It is possible to manually copy the data for
above equipment). The majority of
each transaction from the card statement into
commercially available integration tools will
the organisation’s financial ledger, but there is
provide some form of reporting functionality,
a strong likelihood that much of the time saved
which allows procurement card programme
by not having to raise a purchase order is lost
managers investigate the amount of use that
in the time required to undertake this task
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manually. Therefore we would recommend

opting for a system that automates the upload
of data to the finance system as a minimum
requirement for creating efficiency.
Another alternative to purchasing a tool is to

use any internal programming resource to
develop a basic tool for managing the transfer
of the bank file into the payments record on the
financial ledger system. Whilst this solution
may be appear to be a little ‘rough and ready’ if
the key focus of the organisation is to move
data into the financial ledger it can be a very
cost effective method for securing time
savings.
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Implementing:
How to implement a
procurement card
programme,
including how to
resource the
programme, how to
prepare for cards,
how to engage with
suppliers, how to
set up the
programme and
how to roll out the
cards.
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Involvement: detailed and strategic, high

Implementing 1: workload.
Technical team
Resourcing a Responsible for overseeing the technical
implementation, this team will be made up of
programme staff from the bank, the organisation’s own IT
department and, if necessary, a technical
consultant for the card management software
Putting a procurement card programme into
being put into place. This team will implement
place requires a significant effort on behalf of
the project in line with the organisation’s
the staff in an organisation and should not be
strategy for procurement. For more information
underestimated. Below is a list of the
on technical implementation see
resources likely to be involved in an
“Implementation 4: Set up” on page 34
implementation.
Involvement: detailed, high workload for short
period of time.
Cross functional board
The ultimate authority for managing a
Procurement manager
procurement card project should lie with the
The procurement manager will work with the
board that has responsibility for meeting the
technical team and project manager to help set
Gershon efficiency targets. The project
up the categorisations to be used as well as
sponsor should report on the progress against
the merchant category blocking and spend
the procurement card strategy and established
limits.
targets to the board on a monthly or quarterly
Involvement: operational, low workload
basis.
Involvement: strategic / minimum workload
Finance manager
The finance manager will work with the
Project sponsor
technical team and project manager to ensure
The project sponsor should be a manager
that the data integration meets the
within the organisation with the authority
requirements of the finance team and to
required to support the programme and ‘own’
establish a process for managing VAT
the responsibility for the implementation. The
reclaims.
project sponsor needs to have the ability to
Involvement: operational, low workload
raise the profile of the initiative and to cut
through objections and obstacles.
Procurement card manager
Involvement: strategic / varied workload
Once the implementation is live, the task of
managing the programme will need to be given
Project manager
to a staff member. The procurement card
The project manager will work closely with
programme manager must ensure that the
finance, procurement and the departments that
project remains aligned with the procurement
will be issued with cards. The project manager
card strategy and to monitor processes,
will take ultimate responsibility for ensuring that
contract compliance and usage. The
the procurement card programme aligns with
procurement card manager will usually be
the agreed strategy and that a working solution
located within finance or procurement and will
is put into place. The project manager must
be charged with reporting to the project
also work with the IT department, bank and
sponsor.
software providers to co-ordinate the technical
Involvement: operational, workload will depend
implementation. The project manager will also
on the number of cards in use
work to co-ordinate the supplier adoption
efforts of the organisation.
Procurement card administrator(s)
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In addition to the procurement card manager,

there will be a requirement for some
administration resource to help manage the
procurement card programme. This work will
involve, overseeing data uploads to the finance
system, handling the VAT evidence, collating
transaction logs, overseeing approvals and
identifying maverick spend.
Involvement: operational, workload will depend
on the number of cards in use.
Efficiency manager
In order to recover cashable efficiencies from a
procurement card programme, there will need
to be some involvement from a manager who
is responsible for operational efficiency in the
organisation with the remit to restructure parts
of the organisation in order to recover time
savings made by both buyers and invoice
processing staff. This manager may have a
wide brief for managing operational
efficiencies, beyond the efficiencies linked to
procurement cards.
Involvement: strategic, workload will depend
on the wider efficiency initiatives in place
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Implementation 2: Card administration

Administration policies need to be established
Preparation in order to detail how data will be processed
once the file has been received from the bank.
Implementation Policies needs to include information about the
Prior to distributing any cards, the technology retention and storing of receipts, the allocation
must be implemented. In almost all instances, of spend to budgets, VAT reconciliation and
putting the technology into the organisation is the integration of procurement card spend with
not difficult, the demanding part of the work is any commitment accounting principles in
preparing the organisation for the new place.
technology.
Cardholder guide
Policies and procedures It is essential to draft a short document for
A clear and simple explanation of the cardholders to remind them of their
organisation’s policies and procedures has responsibilities when using cards. A cardholder
proven to be a valuable asset for the most guide should include details of the following:
successful card programmes. This document
needs to include details of four key areas: • How and when cardholders should use the
audit, administration, procurement and card, including using it for online purchases.
cardholder instructions. • The importance of the procurement card
scheme to the organisation’s efficiency targets.
Implementation planning • The importance of buying on contract.
Regardless of the scale of the implementation, • A list of the suppliers the organisation has
the organisation needs to work with the key contracts with.
stakeholders (listed above) to agree an • Details of the disciplinary measures for
implementation plan. This plan needs to detail misuse.
the resourcing requirements of an • Procedural information such as details of the
implementation and the estimated timescales spend limits in place on their cards and what to
for the implementation. If a pilot project is to be do with when a cardholder has forgotten their
run first, the plan needs to detail how long any PIN.
pilot will operate for and what measures will be • Details of any new purchase procedures.
used to determine whether the pilot is a • How staff should redeem loyalty points, e.g.
success. Nectar points, accrued whilst making
purchases with a procurement card.
Involvement of audit • When, and if, cards are to be used by more
Audit will be responsible for ensuring that the than one member of staff.
process for comparing transaction logs to the
monthly statement is sufficiently robust to be Most organisations choose to require
able to identify any instances of fraud and that cardholders to reconcile their purchases every
the risk of any fraud is minimised. Audit will month in a transaction log. The cardholder
therefore have a key role in determining the guide needs to explain how cardholders must
spend limits of cardholders. Audit will need to undertake this task and where to send the
establish a policy for auditing statements for information.
errors or fraudulent transactions. The policy for
auditing statements can either be All issuing banks should have a template
comprehensive and include an audit of all card cardholder guide that can be used as a basis
statements, or can use a sample of for the organisation’s own guide. Other public
statements. sector organisations with card schemes will
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have cardholder guides that may also be

helpful.
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for suppliers, even those who take large, or

Implementation 3: infrequent payments to accept payment by
card. For more details on these solutions
Supplier contact your issuing bank.
engagement Working with suppliers who do not accept

procurement cards
When approaching suppliers who are not set
Already enabled suppliers
up to receive card payments the buying
Using the acceptance analysis, (see “Business
organisation must focus on educating the
case 1: Analysis” on page 6), an organisation
suppliers to understand the opportunity
will have a list of suppliers that already accept
presented by procurement cards. Suppliers
payment via card. It will normally be a relatively
need to understand why the organisation is
simple task to bring these suppliers into the
choosing to use procurement cards, what the
procurement card programme. The project
implication is for the supplier and how to make
manager can write to the supplier to inform
the move to become a card acceptance
them that the buying organisation wishes pay
merchant. Organisations should be prepared to
the supplier by procurement card. The letter
use a full range of methods to communicate
should request that the supplier confirms they
with suppliers, including letters, e-mails,
are willing to accept payment by card.
meetings and phone calls. Issuing banks can
help organisations define their supplier
In some instances, even though a supplier has
adoption strategy.
the facility to accept payment by cards, there
may be some restrictions on the type of
It is crucial that all supplier engagement
transactions the suppliers are willing to accept
material details the benefits to the supplier of
payment by card for. If these are self imposed
using procurement cards. In order to make an
restrictions it will be worth discussing with the
informed decision, suppliers need to cost the
supplier their reasons for these restrictions and
effort of managing the traditional method of
explaining the benefits to both the buying
payment against the benefits of using cards.
organisation and the supplier of using a
The benefits are seen below:
procurement card.
•Prompt payment.
If the supplier is willing to accept payment by
•Cost savings through process reduction.
procurement card the next step will be to
•Reduces the need for credit control
establish what level of VAT data the supplier is
management.
able to provide (for an explanation on the
•Invoice queries diminish.
different levels of data see “Handling
•Duplicate invoice requests diminish.
objections 3: Management information” on
•Empowers suppliers to do business with other
page 18). The buying organisation may wish to
cardholders and other public sector buying
discuss with the supplier the possibility of
organisations that use procurement cards.
providing a higher level of VAT data in order to
•Improves relationship with the buying
maximise the efficiencies achieved through the
organisation.
process.
In order to communicate the importance of
The increasing popularity of procurement
working with suppliers who accept payment by
cards in the public and private sectors, means
card, an organisation can ask suppliers
that a number of suppliers are choosing to
submitting tenders to state whether they are
move to providing level 3 data. At the same
able to accept cards or would be willing to
time, a wider variety of solutions are appearing
accept them should they win the business.
in the level 3 acquiring market making it easier
This will secure transactional efficiency into
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future transactions for both the supplier and

the buying organisation.
Some suppliers may be willing to offer a

discount to buyers for prompt payment through
the use of a procurement card. Alternatively,
some suppliers may wish the buyer to cover
the cost of the MSC. When approaching
suppliers to discuss the use of procurement
cards, it may be useful to open any
conversation by asking what discount would be
available in exchange for early payment of
invoices.
If a supplier is adamant that they do not wish to

accept payment by procurement card it will be
necessary for the buying organisation to
assess the benefit to be gained through
transacting with the supplier by procurement
card against the value of finding an alternative
supplier. If the supplier works in a very
competitive market, the argument for changing
supplier may be relatively simple. If the reverse
is true and the supplier provides a unique
service or preferential terms there may be a
valid case for continuing with the supplier
despite their reluctance to accept payment by
procurement cards.
Suppliers can also conduct an online business

case for accepting card payments using
www.purchasingcard.info
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bank. Using the information on spend controls,

Implementation 4: merchant blocks and other information, the
bank can assemble the scheme and start the
Set up production of the cards, which will usually be
sent to the procurement card manager.
In order to implement a procurement card
programme all the data on individual As well as the card production, the
cardholders and the appropriate spend limits organisation will need to implement any card
needs to be co-ordinated before the cards can management information solution. This work
be distributed. will require the involvement of the IT
department and may also require the
Controls involvement of a consultant with an
Each cardholder will need to have their understanding of the software in use.
monthly and transaction limits documented,
whilst programme and departmental limits will The work required to implement the solution
also need to be set up. In organisations that will depend largely on the functionality
are choosing to implement a large number of available in the solution and the way in which
cards, a hierarchical design for different levels the organisation wants to use the tool. Advice
of cardholder is usually drawn up, and spend on how best to implement these tools can be
limits applied to each level as appropriate. This sought from individual suppliers.
hierarchy of cardholder levels can also be used
to define the merchant category blocks that the It is likely that the card management software
organisation may wish to use. will include some reporting functionality. A set
of reports will need to be set up to help the
Many organisations choose to implement procurement card manager identify how the
controls that are seen as necessary in the first programme is progressing against targets.
instance and are then replaced because they Common reports will include the following:
are deemed to be restrictive. It is worth noting
that the instances of employee fraud in public • Organisational and departmental activity.
sector procurement card programmes has • Individual cardholder activity.
been very low. • Merchant category activity.
• Exception and limits reporting
Cost allocation
The final piece of preparation will focus on the Targets for use
way that costs will be allocated to different All procurement card schemes should monitor
budgets. Card costs can be allocated to the purchasing activity on the cards and set
different cost centres according to the targets for individual card holders, departments
merchant category of the supplier being used and the organisation as a whole. Targets will
or by the identity of the cardholder (provided a allow managers to identify how they are
piece of integration software is in use). progressing with the project and how best to
Alternatively, cards can be allocated their own recover the efficiencies gained from using the
cost centre. This work will require the cards. Targets should therefore be set for a
involvement of staff from the finance number of activities including the following:
department.
• Number of cards in use.
Card production • Number of transactions per month.
Using the hierarchy, the organisation can list • Number of transactions per card per month.
the individuals who will become cardholders. • Ratio of paper to card transactions with
Each cardholder will have to complete an suppliers adopted to procurement cards (split
application form and send it to the issuing by department if possible).
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• Number of suppliers adopted to the

procurement card scheme.
• Total value of spend placed through the
scheme
Implementing a successful procurement card

programme requires organisations to be both
committed and co-ordinated. Sound
preparation in the form of spend and process
analysis is likely to make a significant
difference to the work of implementing a
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based training programme that requires a

Implementation 5: ‘pass grade’ before cardholder can be qualified
to use the card.
Rollout Facing resistance
Communication In some circumstances an employee may
The first step in rolling out a card programme is decide that they do not wish to receive or use a
to communicate with the cardholders. Each card. Whilst the employee may have legitimate
cardholder needs to receive a copy of the fears about using the card, employee
cardholder guide as well as a copy of the reluctance is not a sufficient reason to continue
procurement card programme policy and to use out of date and inefficient processes. In
procedures. It is recommended that the this instance, unwilling staff need to be
documents are also made available through a identified and approached by a senior manager
corporate intranet as well. to address the problem directly.
Training Distributing cards

The staff most affected by a procurement card Cards can be distributed by inviting the
implementation will be cardholders themselves cardholders to sign for them in the finance or
and staff working on transaction reconciliation procurement department offices. However,
in the finance department. All of these staff will many organisations are choosing to see the
need to be trained in order for them to distribution of cards as an opportunity for
understand their new responsibilities. Some senior managers to make a very clear, visual
additional staff such as line managers will not statement of their support for the procurement
become cardholders but will need to card programme. If possible, invite the Chief
understand how approvals and other Executive or another senior manager to make
responsibilities will change. an explicit statement of support by being
present at the issuing of the first cards. An
As part of the training it is advisable to ‘paint event of this nature will increase the value of
the big picture’ so that staff know why the the cards in the eyes of the cardholders and
organisation is changing their procurement will help staff to make better use of the cards.
procedures. Training materials will need to be
produced, banks will likely have some template Cardholders and targets
materials available for use. Materials need to Where targets for using cards are going to be
include the following: used, it is important to communicate what
measurements will be put in place and how the
• Why the cards are being used. performance of both cardholders and
• How the organisation will benefit. departments will be monitored.
• How cardholders have been selected.
• How to use the tool.
• How to reconcile statements.
• How cardholders will benefit.
• The consequences for misuse and some of
the processes used by audit.
Training does not need to be face to face, but

all cardholders must be trained prior to being
issued with a card. There are increasingly
innovative approaches to training being used
by buying organisations. For example, one
public sector body has initiated an intranet
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Running a
programme:
Guidance on how to
run a programme,
including the day to
day management of
a programme,
securing
compliance to
contracts and
recovering benefits.
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A successful card programme relies on

Running a creating a volume of successful transactions
that are more efficient than previous process.
programme 1: In order to secure this success, it is necessary
for the programme to be monitored by the
Managing and cross functional board responsible for
efficiency. In partnership with the project
monitoring sponsor, the board needs to decide how the
programme is developing, whether
opportunities for efficiency are being
Managing a procurement card programme maximised and whether programme needs to
requires three on-going activities. Firstly the be scaled up or reviewed.
day to day management to make sure that the
programme is operating properly; secondly the As procurement cards become ‘business as
monitoring of activity within the programme; usual’ within an organisation, it can be easy for
and thirdly the strategic management of the the opportunities for efficiency from
programme to secure as much efficiency as procurement cards to be overlooked. This can
possible. be due to the fact that other e-procurement
priorities have taken over, or that the
Day to day management programme is not delivering the efficiency that
Day to day management of the programme will was first expected. Sometimes, when a
be undertaken by the procurement card programme manager post becomes vacant, a
manager and administrators. The work will programme will slow down and stagnate. In
involve managing the cardholder liaison, these circumstances it will be necessary to
answering queries, managing lost cards and review the current use of procurement cards to
contacting cardholders who haven’t reconciled make the programme more effective.
statements or submitted receipts. In addition,
at the end of each month administrators will be The following steps can be taken when
required to upload data to the financial ledger, reassessing a procurement card programme:
collate transaction logs and gather VAT
receipts. • Reduce the number of cardholders, giving
responsibility for making purchases to fewer
Monitoring activity within the programme staff
Monitoring the activity within a programme will • Retrain buyers who have cards to help them
be required in order to satisfy the requirements make better use of the cards
of the organisation’s auditors. Regular • Remove unnecessary limits and procedures
checking of statements and the completion of that reduce the effectiveness of the cards
transaction logs are necessary to counter fraud • Review the use of suppliers who will not
and to manage departmental budgets. accept payment by cards
• Redouble the effort to adopt key suppliers to
Monitoring is also required to assess progress become card merchants.
against targets, and to identify where cards are • Resource key posts, such as programme
being used successfully or not. Monitoring is manager appropriately.
necessary to identify where cardholders might
need their spend limits changed or whether a
merchant category blocking has been
successful in restricting unnecessary spend, or
whether it has hampering purchasing activity.
Strategic management
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Train cardholders thoroughly

Running a To prevent cardholders from purchasing from
suppliers that aren’t on contract, it helps if
programme 2: cardholders and their managers are informed
about which suppliers to use. Equally important
Securing contract is ensuring they have a real understanding of
the importance of procurement and the value
compliance of better procurement to the authority.
Discipline cardholders who buy off contract

Adhering to contracts is the root of good Cardholders who consistently buy off contract
procurement practice and wherever possible are costing the organisation money. If the
procurement card programmes should be organisation is prepared to address persistent
focused on delivering contract compliance. offenders in the same way as staff who attempt
to defraud the authority, a clear signal can be
Whilst desktop based procurement systems, sent to cardholders that the need to use
such as marketplace, can be used to ensure contracts is taken seriously by the
buyers only use contracted suppliers, a organisation.
procurement card can be used by a cardholder
in any supplier that accepts payment by the Monitor cardholder’s activity 1
card held by the buyer. So, regardless of The most thorough way to do this is to check
whether there’s a contract in place, provided each card statement for off-contract spend.
the supplier category is not blocked the card However, whilst this is likely to be the most
can be used. This creates a challenge for effective it is also the most work intensive and
procurement managers whose savings targets not feasible unless the programme has only a
will be based on making sure that buyers handful of cards. Instead the organisation
purchase only certain items from certain should routinely take a random sample of
suppliers. There are a number of actions that purchases from card statements and review
procurement managers can take to ensure them in order to see if any off-contract
contract compliance when using procurement suppliers have been used.
cards.
Monitor cardholder’s activity 2
Use lodge or embedded cards As well as taking a random sample of
Embedding cards is the only way to restrict a purchases, managers should choose to target
cardholder from exercising their own choice individual cardholders for signs of off-contract
when selecting a supplier. A lodge card is a spend. Target cardholders will include,
card that resides with the supplier. Lodge cardholders who have previously bought off-
cards allow multiple buyers to place an order contract, new cardholders and the highest
for goods or services and have the charge for spending cardholders.
the goods and services placed on a card
provided an appropriate reference number is Monitor the use of rival suppliers
quoted on the order. At the end of each month, In situations where a contracted supplier has a
the bank file is reconciled with the transaction well known rival supplier, managers should
logs of buyers to ensure that no errors have immediately flag any purchase through a rival
been made. An increasing number of suppliers supplier for investigation. This will force
are prepared to accept lodge cards, many of cardholders to understand that their activity is
whom provide level 3 data. being monitored closely, dissuading them from
purchasing off-contract in the future.
Make departmental managers accountable
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If a cardholder is being given the ability to

make purchases without prior written approval,
this does not absolve departmental managers
from monitoring the purchase activity of their
staff. Departmental managers need also to be
responsible for making sure that cardholders
are complying with contracts. This should
mean encouraging suppliers to use the
contracts in place and monitoring the
transaction logs of cardholders. Managers who
routinely allow cardholders to purchase off
contract should also be subject to disciplinary
measures.
Use level 3 suppliers

Organisations can restrict their use of cards to
suppliers offering level 3 data. With line item
detail data it is easier for procurement staff to
see exactly what is being bought and whether
any goods or services purchased could have
been bought through a contract.
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Time saved by the cardholder is the most

Running a difficult to realise. For example, cardholders
are not always professional buyers, they can
programme 3: be staff who complete a wide variety of
administrative or value adding tasks. Because
Identifying and responsibility for purchasing sits with so many
individuals, the time saved from more efficient
recovering the purchasing by a cardholder may amount to
only a few minutes per week. Certainly not
benefits enough to warrant reducing the number of staff
completing the work and reallocating a
member of staff to another role in the
Time savings organisation.
Procurement cards save time in two ways, the
time the cardholder spends making the Secondly, the amount of time saved depends
purchase is reduced, and the time spent on the process that was in place prior to the
receipting goods and approving an invoice for cards being used. Buyers don’t always
payment is also reduced. Recovering these undertake the time consuming ordering
time savings requires different approaches in procedures they are expected to. Therefore, if
order to reduce the cost of resourcing or to a buyer was circumventing procedures and
reallocate staff to the front line. simply making a phone call to the supplier then
the time saving available from using a card will
Volume of transactions be annulled.
Time savings can only be realised as cashable
savings if the number of temporary or The most effective way to recover time savings
permanent staff in the organisation is reduced. from cardholders, is to concentrate as much,
Non-cashable efficiencies can be recovered routine buying activity into as few staff as
through reallocation of staff. In both cases, possible in a department. This will allow the
some form of departmental reorganisation will savings to accrue in a way that may allow for a
be required. In a department making a large team or department to be restructured.
number of purchases, if four or five staff
members are responsible for managing those Invoice time savings
purchases it may be possible to change the It is common for the management of card data
role of one these staff members. However, to and reconciliation of the card data into finance
do this the time savings made on each systems to be centralised. Where cards are
purchase must accrue to either a full-time implemented into an organisation with
equivalent (FTE) post or half-time equivalent centralised invoice processing the task of
(HTE) post. recovering efficiency is much easier, because
there is a high concentration of people
One FTE post is equivalent to over 90,000 undertaking an inefficient task that is to be
working minutes in a year. This means that a replaced with a new more efficient task.
new process that saves ten minutes each time
it is run, still needs to be repeated nine Even where invoicing isn’t centralised, if the
thousand times in a year before accruing the management of procurement cards is
90,000 minutes required for an employee to be centralised, provided enough transactions are
able to be moved from processing purchases being processed it is possible to restructure the
either to another task, or out of the management of invoicing to free up
organisation. administrative time in the departments.
Cardholder time savings
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Invoice management time savings are also cards to reduce the time spent on raising
increased when card management software is orders, by going directly to suppliers. Cards
being used as this reduces the need for can be used to replace cash transactions
manual keying of information, often from hand made by staff, reducing the risk to staff and the
written purchase orders. risk of fraud.
Recovering the benefits Each transaction made on a procurement card

Collating enough time saving to allow for staff that is not to be turned into a cashable
to be moved requires evidence. It is therefore transaction can be claimed as non-cashable
advisable for a programme to have been saving under the Treasury’s spend review
running successfully for at least six months targets for efficiency.
before attempting to recover time savings.
Using timings for the previous process and a Coupled with the value of gaining spend
timing of the new process, it is possible to knowledge in areas that were previously
determine a time saving for each transaction unavailable to the procurement department
made when using a procurement card. and establishing an easily searchable audit
Multiplying these timings by the number of trail based on the activities of individuals, the
times a transaction is made in a department or arguments for using procurement cards are
organisation will give an indication of the time sufficiently strong to merit their use in some
to be saved. way or another in all public sector buying
organisations.
If this time amounts to more than 45,000
minutes, then an HTE can be saved, if the time
amounts to more than 90,000 minutes then an
FTE can be saved. If the time saving is less
than either of these figures, but the
organisation is using temporary staff to
complete administrative work, the use of this
temporary resource can be reduced by the
equivalent estimated time saving.
Material savings
It is worth noting that procurement cards can
also save money by removing the need for
postage, faxing and storage space, as well as
expensive printer cartridges and order pads.
Whilst these savings are likely to be minimal,
once accrued, they may be sufficient to merit
recording as a cashable saving.
Non-cashable savings
Using procurement cards may also create a
range of intangible or non-cashable savings
that the organisation has no intention of
recovering as a cashable saving. Giving
procurement cards to staff performing critical
out-facing tasks such as social work or
teaching allows these staff to focus on
completing their work rather than completing
order forms. Maintenance workers can use the
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Glossary Exception reports

Reports that focus on unusual transactions,
Benefits realisation such as high value purchases.
The actions taken to identify where benefits
should come from, assessing whether benefits Embedded card
are being achieved and taking steps to ensure An arrangement where the card details reside
that cashable and non-cashable benefits are with a third party, so that multiple buyers can
achieved. Further information on benefits use the card as a payment mechanism.
realisation can be found at: Embedded cards are usually either used with
www.ideaknowledge.gov.uk/eprocurement suppliers that process a large number of
transactions, or in conjunction with an e-
Business case procurement software solution. When used
A business case is the document used to with suppliers, buyers send orders to the
obtain management commitment and approval supplier quoting a reference number. When
for investment in business change. The used with a software solution, multiple buyers
business case provides a framework for can place orders to multiple suppliers by using
planning and management of this change and the software solution as method for placing
ongoing identification of risks. The viability of orders and the card as payment mechanism.
the project will be judged on the contents of the
business case. Full time equivalent (FTE)
A measurement of resource which equates to
Cashable benefits the amount of work it is anticipated an
Cashable benefits result in a reduction in individual will carry out in a year. This may be
expenditure. For example, less money will be measured in various ways but typically is
spent with suppliers but the volume or quality calculated as the number of hours an
of goods or service will remain the same, or employee works in a year.
fewer staff will be required to deliver the same
level of service. Half time equivalent (HTE)
A measurement of resource which is equal to a
Corporate contract half a full time equivalent. It is often considered
A formal agreement with a supplier that is used to be the minimum time saving required to
by all departments and services in the justify removing resource.
organisation for the purchase of particular
goods or Imprest accounts
services. This agreement will be either a: Petty cash accounts, used for low value
• Tendered contract - with agreed terms and purchases. The officer wishing to make a
conditions, set pricing structures for specified purchase is given cash and then accounts for
goods or services. This agreement will have a that cash by production of a receipt for
set period of validity before re-tendering is expenditure (where possible).
required.
• Framework Agreement (in compliance with Leveraging expenditure
EU Procurement Directives) - where terms and Contracts with suppliers are based on the
conditions have been agreed, but a number of overall expenditure made by the organisation
suppliers have been appointed to provide a rather than expenditure by individual
range of goods or services. The selection of an departments. This is likely to result in better
individual supplier for specific goods/services value for money (lower whole life costs and
will then be subject to a mini-competition higher quality) because the increased volume
through a quotations process before agreeing of business is an
which supplier will be used.
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incentive for the supplier to provide better A document that describes:

value in their tender submissions. • How procurement / e-procurement supports
the objectives of the organisation and the
Maverick spend business needs of departments.
The purchase of goods and services from • The actions that the organisation will take to
suppliers that have not been subject to implement good procurement practices and e-
competition in accordance with the official procurement.
procedures approved by the organisation. The • The prioritisation of goods and services -
consequence is to spend less with suppliers which goods and services should the
that have been approved and hence to organisation focus on first?
potentially pay more for the goods or services • Partnership & collaboration approaches.
or to put at risk the prices agreed with • How value for money and / or savings will be
approved suppliers (because they don’t get the achieved through e-procurement,
expected level of business with the • Roles and responsibilities, etc.
organisation).
Purchase cards or p-Cards
Merchant These are alternative names sometimes given
A supplier who is capable of accepting to procurement cards
payment by card may sometimes be referred
to as a merchant or acquirer. Procurement card issuer
The company that issues the procurement
Merchant categories card, that receives details of purchase
The names given to groups of goods that can transactions from suppliers and which sends
be bought. Procurement cards can be the card statement to the organisation.
restricted to allow only goods which fall within
a particular merchant categoristion to be Purchase to pay process
purchased eg stationery, travel. The end-to-end process of raising a purchase
requisition, purchase order, goods receipt and
Merchant Service Charge (MSC) making payment to suppliers.
The charge levied by the bank for processing a
card transaction. This will usually be calculated Reconciliation
as a percentage of the total transaction value. The process of manually or automatically
matching purchase transactions recorded in an
Non-cashable benefits electronic purchase log with the statement
Non cashable benefits occur where there is no received from the card issuing bank
direct reduction in costs but performance is
improved for no additional use of resource. Supplier
This may be a process efficiency where time is An organisation responsible for supplying
saved but it is not sufficient to be reallocated, goods or services. Procurement cards can be
or it may be an improvement which cannot be restricted to particular suppliers.
valued in cash terms such as waiting times for
a maintenance job. Supplier adoption
The task of encouraging suppliers to transact
Process efficiencies with the buying organisation in a particular
A reduction in the cost of a process or the time manner is known as supplier adoption. When
taken to complete a process (e.g. processing a implementing any e-procurement solution it will
purchase order) as a result of automating the be necessary to undertake a degree of supplier
process. adoption to explain how the new processes will
affect the suppliers. This will be all the more
Procurement and e-procurement strategy important where the suppliers are required to
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implement and use new technology

themselves, for example a card terminal.
Transaction log
Organisations using procurement cards often
require their buyers to complete a transaction
log for every transaction they carry out. The log
ensures that a buyer keeps track of all their
purchases and can compare their monthly
statement to the log to check for unauthorised
transactions or errors.
Page 45
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Credits
This document was written for the Regional

Centres of Excellence in collaboration with the
National e-Procurement Project and the Office
of Government Commerce.
Additional advice and guidance was received

from the following organisations:
Kent County Council

Portsmouth City Council
Wycombe District Council
Visa Europe
This document was authored by:
Ticon UK Ltd,
146 Strand
London
WC2R 1JD
0207 836 1999
www.ticon.uk.com
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Procurement cards Guide Guidance Paper Version 1.5.

transaction. This fee can be negotiated with

Intangible benefits Procurement cards need to be viewed in the

Realising the benefits

transform frequent, lower value purchases, but

marketplace can all benefit from invoice and

In addition to providing a clear understanding

orders to suppliers. However, savings should

Organisations that are still using paper % of Workload = the proportion of an

Time savings table

Below is an example of some of the steps that

Time = the time taken to complete a task

Table 1: Estimating savings from procurement card transactions

Raise a requisition Order by phone

6. Estimate the cost of maintaining the procurement card

An online business case can be completed at:

cases, sufficient motivation to prevent

will provide a paper trail that is unlikely to be

Finally, if an organisation is subjected to fraud

the whole programme. This means that

Print and Advertising

* Point of purchase blocks rely on the

** Personal Services cover services such as

data has been approved by HMRC as

Level 2, or Summary Level Unfortunately, the majority of suppliers provide

level 3. Managing concerns about data levels

Option 1: use only LID enabled suppliers

Option 2: accept that level 1 data is better

However, organisations also need to ask

Transactions processed using level 1 data will

procurement card programme the problem will

4: Cards and Managing procurement cards

Even if the estimates for times savings to be

Resource the management of a

Take an informed approach to benefits

managing the solution. So, if the solution

The GPC framework agreement

download the latest GPC annual report, visit

individual cards, departments or the scheme

manually. Therefore we would recommend

Another alternative to purchasing a tool is to

Involvement: detailed and strategic, high

In addition to the procurement card manager,

Implementation 2: Card administration

have cardholder guides that may also be

for suppliers, even those who take large, or

engagement Working with suppliers who do not accept

future transactions for both the supplier and

Some suppliers may be willing to offer a

If a supplier is adamant that they do not wish to

Suppliers can also conduct an online business

bank. Using the information on spend controls,

• Number of suppliers adopted to the

Implementing a successful procurement card

based training programme that requires a

Training Distributing cards

Training does not need to be face to face, but

A successful card programme relies on

Train cardholders thoroughly

Discipline cardholders who buy off contract

Make departmental managers accountable

If a cardholder is being given the ability to

Use level 3 suppliers