Visa Commercial Card Best Practices

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1 Visa Commercial Card Practices

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3 Introduction Commercial card best practices are part of Visa s ongoing effort to understand and improve the processes of business. Visa Commercial Solutions commissioned Deloitte to conduct a comprehensive study of procurement and payment best practices for companies nationwide. From this study, 29 best practices relating to commercial cards emerged. By adopting these best practices, companies can expect to: increase process effectiveness and efficiency boost user satisfaction improve vendor management enhance control over spending reduce transaction costs Deloitte identified 52 large corporate and mid-size companies with leading Procure-to-Pay practices. After distributing a detailed questionnaire to all companies, they conducted 20 onsite interviews with select participants. The questionnaire gathered quantitative and qualitative information, including: Understanding best practices, key drivers, enablers, challenges, anecdotal information, user satisfaction ratings, service-level quality Macro-level statistics dollar spend, average transaction on card, average dollar size of transaction, vendor-negotiated discount rates; micro-level statistic indirect activity cost and time (excluding overhead); IT/data requirements Participants included procurement, Accounts Payable (A/P), travel managers, buyers, commercial card administrators, and representative users to gain greater insight into companies specific commercial card best practices. 1

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5 Summary Commercial cards play an important role in the Procure-to-Pay strategies of best practices companies. They deliver increased processing efficiencies for procurement, travel and entertainment (T&E), and fleet expenditures. As part of these programs, companies may combine the functions of purchasing, fleet, and T&E into a Visa Commercial One card, or issue individual cards for different applications. To increase efficiencies and reduce the resource strain caused by manual processes, many companies have streamlined Procure-to-Pay procedures. Commercial cards have played an important role in this. By enabling immediate data integration, reducing transaction costs, and enhancing control over spending, these cards have improved allocation of accounting resources and time utilization for line-of-business employees. The potential for savings has motivated many companies to create reward and penalty programs to speed commercial card adoption. From charge-backs for non-compliance to passing savings along to business units, best practices companies have seen the benefit of encouraging card usage. In addition to improving operations, commercial cards have also had significant influence on vendor relationships. By implementing ghost accounts for specific high-use vendors or establishing departmental cards, companies have improved time payment records, ensured sales and use tax compliance, and automated data gathering for discount negotiations. Additionally, commercial cards can guarantee business continuity during systems outages or natural disasters. The best practices described in this booklet encourage companies to have a commercial card program that balances efficiency with control to optimize operations. These best practices stress the importance of sound fundamentals in commercial card management and organization and include innovative, yet practical tools that enable additional cost savings and benefits. Commercial cards help reduce purchase order volume, streamline vendor payment, and improve cost allocations. 3

6 Program Foundation Practice 1 Practice 2 Practice 3 Practice 4 Practice 5 Practice 6 Practice 7 Practice 8 Practice 9 Source, select, and implement a Visa Purchasing card program Source, select, and implement a T&E card program Source, select, and implement a Visa Commercial One card program Align commercial card program objectives with company s overall Procure-to-Pay strategy Obtain active senior management promotion of and involvement in the commercial card program Establish center-led management and administration of the commercial card program Institute a centralized travel management function Develop enterprise-wide procurement policies and procedures Develop and distribute company-wide travel policies Practice 10 Develop and disseminate enterprise-wide commercial card policies and procedures Program Management Practice 11 Incorporate a comprehensive commercial card training program Practice 12 Practice 13 Practice 14 Practice 15 Practice 16 Practice 17 Practice 18 Establish Visa Purchasing/Visa Commercial One card issuance criteria for optimal distribution to employees Establish T&E/Visa Commercial One card issuance criteria for optimal distribution to business travelers Mandate and enforce use of Visa Purchasing/ Visa Commercial One card for all eligible purchases Mandate and enforce use of the T&E/Visa Commercial One card for all eligible purchases Maximize use of Visa Purchasing/Visa Commercial One card virtual accounts Maximize use of T&E/Visa Commercial One card virtual accounts Incorporate commercial cards into business continuity planning 4 Visa Commercial Card Practices

7 Program Management continued Practice 19 Establish parameters for eligible Visa Purchasing/ Visa Commercial One card transactions leveraging appropriate controls Practice 20 Practice 21 Practice 22 Practice 23 Program Reporting Practice 24 Practice 25 Practice 26 Practice 27 Practice 28 Practice 29 Integrate the Visa Purchasing/Visa Commercial One card into the e-procurement system as a method of payment Use the Visa Purchasing/Visa Commercial One card to pay invoices received in Accounts Payable Incorporate Visa Purchasing/Visa Commercial One card acceptance into preferred vendor contract terms Investigate Visa Purchasing/Visa Commercial One card expansion to additional spend categories to maximize benefits achieved Work with your Issuer to receive commercial card statements electronically with cost centers and General Ledger (G/L) codes predefined to facilitate end-user reconciliation Pre-populate expense reporting with commercial card data Develop solutions that support the reporting and payment of sales and use taxes Gain a comprehensive view of spend by integrating data from multiple sources (e.g., e-procurement, travel, ERP, Visa Purchasing cards) Share commercial card performance and savings reports with senior management to promote appropriate use of the card Use Issuing bank or card-provider analysis tools to review and improve your commercial card program performance 5

8 Card Program 1 Practice Program Foundation Source, select, and implement a Visa Purchasing card program Leading companies use a thorough sourcing process to select a purchasing card program that will help the company meet its goals and objectives. Sourcing a purchasing card program can occur at implementation of a new program or at a transition point when the needs of the company change. Companies must determine the following when selecting a card program: Issuer (e.g., financial institution or other issuer), card provider (e.g., Visa, MasterCard, American Express), and card type (e.g., Visa Purchasing card and Visa Commercial One card). Leading companies recognize the following benefits through implementation of a Visa Purchasing card program: Integration of Visa Purchasing card data into internal MIS, Accounts Payable (A/P), and General Ledger (G/L) systems Streamlines data input Improves data quality and accuracy Automates mapping of transactions to cost centers Online access to cardholder account data Consolidation of spend for reporting purposes (e.g., sourcing, exception reporting) Reduced transaction costs for purchasing and payment activities Reduces volume of purchase requisitions and purchase orders Automates payment to suppliers Enables consolidation of transactions for single payment to Issuer Increased cardholder satisfaction Streamlines procurement process Reduces requirement to fill out purchase requisitions and obtain approvals for typical purchases Empowers user to make timely purchases Improved control over spend Maintains control through use of card restrictions and parameters on front end (e.g., credit limits) Increase visibility of potential non-compliant purchases through back-end exception reporting Reduced petty cash and check requests, resulting in reduced costs associated with processing and tracking petty cash and check requests continued on next page 6 Visa Commercial Card Practices

9 Card Program 1 Practice Source, select, and implement a Visa Purchasing card program continued Leading companies develop specific and achievable goals and objectives for their Visa Purchasing card programs. These goals and objectives should be consistent with corporate culture and procurement policies. practice companies periodically review the goals and objectives for continuous improvement purposes. Prior to implementing a Visa Purchasing card solution, best practice companies analyze the costs and benefits of each available program, taking into consideration any product variations from one Issuer to another. Companies compare purchasing programs based on the following factors: Merchant acceptance Current Issuer relationship Financial arrangement Industry reputation Card management and administration tools available through Issuer, including: Templates to assist with implementation (e.g., Policies and Procedures) Integration of card data with financials or ERP Online account administration Online reporting capabilities Expense reporting management tools Knowledge/experience of card sales personnel and ability to provide consultative services Customer service levels (e.g., Service Level Agreements, proactive relationship) Companies compare purchasing cards based upon the following factors: Standard transaction cost charged for use of the card (e.g., two percent versus four percent) Merchant acceptance continued on next page 7

10 Card Program 1 Practice Source, select, and implement a Visa Purchasing card program continued MARKET APPLICABILITY: All Companies IMPLEMENTATION ACTION STEPS: Benefit Obtained: Cost Savings/ Process Efficiencies Benefit Obtained: User Satisfaction Benefit Obtained: Vendor Management Benefit Obtained: Control Rationale: Sourcing for an appropriate card program ensures the greatest possible cost savings Rationale: Ensures that the card program meets the needs of the end users Rationale: Thorough review of card program enables company to select a card that provides needed vendor acceptance and provides greatest data for vendor management and negotiations Rationale: Ensures that the selected card program has the appropriate controls in place 1. Review goals and objectives for the Visa Purchasing card program 2. Create cross-functional team of key stakeholders to participate in card selection process at a minimum include both procurement and A/P personnel 3. Develop request for proposal and distribute to Issuers 4. Evaluate Issuer responses against purchasing card goals and objectives and select Issuer based upon ability to meet those goals and objectives IMPLEMENTATION SUCCESSES and TRENDS The top two reasons cited by study participants for selecting a particular Issuer were: financial arrangement with Issuer and merchant acceptance. 67 percent of study participants had implemented a Visa Purchasing card program to meet the objectives of transaction cost reduction, settlement convenience, and user convenience. 8 Visa Commercial Card Practices

11 Card Program 2 Practice Program Foundation Source, select, and Implement a T&E card program Travel and entertainment (T&E) cards are a very effective tool for managing travelrelated spend, reducing cash advances, and providing travelers with an easy, fast, and safe method of payment while on the road. Even for businesses with low volumes of travel, T&E cards should be considered. Leading companies recognize the following benefits through implementation of a T&E card program: Reduced cash advances, resulting in improved cash management and reduced costs associated with processing and tracking cash advances Integration of T&E card data into internal MIS, expense reporting, Accounts Payable (A/P), and General Ledger (G/L) systems Streamlined expense report administration Reduced expense report cycle time Improved travel data quality and accuracy Improved traveler convenience and safety Decreased concerns regarding funds while traveling No need to use personal cards for travel No need to carry large cash advances while traveling Online access to cardholder account data Improved access to funds for international travel Converts funds to U.S. dollars on T&E statement Reduces currency conversion rates as card transaction rates are typically better than those available at stores providing this service Cash access provides money in local currency Leading companies develop specific and achievable goals and objectives for their T&E card programs. These goals and objectives should be consistent with corporate culture and travel policies. practice companies periodically review the goals and objectives for continuous improvement purposes. continued on next page 9

12 Card Program 2 Practice Source, select, and Implement a T&E card program continued Leading companies utilize a thorough sourcing process to select a T&E card program that will help the company meet goals and objectives set for the program. Sourcing a card program can occur during the implementation of a new program or at a transition point when the needs of the company change. Issuers are vendors and should be included in the standard vendor reviews to ensure that they continue to provide services that meet program objectives. Prior to implementing a T&E card solution, best practice companies analyze the costs and benefits of each available program, taking into consideration any product variations from one Issuer to another. Companies compare T&E programs based on the following factors: Merchant acceptance Current relationship Financial arrangement Industry reputation Card management and administration tools available through Card Issuer, including: Templates to assist with implementation (e.g., Policies and Procedures) Integration of card data with financials or ERP On-line account administration On-line reporting capabilities Expense reporting management tools Knowledge/experience of card sales personnel and ability to provide consultative services Customer service levels (e.g., Service Level Agreements, proactive relationship) continued on next page 10 Visa Commercial Card Practices

13 Card Program 2 Practice Source, select, and Implement a T&E card program continued MARKET APPLICABILITY: All Companies Benefit Obtained: Cost Savings/ Process Efficiencies Benefit Obtained: User Satisfaction Benefit Obtained: Vendor Management Benefit Obtained: Control Rationale: Allows for the most efficient and costeffective method of purchasing and paying for travelrelated services; card programs reduce need for cash advances, which improves cash management and reduces processing and tracking costs; also provides improved efficiency in expense report processing and expense management Rationale: T&E cards provide significantly improved travel convenience Rationale: Implementation of a T&E card provides improved data quality and accuracy for vendor management and negotiations Rationale: Card programs facilitate a degree of control through card features and back-end audit and exception reporting IMPLEMENTATION ACTION STEPS: 1. Review Travel Policy and set goals and objectives for the T&E card program; consider any cultural implications (e.g., employee desire for reward programs) 2. Create cross-functional team of key stakeholders to participate in card selection process at a minimum include procurement, travel management, and A/P personnel 3. Develop request for proposal and distribute to Issuers 4. Evaluate Issuer responses against commercial card goals and objectives and select Issuer based upon ability to meet those goals and objectives 5. Leverage Issuer experience and expertise for implementation of the T&E card program (e.g., policies, recommended reports) IMPLEMENTATION SUCCESSES and TRENDS 69 percent of our survey respondents have implemented a T&E card program. The primary reason for selection of the Issuers was merchant acceptance followed by reporting capabilities. Six of the survey participants reported that one of the greatest benefits of the card program was traveler convenience, as travelers did not have to wait for cash advances to begin travel. Several companies reported that transitioning to T&E cards provided them with improved data access for vendor negotiation purposes. 11

14 Card Program 3 Practice Program Foundation Source, select, and implement a Visa Commercial One card program Sourcing a Visa Commercial One card program can occur when selecting a new card program or upon deciding to reduce the number of card programs. Visa Commercial One cards can be used for procurement, travel and entertainment, and fleet expenses. Leading companies employ a thorough sourcing process for selecting a Visa Commercial One card program, analyzing the program s benefits, establishing program goals and objectives, and determining the appropriate Issuer and card provider that can best help the company achieve its specific objectives. practice companies employing a Visa Commercial One card program have recognized the following benefits: Increased efficiency and effectiveness of card management and administration Improved negotiating position and streamlined relationship management with the card provider Reduced number of card accounts managed, particularly for companies with a high degree of purchasing and T&E cardholder overlap Complete and detailed view of spend through access to aggregate and individual cardholder account data Cardholder satisfaction User convenience from having one statement to reconcile No confusion of which card to use Reduced transaction costs for purchasing and payment activities Reduced volume of purchase orders and check payments Reduced petty cash and check requests, resulting in reduced costs associated with processing and tracking the requests The Visa Commercial One card benefits must be balanced against the following considerations: Program liability structure works optimally with corporate liability Some Issuers can help facilitate split-liability, e.g., corporate liability for purchasing transactions and individual liability for T&E transactions Detailed reconciliation process must be put in place to ensure any personal expenses placed on the card are correctly accounted for and not paid by the employer Spend will have to be categorized (procurement versus T&E) to assist in estimation of sales and use tax obligations Spend categorization is usually done using information found in Merchant Category Codes (MCCs) 12 Visa Commercial Card Practices continued on next page

15 Card Program 3 Practice Source, select, and implement a Visa Commercial One card program continued Issuers may be able to provide greater product functionality on separate card programs While Visa Commercial One card programs are intended to reduce the number of cards in the hands of employees, in many cases, the same employees do not make both T&E and indirect procurement purchases practice companies develop specific, achievable, short- and long-term goals for their Visa Commercial One card programs. They align these goals with their overall business strategy and ensure that they are consistent with their procurement and travel policies. practice companies periodically review these goals to ensure their achievement. Leading companies analyze the costs and benefits of each available program, taking into consideration product variations between Issuers (e.g., financial institution or other Issuer) and card providers (e.g., Visa, MasterCard). Companies compare Issuers based on the following factors: Current bank relationships Financial arrangement Industry reputation Card management and administration tools: Templates to assist with implementation (e.g., policies and procedures) Integration of card data with financials or ERP Online account administration Online reporting capabilities Expense reporting management tools Program expansion tools practices benchmarking tools Knowledge/experience of card sales personnel and ability to provide consultative services Customer service levels (e.g., Service Level Agreements, proactive relationship) Companies compare card providers based upon the following factors: Merchant/supplier acceptance Standard transaction cost charged to merchants for transaction processing continued on next page 13

16 Card Program 3 Practice Source, select, and implement a Visa Commercial One card program continued MARKET APPLICABILITY: All Companies Benefit Obtained: Cost Savings/ Process Efficiencies Benefit Obtained: User Satisfaction Benefit Obtained: Vendor Management Benefit Obtained: Control Rationale: Sourcing for an appropriate card program ensures the greatest possible cost saving Rationale: Having Visa Commercial One card program consolidates management and administration and eliminates end-user confusion over which card to use for which type of spend Rationale: Thorough review of card program enables company to select a card that provides the needed vendor acceptance and provides greatest data for vendor management and negotiations Rationale: Ensures that the selected card program has the appropriate controls in place IMPLEMENTATION ACTION STEPS: 1. Establish goals and objectives for the one card program 2. Create cross-functional team of key stakeholders to participate in card selection process at a minimum include both procurement and A/P personnel 3. Develop request for proposal and distribute to Issuers 4. Evaluate Issuer responses against Visa Commercial One card goals and objectives and select Issuer based upon ability to meet those goals and objectives IMPLEMENTATION SUCCESSES and TRENDS Three participating companies decided to implement a Visa Commercial One card solution to decrease employee confusion and take advantage of a standardized technological platform. Through an internal survey of end users, one of the companies determined that end users with multiple card needs found it confusing to manage separate cards i.e., trying to figure out which card to use. This in turn decreased the card s appeal and resulted in lower card usage. The simplicity and convenience of its Visa Commercial One card program, however, increased the company's internal acceptance and satisfaction with the payment mechanism. As a result of an acquisition, one company was employing all card programs, including purchasing, T&E, fleet and Visa Commercial One cards. Taking advantage of the opportunity to consolidate and automate the preferred practices of the merged entities, the company found the Visa Commercial One card program was an effective means of capturing total spend and intends to move all card programs to that platform. Two participating companies implemented a Visa Commercial One card in an effort to move all low-dollar expenditures from invoices and purchase orders to card transactions. Satisfied with the benefits of their Visa Commercial One card programs, the companies are looking for other spend categories to migrate onto the card. For example, one company is currently looking at moving its fleet expenditures onto the card. 14 Visa Commercial Card Practices

17 Card Program 4 Practice Program Foundation Align commercial card program objectives with company s overall Procure-to-Pay strategy A commercial card program should be consistent with, and implemented as part of, the company s overall Procure-to-Pay strategy. Procure-to-Pay strategies typically have the following objectives: reduce transactions costs, improve vendor management, increase controls, and enhance user satisfaction. practice companies ensure specific commercial card performance measures are in place to correlate to Procure-to- Pay objectives. Measurements can include: purchase transaction cost, invoice payment cost, spend on card, and user satisfaction data. Additionally, the companies periodically review their card program objectives and performance for continuous improvement purposes. IMPLEMENTATION ACTION STEPS: 1. Review corporate/ procurement mission and vision statement; review current Procure-to-Pay policy 2. Develop simple commercial card goals and objectives; highlight objectives that can be modified as the program evolves or as business needs change 3. Ensure that goals are measurable and attainable (e.g., reduction in invoice volume, increase in card penetration, reduction of number of suppliers) 4. Build in flexibility to allow modification according to specific division/unit/ country needs 5. Communicate goals and drivers for each goal or objective to cardholders and managers 6. Track these goals for continuous improvement efforts; publicize successes MARKET APPLICABILITY: All Companies Benefit Obtained: Cost Savings/ Process Efficiencies Benefit Obtained: Control Rationale: Leveraging cards as part of an overall company strategy assists companies in using the most efficient and cost-effective method for purchasing and payment Rationale: Ensuring that commercial card program goal setting and tracking is performed in conjunction with Procure-to-Pay performance measures will facilitate greater management control of objectives IMPLEMENTATION SUCCESSES and TRENDS One study participant had a strategic initiative to reduce the overhead cost of its transactional Procurement functions and reallocate resources to other parts of the company. Through implementation of a Visa Purchasing card program, it was able to reduce A/P headcount by 66 percent from 135 personnel to 45 personnel over a four-year span. Another study participant was able to meet its company s productivity goals of reducing manual process of paper invoices by increasing the volume of transactions on the card by 40 percent, which enabled its A/P personnel to focus on more strategic activities. 15

18 Card Program 5 Practice Program Foundation Obtain active senior management promotion of and involvement in the commercial card program Obtaining senior management (e.g., business unit lead, senior or executive vice president) support of and involvement in the implementation, administration, and championing of the commercial card program is often critical to maximize the card program s benefits. In fact, one-third of the study participants indicated the lack of senior management support and involvement as the most significant barrier to card expansion. Companies have successfully obtained and maintained senior management involvement in the program by educating them about card use benefits and by identifying ways senior management can demonstrate their support for the program. practice companies often ask senior management to demonstrate commitment to the program through the following: Integration of card use into business planning: Establishing and tracking business unit goals for commercial card use jointly with procurement and the business units Inclusion of card use goals in management bonus plan: Including goals for commercial card use within management s financial rewards program Communication: Sending an or memo to employees advocating or mandating use of the card and detailing the benefits of the program Training: Participating in card program training to display support of and involvement in the card program Card program enforcement: Supporting and enforcing the stipulations of non-compliance according to program policies and procedures Finally, some best practice companies have found that an organizational structure which allows Program Administrator access to senior management, such as a dotted line relationship from Accounts Payable to the CFO, can be very effective for obtaining senior management time and support for the program. continued on next page 16 Visa Commercial Card Practices

19 Card Program 5 Practice Obtain active senior management promotion of and involvement in the commercial card program continued MARKET APPLICABILITY: All Companies Benefit Obtained: Cost Savings/ Process Efficiencies Benefit Obtained: Control Rationale: Senior management and business unit support of the card program encourages appropriate use of the card, resulting in anticipated card program cost savings and process efficiencies Rationale: Involvement of senior management and business unit leaders in the card program provides visibility into card program compliance and discourages misuse of the card IMPLEMENTATION ACTION STEPS: 1. Develop a crossfunctional team to form communication initiative to share benefits of the card program with senior management 2. Identify areas in which senior management or business unit involvement can further promote or enforce use of the card 3. Develop a plan for senior management or business unit involvement (e.g., communication through , involvement in training) 4. Schedule periodic review meetings with senior management to ensure ongoing participation and support IMPLEMENTATION SUCCESSES and TRENDS One large market company was able to obtain CFO involvement in card program communication. During card training, new hires were required to watch a video in which the CFO holds the card and explains why it is necessary and beneficial to use it. The CFO at a high-tech manufacturer has communicated to all employees through an memo that use of the corporate card is mandated for all cardable purchases. One construction company was able to garner business unit support for the card program through constant interaction with site managers, utilizing: Articles in the corporate newsletter User-satisfaction surveys 17

20 Card Program 6 Practice Program Foundation Establish center-led management and administration of the commercial card program Center-led oversight facilitates standardization of the commercial card program. While card requirements and restrictions may vary slightly based upon business unit procurement needs, the overall program will be consistent across the company. This best practice approach reduces cardholder confusion and reinforces compliance with a consistent corporate policy. The majority of study participants reported centralized management of the commercial card program. Development of commercial card policies and procedures, vendor management and Strategic Sourcing, creation of training programs, and program scorecard creation and management are activities performed centrally. Large or geographically dispersed companies often have centralized oversight with programs administered by location-specific representatives. These representatives are typically responsible for the following: location-specific reporting, reconciliation, training delivery, and response to end-user inquiries. IMPLEMENTATION ACTION STEPS: 1. Position the commercial card program in a centralized function that has visibility and access to senior management 2. Analyze the need for centralized management to be supplemented with site-specific representatives 3. Communicate the appropriate pointsof-contact for the commercial card program to cardholders; make contact list available on company intranet and/or distribute updates to cardholders MARKET APPLICABILITY: All Companies Benefit Obtained: Cost Savings/ Process Efficiencies Benefit Obtained: User Satisfaction Benefit Obtained: Control Rationale: Facilitates employee awareness and understanding of commercial card program that increases card usage Rationale: Improves employee awareness of appropriate personnel to contact for questions and issues Rationale: Facilitates standardization of card program; increases employee awareness of program, which improves understanding of program importance and potentially increases spend placed on cards IMPLEMENTATION SUCCESSES and TRENDS Several best practice companies directly attributed the success of their purchasing card program to having dedicated and attentive administrators. One company has credited its administrator for more than doubling the card distribution and usage (from 2,000 users to 4,100 users) over a four-year time period. 65 percent of surveyed companies centralized the card program administration in procurement and 31 percent place it in Finance/Accounts Payable. 18 Visa Commercial Card Practices

21 Card Program 7 Practice Program Foundation Institute a centralized travel management function practice companies have centralized the travel management function to achieve the following benefits: Improve travel coordination efforts Enhance negotiating strength Ensure consistent development and application of travel policy Streamline communication with vendors Increase user satisfaction from centralized service Ensure consistent and comprehensive reporting The majority of study participants reported centralized travel management. At a minimum, the development of travel policies and vendor negotiations and management should be centralized. Other activities that can be centralized include: Travel policy management Travel policy communication (e.g., newsletters, web site) T&E card administration Management of travel agent(s) of any type: Outsourced In-house Location-specific Management of in-house travel web site Customer service management (e.g., reservation booking, responses to inquires) T&E reporting continued on next page 19

22 Card Program 7 Practice Institute a centralized travel management function continued MARKET APPLICABILITY: All Companies Benefit Obtained: Cost Savings/ Process Efficiencies Benefit Obtained: User Satisfaction Rationale: Centralized travel and consolidation of spend reduces costs and improves discounts Rationale: Improves employee awareness of appropriate personnel to contact for questions and issues IMPLEMENTATION ACTION STEPS: 1. Identify the size and scope of travel volume (e.g., number of travelers, city pairs) 2. Determine travel management activities and reporting structure, and divide responsibilities according to required skills 3. Staff the travel management function with individual(s) who are knowledgeable in the travel industry to ensure the greatest benefits are achieved through the program; alternatively, train those responsible for the travel management function on travel industryspecific reporting, tools, negotiation techniques, and processes to ensure staff have expertise necessary to perform successfully 4. Determine and develop common tools to support the travel management function (including vendor database, card management policies, data extracts from ERP system to track spend, dedicated web site, and travel index/guides) Benefit Obtained: Vendor Management Benefit Obtained: Control Rationale: Improves vendor relationships and enhances management of travel vendors; information collected in this function supports the contract negotiation process Rationale: Improves the ability to track and analyze travel spend at centralized location IMPLEMENTATION SUCCESSES and TRENDS 70 percent of our survey participants have a centralized travel management function. Two-thirds of the participants have this function reporting to the Finance or Procurement departments. One study participant transitioned to centralized travel management, which consolidated spend and allowed the company to decrease the number of travel agencies servicing the company to one. The move to a single travel agency reduced rates and streamlined the vendor relationship effort. 20 Visa Commercial Card Practices

23 Card Program 8 Practice Program Foundation Develop enterprise-wide procurement policies and procedures Leading companies document procurement policies and procedures to communicate to their internal customers their recommended Procure-to-Pay processes. A procurement policy should contain the following content: Mission statement and objectives of procurement function, including alignment with company s mission statement Procurement organization chart with contact information Sourcing and procurement guidelines Sourcing strategy Requisition of expense items Requisition of capital items Requisition of services Preferred vendors Approval rules Receipt and return process Accounts Payable (A/P) process Procurement control and audit Use of commercial card Commercial card manager contact information Issuance criteria and process Cardholder agreement Usage guidelines Reconciliation process Payment process On an annual basis, best practice companies review their policies and procedures and modify as needed. Changes are then communicated to users and incorporated into existing training. continued on next page 21

24 Card Program 8 Practice Develop enterprise-wide procurement policies and procedures continued MARKET APPLICABILITY: All Companies Benefit Obtained: Cost Savings/ Process Efficiencies Benefit Obtained: Control Rationale: Procurement policies and procedures detail standard practices designed to make a procurement organization operate more efficiently; users who learn about and follow these practices take actions that enable procurement savings, such as use of preferred vendors Rationale: Designing and documenting procurement policies and procedures that fit a company s desired level of control enables communication of requirements to ensure compliance IMPLEMENTATION ACTION STEPS: 1. Develop comprehensive outline that covers all relevant aspects of Procure-to-Pay process 2. For each policy section, research current practices and third-party research regarding best practices; determine preferred processes based upon company culture and capabilities 3. Document the policies and procedures 4. Continually reexamine policies and procedure and update as needed IMPLEMENTATION SUCCESSES and TRENDS 85 percent of our survey respondents have documented procurement policies and procedures. 74 percent of those respondents had less than 5 percent of all purchases fail a formal audit process. All of the study participants who do not have formally documented policies and procedures stated user inability to comply with procedures or failure to follow the approval process as the reasons why they failed audit. These items are the most common component of any policy and procedure document. 22 Visa Commercial Card Practices

25 Card Program 9 Practice Program Foundation Develop and distribute company-wide travel policies practice companies develop company-wide T&E policies and communicate them in ways that maximize compliance. The policy should be clear, easily accessible, and widely disseminated. Enhancing travelers understanding and buy-in to the policy improves compliance, diminishes policy-related conflicts at the point of booking, and increases benefits associated with compliance. Leading companies ensure that T&E policies are aligned with overall Procure-to-Pay objectives and are actively endorsed by senior management. Travel policies should contain the following topics: Objectives Summary responsibilities Travel approval process Designated travel agency Air travel policies Auto travel policies Rental car travel policies Other out-of-town expense policies Other business expense policies Reimbursable expense guidelines Air travel Car rental Personal vehicle use Lodging Meals/business entertainment Spousal travel expenses Non-reimbursable expenses Reimbursement process T&E card Cardholder benefits Cardholder responsibilities Credit limits, restriction/controls Liability associated with the card Restricted transactions Dispute resolution Lost card procedures Cardholder agreement form Card activation Policy violations Safety and security measures continued on next page 23

26 Card Program 9 Practice Develop and distribute company-wide travel policies continued MARKET APPLICABILITY: All Companies Benefit Obtained: Cost Savings/ Process Efficiencies Benefit Obtained: User Satisfaction Rationale: Increases compliance with use of preferred vendors, thereby leveraging the established discounts and increasing the ability to maintain or gain additional discounts through those vendors Rationale: Improves employees ability to access travel policy requirements and restrictions; empowers employees to make appropriate travel decisions IMPLEMENTATION ACTION STEPS: 1. Develop a policy that is consistent with company culture and needs by reviewing current policies, surveying employees to gain user insights, and reviewing current travel spend data (e.g., hotels, airlines, rental car agencies, and cellular phone carriers) 2. Gain senior management approval and participation to demonstrate corporate sponsorship 3. Present the policy in a user-friendly format that guides travelers through the entire process; include answers to frequently asked questions (FAQs) 4. Make the travel policies available through new hire orientation; maintain the travel policies on a company intranet 5. Communicate updates to the policy and related successes of the program on an ongoing basis; issue periodic traveler tips that focus on key elements of the T&E policies Benefit Obtained: Vendor Management Benefit Obtained: Control Rationale: Increases compliance with use of preferred vendors, providing travel management function with greater ability to assess vendor pricing performance and greater leverage with vendors to improve performance and pricing (e.g., concierge services, upgrades, travel incentives) Rationale: Provides employees with understanding of travel restrictions, mandates, and policy updates; employees who are aware of and understand policies are more likely to follow them IMPLEMENTATION SUCCESSES and TRENDS Three study participants noted that regular communication of travel tips for non-compliance areas improved employee compliance with the policy (e.g., in or through company newsletters). One mid-size study participant not only reviewed and updated his company s travel policies periodically, but also communicated the changes to travelers. This review and communication process resulted in a reduction of the travel budget by one-third over the last three years, which equated to a reduction from $9 million to $6 million. 24 Visa Commercial Card Practices

27 10 Practice Program Foundation Develop and disseminate enterprise-wide commercial card policies and procedures Leading companies document commercial card policies and procedures to communicate the appropriate use of the commercial card to cardholders. The policy should provide clear guidelines and be widely disseminated. Cardholders are more likely to use cards for eligible purposes if they understand what the eligible purchases are and how policy and procedural compliance fits with the overall company strategy. Companies report a variety of reasons why they have implemented card programs, and their policies reflect these objectives. IMPLEMENTATION ACTION STEPS: 1. Review corporate/ procurement mission and vision statement; review current Procure-to-Pay policy to understand how a commercial card meets policy objectives 2. Develop and disseminate a policy to address the commercial card program selected, including the items listed above 3. Review policy and update periodically as needed A Commercial card policy should contain the following content by commercial card type: Commercial card objectives Cardholder responsibilities Approving manager responsibilities Credit/transaction/spending limits Ordering process/eligible purchases Record keeping/reconciliation Security and liability Auditing procedures Restricted transactions Dispute resolution Lost card procedures Cardholder agreement form Card activation Training MARKET APPLICABILITY: All Companies Benefit Obtained: Cost Savings/ Process Efficiencies Benefit Obtained: User Satisfaction Benefit Obtained: Control Rationale: Clear guidelines empower the cardholders to use cards appropriately, ensuring expected savings are achieved Rationale: Clear guidelines empower the cardholders to use cards appropriately; use of cards is more convenient than purchase orders Rationale: Policies document and communicate expectations and control mechanisms to managers, administrators, and cardholders 25

28 11 Practice Program Management Incorporate a comprehensive commercial card training program practice companies develop training materials with relevant information and mandate that employees receive appropriate commercial card training prior to card issue. Strong policies and procedures must be established as the foundation for the training effort. Fundamentals of a training program include goals, type of trainees, content per trainee, and formats for delivery. The training goals should be matched to trainee type: Trainee Type Executive Super User Approver Cardholder Trainee Type Definition Designated to be a senior vice president or above Heavy use of card for purchasing with reconciliation approval responsibilities Infrequent need to requisition; primary role to be approval of requisitions Use of card for purchasing, with little approval capability Training Goals Card program awareness Detailed commercial card policies and procedures training Overview of commercial card policies and procedures and detailed training on approval processes Overview of commercial card policies and procedures and detailed training on eligible purchases continued on next page 26 Visa Commercial Card Practices

29 11 Practice Incorporate a comprehensive commercial card training program continued There are multiple training delivery formats. practice companies analyze each format and determine the appropriate mix for the organization and trainee types. Delivery formats include: virtual training (e.g., webcasts), classroom training, and selfstudy. Each delivery format has its advantages and disadvantages. Delivery Format Virtual Self-study (computer-based training) Advantages Enables virtual classroom setting Enables deep buy-in and accountability Scalable and repeatable Low cost Ensures consistent presentation of materials time to use if geographically disperse organization Scalable and repeatable Low cost Training facility not required Can be completed at trainee s own pace Disadvantages Presents new learning style Requires knowledge of intranet technology Assumes companies have intranet Requires trainee to independently access and complete the training Eliminates face-to-face human interaction Classroom via train the trainer Enables center-led design Expensive and decentralized execution of training program Not easily repeatable Enables face-to-face interaction Preferred style of learning Potential for inconsistency of presentation of materials Requires training facilities continued on next page 27

30 11 Practice Incorporate a comprehensive commercial card training program continued Other training materials can include Quick Reference Cards that summarize the critical training topics and are posted at employees desks. MARKET APPLICABILITY: All Companies Benefit Obtained: Cost Savings/ Process Efficiencies Benefit Obtained: User Satisfaction Rationale: Reduces costs through compliance Rationale: Empowers employees to comply with policies IMPLEMENTATION ACTION STEPS: 1. Identify the trainee types 2. Match training content and delivery modes to each trainee type 3. Execute training program 4. Review the training program for effectiveness (policy compliance) and relevance (end-user evaluations) 5. Periodically update according to changes in policies and procedures Benefit Obtained: Vendor Management Benefit Obtained: Control Rationale: Increases the likelihood of choosing approved vendors Rationale: Increases the likelihood that established policies and procedures will be used IMPLEMENTATION SUCCESSES and TRENDS A survey respondent had a dedicated purchasing card training program and directly linked this to the successful penetration and expansion of the card program, as cardholders understood the benefits and were empowered to use the card. One survey respondent directly attributed increased purchasing card usage through incorporating purchasing card training into its new hire training program. During training, one company distributed a Pink Book, which contained its procurement policy. This brightly colored manual was used as an easily recognizable, quick-reference tool for understanding how to use the card. Visa Commercial Card Practices 28

31 12 Practice Program Management Establish Visa Purchasing/Visa Commercial One card issuance criteria for optimal distribution to employees Leading companies ensure that purchasing/visa Commercial One cards are distributed appropriately. These companies develop criteria for distribution of cards that are consistent with company culture, policies, and spend parameters for card-eligible purchases. Issuing cards to the right people and encouraging use of the cards is key to the success of a purchasing card program. Distribution of cards should be wide enough to ensure all regular purchasers of card eligible purchases have a purchasing card or have access to a departmentdesignated card. practice companies identify designated buyers who will use the card on a frequent basis, typically called Super Users. Super Users are individuals who may be responsible for all purchases for a business unit or facility. IMPLEMENTATION ACTION STEPS: 1. Develop criteria for distribution of cards that is consistent with company culture and policies; review purchase orders, petty cash distributions, and check requests to identify typical purchasers at your organization 2. Distribute criteria for card issuance as part of procurement and purchasing card policies 3. Distribute cards to Super Users and other identified purchasers 4. Solicit feedback from cardholders and managers to ensure appropriate distribution; e.g., if a cardholder is regularly making purchases for another employee, that employee may require a card 5. Review activation reports to identify individuals that have not activated cards after issuance; these individuals are likely to be purchasing card-eligible items through other methods. Particular attention should be paid to this during rollout of a new card program, as there may be some resistance to change MARKET APPLICABILITY: All Companies Benefit Obtained: Cost Savings/ Process Efficiencies Benefit Obtained: User Satisfaction Benefit Obtained: Control Rationale: Distribution of cards to those who regularly purchase items ensures that the maximum number of eligible purchases go through the card, reducing transaction costs associated with purchase orders and petty cash Rationale: Ensuring that appropriate personnel have cards improves satisfaction with procurement process; individuals who do make purchases appreciate the convenience of the card Rationale: Increases control by placing cards in the hands of the appropriate employees IMPLEMENTATION SUCCESSES and TRENDS Survey respondents reported that identification of the appropriate purchasers, and distribution of purchasing cards to those individuals, directly led to the success of their card programs. Leading companies regularly review inactive card and card activation reports to identify cards that are not being used. Companies reported that this information was used to identify individuals who do not need cards, need additional education on use, or need encouragement to transition to a new process. One company that gave cards to designated users was able to move 100,000 transactions from purchase orders to purchasing cards. 29