Visa Commercial Card Best Practices

Visa Commercial Card Practices

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

2 Visa Commercial Card Practices

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

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

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

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

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

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

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

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

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

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

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

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

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

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 email or memo to employees advocating or mandating use of the card and detailing the benefits of the program Training: Participating in card program training to display support of and involvement in the card program Card program enforcement: Supporting and enforcing the stipulations of non-compliance according to program policies and procedures Finally, some best practice companies have found that an organizational structure which allows Program Administrator access to senior management, such as a dotted line relationship from Accounts Payable to the CFO, can be very effective for obtaining senior management time and support for the program. continued on next page 16 Visa Commercial Card Practices

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 email, 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 email 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

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

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

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

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

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

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

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 email 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

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

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

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

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

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

13 Practice Program Management Establish T&E/Visa Commercial One card issuance criteria for optimal distribution to business travelers Leading companies ensure that T&E cards are distributed appropriately. These companies develop criteria for distribution of cards that are consistent with company culture, policies, and spend parameters for card-eligible purchases. The use of T&E cards can reduce costs associated with processing cash advances and check requests. Some companies distribute T&E cards to all travelers, and others only distribute cards to regular travelers. To identify individuals who require T&E cards, companies review cash advance requests and expense reports. Companies should also review travel volume and needs of various business units (e.g., Sales) and roles when identifying travelers. T&E cards can be a significant benefit to employees who may not have an established credit history. IMPLEMENTATION ACTION STEPS: 1. Develop a criteria for distribution of T&E cards that is consistent with company culture and policies; coordinate with managers to determine profile of a typical traveler; review expense reports and cash advances to identify individuals who should have T&E cards 2. Prior to any travel for a non-cardholder, managers should determine whether the employee will have ongoing travel responsibilities if the employee does, then the manager should consider issuing a T&E card to the employee 3. Regularly review inactive T&E card reports; determine whether employee is using his own card to pay for travelrelated expenses; if so, encourage use of the card; if not, reevaluate the need for the employee to have the card For employees who do not travel regularly (typically only once a year or less) or for recruits/interns who may be involved in limited short-term travel, companies may want to investigate the use of virtual accounts or central billing accounts to handle airline, hotel, and car rental costs. MARKET APPLICABILITY: All Companies Benefit Obtained: Cost Savings/ Process Efficiencies Benefit Obtained: User Satisfaction Benefit Obtained: Vendor Management Benefit Obtained: Control Rationale: Encourages all travel-related expenses to be purchased with the T&E card, reducing transaction costs associated with cash advances and check requests Rationale: Improves travelers ability to pay for travel-related expenses, reduces travelers concerns over access to funds while traveling, and alleviates need for travelers to use personal funds or credit for business travel Rationale: Optimal distribution of T&E cards increases eligible spend on the cards, providing improved reporting of actual travel spend for vendor management Rationale: Increases control through consolidation of spend allows for improved reporting and reconciliation of travel spend IMPLEMENTATION SUCCESSES and TRENDS practice companies have increased their issuance of T&E cards by monitoring expense reports and identifying travelers who pay exclusively out of pocket. A majority of the companies surveyed reported that use of T&E cards significantly reduces the need for cash advances. One company issued cards to all employees who needed to travel and mandated use of the card. That company was able to achieve a 29 percent discount on its $3.5 million travel spend. Visa Commercial Card Practices 30

14 Practice Program Management Mandate and enforce use of Visa Purchasing/ Visa Commercial One card for all eligible purchases practice organizations mandate and enforce use of commercial cards. Consolidating eligible spend onto purchasing cards improves the organization s ability to achieve cost savings and control maverick spend. Companies should decide how to enforce compliance to their prescribed use of the purchasing cards. Some companies strongly encourage usage through education and compliance reporting, while other companies mandate usage and charge those business units not in compliance with the cost of purchase order generation. Some companies have elected to reward business units by passing cost savings back to the business unit. Each company must determine how best to encourage purchasing card usage for eligible transactions based upon their culture. IMPLEMENTATION ACTION STEPS: 1. Regularly communicate which purchases are eligible for purchasing on cards 2. Review purchases made through other methods (e.g., purchase orders) to determine whether purchases should have been made on a card 3. Notify cardholders and/or management when purchases should have been made through a Visa Purchasing card 4. Communicate benefits of and successes associated with use of cards MARKET APPLICABILITY: All Companies Benefit Obtained: Cost Savings/ Process Efficiencies Benefit Obtained: Control Rationale: Increased use of the card for eligible purchases reduces transaction costs associated with those purchases and overall program costs Rationale: Increases compliance with criteria for placing eligible spend on commercial card IMPLEMENTATION SUCCESSES and TRENDS Survey results indicate that 68 percent of the respondents either mandate or strongly encourage the usage of their Visa Purchasing cards to maximize savings. One survey participant distributed Visa Purchasing card spending goals to all business units to generate competition to increase eligible spend placed on the card. Another survey respondent reported that encouragement and communication worked with all but one business unit. To force compliance, the procurement department declined to pay the invoice and forwarded it to the business unit to figure out how to pay the vendor. One survey participant declined purchase requisitions for items that met criteria for purchase with the Visa Purchasing card. This significantly reduced the number of purchase orders being processed at the company and increased eligible spend on the Visa Purchasing card. Mid-size companies have reported that declining check requests and decreasing petty cash on hand have resulted in increased use of commercial cards for eligible purchases. One company-mandated use of the commercial card for all eligible spend. If cardholders did not follow policy, they were given a warning after the first violation and then incurred increasing charges back to the business unit for each additional violation. 31

15 Practice Program Management Mandate and enforce use of the T&E/ Visa Commercial One card for all eligible purchases practice companies mandate and enforce use of T&E/Visa Commercial One cards. Consolidating travel payments into a single payment vehicle improves a company s ability to capture and analyze data for vendor negotiations and compliance reporting (e.g., tracking of progress against volume guarantees and use of preferred vendors). T&E card use also facilitates automated pre-populated expense reporting. Additionally, use of a T&E card helps minimize the need for cash advances. One-third of the survey participants mandated usage of their T&E cards. IMPLEMENTATION ACTION STEPS: 1. Develop policies and procedures as a foundation to compliance 2. Mandate T&E card use and communicate benefits to cardholders 3. Encourage card use by training cardholders on proper use 4. Regularly communicate benefits and successes of the T&E card program 5. T&E card administrators, travel managers, and/or Accounts Payable should monitor compliance; review expense reports to identify exceptions; leverage exception reporting tools available through Issuers 6. Based on culture, distribute non-compliance reporting to non-compliant traveler, direct supervisor, and/or management 7. Based on culture, take steps to enforce use for continued non-compliance Companies use a variety of techniques, based upon their corporate culture, to enforce use of the card. A typical method is distribution of exception reporting to non-compliant travelers and their supervisors. Some companies reported that employees are given initial warnings for non-compliant behavior (e.g., email, voice mail, in person). Should the traveler continue to spend outside of policy, the company will not reimburse those expenses. MARKET APPLICABILITY: All Companies Benefit Obtained: Cost Savings/ Process Efficiencies Benefit Obtained: Vendor Management Benefit Obtained: Control Rationale: Increases compliance, reducing travel costs and trip-planning effort; reduces the level of effort required to gather travel spend information Rationale: Can help strengthen vendor relationship due to increased use, and improved data can be used for future contract negotiations Rationale: Enables company-wide, centralized visibility to spend data and supports effective reporting for audit and control purposes IMPLEMENTATION SUCCESSES and TRENDS A large corporate study participant mandated and enforced use of the corporate T&E card, increasing spend on the card and enabling reduced fees through the Issuer. On average, survey participants that mandated T&E card use also appeared to achieve higher discounts through travel vendors. For air travel, the average discount was 26 percent compared with 13 percent for companies that did not mandate T&E card use. Of the survey participants that mandated T&E card use, only 20 percent felt the need to continue to provide cash advances. Of the survey participants that did not mandate use of the T&E card, 55 percent continued to fund cash advances to their employees. A mid-size company mandated use of the corporate T&E card for all airfare to reduce control concerns associated with travel booked but not taken. Through implementation of this program, the company achieved better tracking of unused travel and was able to reduce thousands of dollars of unused airfare credit. Visa Commercial Card Practices 32

16 Practice Program Management Maximize use of Visa Purchasing/Visa Commercial One card virtual accounts Virtual accounts are commercial cards associated with one department or vendor, regardless of the particular end user making the purchase. The two most common examples of virtual accounts are ghost accounts and department cards. Ghost accounts are master accounts with no associated physical card. A department card is a plastic card that is assigned to a specific group within the company. With both cards, purchases are charged to an individual commercial card account number, which can only be accessed by designated purchasers. practice companies leverage virtual accounts as part of their overall Visa Purchasing card strategies. Consolidation of spend onto virtual accounts reduces administration of purchase orders, various card programs (e.g., virtual accounts can be substituted for supplier cards), and multiple card statements. Examples of spend categories that are typically handled through virtual accounts: Recurring charges through service companies, such as monthly bills for shredding, cleaning, telephone/pager services, rent, and utilities Services, such as temporary services, catering, and copier maintenance Events planning expenses, such as hotels and transportation for marketing or training functions. Capital items for projects, such as technology equipment Ghost accounts are a particularly effective and efficient method of payment for e-procurement purchases, as they provide settlement convenience: a single Electronic Funds Transfer (EFT) payment for multiple charges instead of numerous individual checks. Ghost accounts should be set up for each e-procurement supplier with high levels of spend. For both e-procurement and standard purchasing, this approach minimizes administrative work, because the company will manage fewer accounts, compared to establishing an account for each buyer. For ghost accounts, the vendor typically maintains the card number at its location to be charged at the time of each purchase or on a monthly basis. Ghost accounts reduce the risk of late payments, minimize burden on A/P to pay recurring monthly bills, and increase vendor satisfaction with timely payment. continued on next page 33

16 Practice Maximize use of Visa Purchasing/Visa Commercial One card virtual accounts continued MARKET APPLICABILITY: All Companies Benefit Obtained: Cost Savings/ Process Efficiencies Benefit Obtained: User Satisfaction Benefit Obtained: Vendor Management Rationale: Use of ghost accounts reduces time for reconciliation and settlement of transactions Rationale: Eases both the order placement and payment processes; increases vendor satisfaction through timeliness of payments Rationale: Maintaining a single vendor and or commodity on a ghost account allows for improved tracking of spend with the supplier(s) IMPLEMENTATION ACTION STEPS: 1. Evaluate current spend and identify suppliers or commodities to target for virtual card programs 2. Leverage Issuer experience to implement and manage a virtual card program 3. For current suppliers, coordinate transition to ghost accounts 4. Determine data requirements and communicate to vendor 5. Finalize requirements for reconciliation purposes and communicate to purchaser/cardholder Benefit Obtained: Control Rationale: Use of back-end audit maintains the controls on these purchases; improved controls can be achieved through reporting on the card account (e.g., companies can review monthly charges for variance and month-to-month variance); enables greater management of departmental or commodity-based spend IMPLEMENTATION SUCCESSES and TRENDS Half of the survey respondents use virtual accounts. One study participant has significantly leveraged use of the ghost account program for all possible recurring expenditures, including catering, telephone, cellular phone, pagers, shredding, and maintenance that significantly improved the reconciliation process and vendor negotiations by placing all spend with each vendor on a single account. The transition also resulted in a significant reduction in the number of invoices and purchase orders. One survey respondent implemented e-procurement and ghost accounts with designated vendors (e.g., computer provider). Ghost account use facilitated issue resolution and expedited payment. Visa Commercial Card Practices 34

17 Practice Program Management Maximize use of T&E/Visa Commercial One card virtual accounts Virtual accounts are commercial cards associated with one department or vendor, regardless of the particular end user making the purchase. The two most common examples of virtual accounts are ghost accounts and department cards. Ghost accounts are master accounts with no associated physical card; the account number is typically maintained with a single vendor. A department card is a physical card that is assigned to a specific group within a company. In both cases, purchases are charged to an individual commercial card account number, which can only be accessed by designated purchasers. practice companies use virtual accounts as part of their overall T&E card strategy. For example, companies set up ghost accounts with their contracted travel agents for T&E spend, most commonly airline spend, and they use department cards to cover T&E spend for infrequent travelers or non-employees, e.g., contractors or recruits. The advantages of T&E virtual accounts include: Convenience for those who have not yet received a T&E card or who do not meet the company s guidelines to receive a T&E card, such as: New hires/recent college graduates Potential hires Contractors Foreign employees/new immigrants Employees who are infrequent travelers based on annual T&E spend or number of trips per year Reduction of costs associated with individual employee reimbursement of travel spend Elimination of employee burden to cover travel expenditures during the period between when they are incurred and reimbursed Reduction of late payments to the vendor or Issuer practice companies receive and pay virtual account bills centrally. They establish controls to validate purchases or reconcile card statements through department/employee verification of their expenses. These companies also mandate the use of virtual accounts and ensure that travelers and the travel agency understand the company s travel and expense policies, preferred suppliers, and negotiated rates. practice companies use and consolidate the virtual account card data with other T&E data (e.g., from the travel agency, hotels, car rental agencies, and other internal reporting systems) in order to get a complete view of spend for improved reporting and negotiating power with vendors. continued on next page 35

17 Practice Maximize use of T&E/Visa Commercial One card virtual accounts continued MARKET APPLICABILITY: All Companies Benefit Obtained: Cost Savings/ Process Efficiencies Rationale: Use of ghost accounts reduces time for reconciliation and settlement of transactions IMPLEMENTATION ACTION STEPS: Department Cards 1. Evaluate current T&E spend and T&E buyer profiles 2. Identify groups of T&E purchasers to whom to assign department cards (e.g., by department, function, or related activities, etc.) 3. Use Issuer experience to implement and manage T&E department cards 4. Transition current purchasers/cardholders to T&E department cards 5. Determine data requirements and communicate to vendor(s) 6. Finalize requirements for reconciliation purposes and communicate to purchasers/cardholders Ghost Accounts 1. Evaluate current T&E spend and identify categories to target for ghost accounts 2. Use Issuer experience to implement and manage T&E ghost accounts at vendors 3. Set up current purchasers/ card holders on T&E ghost accounts at vendors 4. Determine data requirements and communicate to vendor(s) 5. Finalize requirements for reconciliation purposes and communicate to purchaser/cardholder Benefit Obtained: User Satisfaction Benefit Obtained: Vendor Management Benefit Obtained: Control Rationale: Eases both the order placement and payment processes; increases vendor satisfaction through timeliness of payments; and decreases employee debt burden Rationale: Maintaining a single T&E expense on a ghost account allows for improved tracking of spend with the supplier Rationale: Use of back-end audit maintains the controls on these purchases; improved controls can be achieved through reporting on the card account (e.g., companies can review monthly charges for variance and month-to-month variance); enables greater management of departmental or travel spend IMPLEMENTATION SUCCESSES and TRENDS In addition to issuing individual T&E cards for frequent travelers, one company has set up 85 virtual travel accounts with its contracted travel agent for each of its departments. These virtual travel accounts pay for the air travel of each department s infrequent travelers, including employees with less than $500/year of T&E expenses. By setting up these virtual accounts, the company is able to control T&E expenses centrally and manage the T&E card program more effectively by concentrating on high spend users. Two mid-market companies have issued T&E cards for non-air travel and require all air travel to be booked through the company s virtual travel account with its contracted travel agent. These companies have benefited from central control, real-time access to travel data, and end-user satisfaction. End users are relieved of the debt burden of air travel expenses. Visa Commercial Card Practices 36

18 Practice Program Management Incorporate commercial cards into business continuity planning Leading companies incorporate continuity planning into all business operations and leverage commercial cards as part of their plan. Business disruption causes may be minor (e.g., system outage) or catastrophic (e.g., natural disaster), yet the use of commercial cards as part of this process can facilitate continuing business operations. Visa Purchasing cards and T&E cards can be alternate forms of purchase and payment for transactions and can additionally be used as a cash management tool or for immediate access to credit. Credit limit increases may necessitate coordinating with your Issuer. Study participants regularly reported use of commercial cards to remedy unexpected circumstances. IMPLEMENTATION ACTION STEPS: 1. Include use of commercial card in contingency planning documents as an alternate form of purchase and payment 2. Detail commercial card use in the event of a business disruption in the commercial card policy 3. As part of communication of Visa Purchasing card successes, tips, and updates, include use of card to resolve continuity or emergency issues MARKET APPLICABILITY: All Companies Benefit Obtained: Cost Savings/ Process Efficiencies Benefit Obtained: User Satisfaction Benefit Obtained: Control Rationale: Reduces need to process emergency cash advances and check requests Rationale: Enables employees to use purchasing cards to handle unexpected business events; reduces employee stress with resolving these issues Rationale: Enables employees to manage business needs through unforeseen circumstances IMPLEMENTATION SUCCESSES and TRENDS One New York City-based study participant reported that use of its commercial card allowed it to facilitate business continuity when the events of September 11 impacted its purchasing and payment technology infrastructure. At one company, video equipment did not arrive in a timely fashion for use at a marketing event employees were able to lease video equipment locally using a Visa Purchasing card and the marketing event continued as planned. 37

19 Practice Program Management Establish parameters for eligible Visa Purchasing/ Visa Commercial One card transactions leveraging appropriate controls One of the most critical steps in establishing a purchasing card program is to define well-thought-out parameters, such as identification of the appropriate commodity and spend limits that encourage ease of use but allow for appropriate control. Leading companies clearly define eligible commodities and a spend target for purchasing card use. Companies surveyed differ by the commodity types that are eligible for their card program. Commodity-type allowance ranges from only office supplies, to all indirect spend of a certain dollar value, to all capital and expense items. Companies also differ by their established card spend targets, ranging from all items under $250 to all items under $5,000. To determine the appropriate purchasing parameters, a company should undergo a spend analysis process. To begin, companies should analyze their A/P data to identify spend patterns, such as average spend and number of transactions by commodity. Where possible, high-volume transactions or recurring transactions should be transitioned to purchase through the card program. Companies should also analyze current approval requirements (e.g., signature approvals, purchase requisitions) for commodities and dollar amounts, to determine for which items back-end audit procedures can be leveraged to maintain controls. Finally, leading companies leverage Card Issuer experience and knowledge in determining eligible purchases. Once the commodities for card usage are determined, a spend target should be set. Spend targets should be set at a dollar amount that enables cardholders to purchase items that are frequently purchased in their eligible commodity groups. Organizations should set credit limits that strike a balance between control and ease of use. No single credit limit will be appropriate for every organization. Even within organizations, different business units and levels of employees may have different credit limits associated with their individual card accounts. Initial setting of credit limits should incorporate an analysis of monthly purchase volumes, so the cardholder will be able to purchase as required. Limits should be reviewed and adjusted on a periodic basis. Finally, best practice companies optimize use of Merchant Category Code (MCC) blocking: They ensure that appropriate purchases are not declined due to an MCC block but also restrict purchases that are outside of company policy, such as purchases at jewelers or casinos. continued on next page Visa Commercial Card Practices 38

19 Practice Establish parameters for eligible Visa Purchasing/Visa Commercial One card transactions leveraging appropriate controls continued MARKET APPLICABILITY: All Companies Benefit Obtained: Cost Savings/ Process Efficiencies Benefit Obtained: User Satisfaction Benefit Obtained: Control Rationale: Conducting a thorough analysis of spend to be placed on Visa Purchasing cards ensures that goods and services are purchased through the most cost-effective method Rationale: Clear guidelines empower the cardholders to use cards appropriately Rationale: Spend parameters provide clear guidelines for what items should be purchased through card IMPLEMENTATION ACTION STEPS: 1. Review spend and number of transactions for each commodity, division, and role. Review current spend and commodities on cards 2. Identify the high-end dollar amount for typical purchases; identify the dollar amount for most frequent purchases 3. Select commodities and dollar amounts to target for card program 4. Set card spend targets for the various commodities, divisions, and/or roles; card spend targets should be slightly higher than the cost of the most frequent purchases IMPLEMENTATION SUCCESSES and TRENDS One mid-size manufacturing company established a Visa Purchasing card spend target for all manufacturing purchases up to $1,000. This step significantly reduced the number of requisitions processed by each manufacturing facility. Another study participant established spend targets of $1,000 within the manufacturing facility and $5,000 for engineers, as the engineering group regularly purchased larger dollar items. One large corporate company places 60 percent of its procurement transactions, accounting for 12 percent of its $11.4 billion of annual spend, on its Visa Purchasing card. Another large corporate company places 49 percent of its $30.5 billion of annual spend on its Visa Purchasing card. One company reviewed credit limits monthly during pilot and rollout and transitioned to quarterly review on an ongoing basis. One study respondent identified that procurement increases in the summer, so limits were temporarily increased for that period of time. 39

20 Practice Program Management Integrate the Visa Purchasing/Visa Commercial One card into the e-procurement system as a method of payment practice companies strive to achieve end-to-end Procure-to-Pay process automation. These companies implement e-procurement software to streamline and automate their requisition, approval routing, and order placement activities. To automate the payment of an electronically ordered product or service, companies can integrate the Visa Purchasing/Visa Commercial One card as one effective method of payment. Card integration can be more efficient than check payments as process steps such as invoice receipt and processing, manual reconciliation, and check printing can be eliminated. practice companies generally implement ghost cards (account numbers not associated with a physical card) with their e-procurement software. These cards are assigned to a specific department or, more commonly, a specific vendor. Below is a typical process companies have used to integrate the Visa Purchasing/ Visa Commercial One card into their e-procurement system: Consult with the Issuer to format the card transaction file for integration into the e-procurement system; the card transactions will enter the system as if they were electronic invoices e-procurement vendors paid by card should be advised not to mail a paper invoice As payment information is received, the system will mark the order and payment as reconciled if the invoice amount is within a specified dollar or percentage threshold of the purchase order (to account for shipping and taxes) In addition to process efficiencies, using Visa Purchasing/Visa Commercial One cards to pay e-procurement purchases reduces risk of late payment to vendors and assists in vendor management, as spend by supplier can be consolidated on one card account. continued on next page Visa Commercial Card Practices 40

20 Practice Integrate the Visa Purchasing/Visa Commercial One card into the e-procurement system as a method of payment continued MARKET APPLICABILITY: All Companies Benefit Obtained: Cost Savings/ Process Efficiencies Benefit Obtained: Vendor Management Benefit Obtained: Control Rationale: Significantly reduces payment process costs Rationale: Assists with spend data capture by vendor through payment with ghost cards assigned by supplier Rationale: Enforces card payment for electronic purchases IMPLEMENTATION ACTION STEPS: 1. Determine e-procurement suppliers to investigate for payment via card through the system 2. Develop cross-functional team of business and technology employees to analyze the costs and benefits of card payment to the selected e-procurement suppliers 3. Present analysis to senior management for approval of integrating the card as a form of payment into the e-procurement system 4. Notify suppliers of the decision to pay via card 5. Develop a joint implementation plan with the Issuer 6. Implement use of the purchasing card with the e-procurement system 7. Train e-procurement buyers on the new payment process 8. Track actual savings relative to plan and adjust as needed IMPLEMENTATION SUCCESSES and TRENDS Of the survey respondents who have implemented an e-procurement system, on average, 27.5 percent of their spend on e-procurement software is being paid by card to reduce payment process costs. One large market company has set up ghost accounts by vendor to pay for electronically procured goods. In doing so, it has been able to gain improved visibility into spend by vendor and to enable greater sourcing savings. 41

21 Practice Program Management Use the Visa Purchasing/Visa Commercial One card to pay invoices received in Accounts Payable Many companies are realizing the benefits associated with Visa Purchasing/Visa Commercial One card use in the Accounts Payable (A/P) department. Those benefits include improved company compliance to commercial card program policy and increased process efficiencies. practice companies establish guidelines for commercial card use and work to ensure compliance to policy. Card-use policy typically includes the definition of spend types and purchase amounts most appropriate for payment with the card. Companies also develop a list of suppliers that are strongly encouraged or mandated for card use. This list can be developed by providing the Issuer with a list of suppliers that can be analyzed through Visa s Supplier Matching Service to identify those suppliers who accept commercial card payment. Companies distribute their commercial card use policies to all cardholders, but in order to prevent leakage and increase compliance to policy, many companies are identifying and paying, within A/P, invoices that should have been paid by the card. For the purchase order-based purchases, A/P also provides the buyer, if they are a card holder, with card policy information to re-educate them on how to use the card or, if they are not a cardholder, with information on how to obtain a card. The cards used in A/P departments are typically department cards that are assigned to an individual, such as the A/P manager or an A/P technician. The monthly spend limit may be higher than that of average cardholders to allow for the higher volume of spend anticipated on the card. In addition to more traditional spend types, A/P departments also use the card to pay for spend categories such as: hardware, software, MRO, temporary services, and telecommunications. continued on next page Visa Commercial Card Practices 42

21 Practice Use the Visa Purchasing/Visa Commercial One card to pay invoices received in Accounts Payable continued MARKET APPLICABILITY: All Companies Benefit Obtained: Cost Savings/ Process Efficiencies Benefit Obtained: User Satisfaction Benefit Obtained: Control Rationale: Increases process savings through displacement of check payments Rationale: Allows A/P to increase policy compliance and re-educate cardholders on appropriate card use, without requiring the cardholder to pay the received invoice with the card themselves, which may delay payment Rationale: Encourages A/P to more closely monitor and improve card compliance IMPLEMENTATION ACTION STEPS: 1. Develop and distribute commercial card use guidelines 2. Measure compliance to policy; determine if card use guidelines can better be met through having a card in A/P 3. Identify the individual to whom to assign the card; design control parameters, such as monthly spend limit, MCC restrictions, and card-use audit process 4. Implement the A/P card by establishing the account and conducting card-holder training 5. Determine whether or not follow up with buyers will occur to encourage use of the card at the time of purchase 6. Periodically review card use guidelines in A/P; update policies accordingly IMPLEMENTATION SUCCESSES and TRENDS One survey participant established a ghost card in A/P to reduce the number of one-time vendor setups, decrease working capital pressures, and increase card policy compliance. A software company has one cardholder and one ghost card in A/P. The ghost card is used to pay three vendors: promotional items, office supplies, and catering. The plastic card is used for invoice payments under $1,000 in support of the company s mandate that every transaction under $1,000 be paid with the card. 43

22 Practice Program Management Incorporate Visa Purchasing/Visa Commercial One card acceptance into preferred vendor contract terms The utilization of cards as a payment method can reduce purchase transaction costs and settlement costs for organizations. Card purchases do not require a purchase order, and payment of card statements, which have multiple transactions per statement, can substantially reduce the number of paper invoices processed. Additionally, end users are often pleased with the ease of use of a card versus the requirement to generate a purchase order. The primary benefit to vendors is faster payment of card purchases. Recognizing the advantage of using Visa Purchasing cards as a payment method, leading companies often require that their preferred vendors accept Visa Purchasing cards as a form of payment. Also, where appropriate, they often work through the details of vendor acceptance of virtual accounts, which are accounts set up in order to charge transactions with one supplier/commodity-type to one account regardless of the end user making the purchase. Finally, companies work with vendors to define the transaction information, such as Level III data; they would like to receive from the vendors to supplement their reporting and sourcing needs. IMPLEMENTATION ACTION STEPS: 1. Include Visa Purchasing card/ghost account acceptance in preferred vendor selection criteria 2. Review with vendors rationale for the requirement that they accept Visa Purchasing cards/ghost accounts 3. Finalize details of card utilization and reporting requirements MARKET APPLICABILITY: All Companies Benefit Obtained: Cost Savings/ Process Efficiencies Benefit Obtained: User Satisfaction Benefit Obtained: Vendor Management Rationale: Utilization of Visa Purchasing cards reduces transaction costs by eliminating the creation of purchase orders and processing of paper invoices Rationale: End users often find purchasing items with cards much easier and faster than completing a requisition to generate a purchase order Rationale: Vendor spend data is more accessible through Visa Purchasing cards and/or virtual accounts is accessible IMPLEMENTATION SUCCESSES and TRENDS 50 percent of the survey respondents who electronically requisition goods use the Visa Purchasing card as a form of payment for those orders. On average, they pay 30 percent of their transactions with a card. The three most frequently cited objectives of a Visa Purchasing card program by our survey participants were transaction cost reduction, settlement convenience, and user convenience. Implementation of these best practices facilitates achievement of these objectives. Several survey participants had the vendor ghost account number embedded in their order entry system, which provided further settlement convenience. Visa Commercial Card Practices 44

23 Practice Program Management Investigate Visa Purchasing/Visa Commercial One card expansion to additional spend categories to maximize benefits achieved The use of cards as a payment method can reduce purchase transaction costs and settlement costs for organizations. Companies tend to focus on using cards only for hightransaction, low-dollar items. While use of cards for this purpose provides significant benefit, companies should also investigate expansion of use into other spend categories, including: recurring payments (e.g., phone, utilities), temporary services, and computers. To identify the spend categories that will provide the greatest benefit through transition to a card program, look at ongoing vendor relationships and select vendors with whom you have high transactions/spend or recurring payments. Issuers can assist with analysis of Accounts Payable (A/P) files, vendor targeting, and incorporation of data. Issuers also provide services to help companies identify which suppliers within the company s vendor base already accept cards as a form of payment. Recognizing the advantage of using Visa Purchasing cards as a payment method, leading companies often require that their preferred vendors accept Visa Purchasing cards as a form of payment. Companies also may use the following creative techniques to encourage card acceptance: identify large local companies that have implemented cards and investigate use of the same vendors; develop a consortium relationship and leverage the combined purchasing power of the group to encourage vendor acceptance of cards; and incorporate card acceptance in the request for proposal (RFP) or bid process. continued on next page 45

23 Practice Investigate Visa Purchasing/Visa Commercial One card expansion to additional spend categories to maximize benefits achieved continued MARKET APPLICABILITY: All Companies Benefit Obtained: Cost Savings/ Process Efficiencies Benefit Obtained: User Satisfaction Benefit Obtained: Vendor Management Benefit Obtained: Control Rationale: Increases ability of Visa Purchasing cards to reduce transaction costs by eliminating additional purchase orders and processing of paper invoices Rationale: Employees often find purchasing items with cards easier and faster than completing a requisition to generate a purchase order Rationale: Placement of additional spend categories on cards enables reporting by vendor through card program Rationale: By increasing the volume and commodities purchased through the card, companies achieve greater visibility to spend and increased control in those areas IMPLEMENTATION ACTION STEPS: 1. Review categories of spend to identify target areas for transition to card program (e.g., recurring charges, services, temporary services, projects, raw materials) 2. Request that Issuer conduct a supplier/ merchant matching to identify which of your vendors accept payment by credit card to identify additional commodities for transition to card program (e.g., The Visa Supplier Matching Service) 3. For those vendors that do not currently accept cards as a method of payment, request that vendor begin to accept payment; if necessary, use creative methods detailed above IMPLEMENTATION SUCCESSES and TRENDS One mid-size company leveraged its significant spend with local vendors to require their acceptance of cards for payment. One company used its card program to expand spend to recurring payments for phone services, pager services, copier maintenance, shredding, coffee supplier, flowers, catering, etc. Due to the financial success of this initiative, management continues to investigate opportunities to expand spend and has incorporated the requirement for acceptance of commercial cards in RFPs. Survey responses illustrate spend for a variety of commodities: Two mid-size manufacturing companies use the card for over 75 percent of hardware/ software purchases One large corporate finance company uses the card for 100 percent of spend with temporary employees and contractors One large corporate services company uses the card for 80 percent of spend on packaging and shipping Visa Commercial Card Practices 46

24 Practice Program Reporting 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 practice companies streamline the reconciliation process by minimizing the time spent receiving statements and allocating transactions to G/L codes and cost centers. Companies can work with their Issuer banks to determine the best mechanism for automating this process according to their specific needs. Automated statement delivery enables cardholders to receive statements faster and in a format that can be more easily updated than statements sent by mail. Typically, to receive a statement electronically, companies will do one of the following: Download an electronic statement from its Issuer s web site Receive the data via e-mail Receive data feeds according to a predefined schedule or based upon transaction volume To further automate the reconciliation process, companies predefine a G/L code and cost center code for the card payment transaction. Predefinition assists cardholders in reconciliation by providing a best guess allocation that cardholders can adjust as needed prior to submitting a statement for approval. General Ledger code predefinition rules can be based on criteria such as vendor name, cardholder and, most commonly, merchant category code. Cost centers are typically predefined based on the cardholder. As business units/cost centers may allocate the same type of spend to a different G/L, the G/L predefinition mapping can be specific to a business unit or cost center. Companies should work with their Issuers to implement the predefinition mapping best suited to their needs as well as to design a maintenance schedule of the rules. continued on next page 47

24 Practice 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 continued MARKET APPLICABILITY: All Companies Benefit Obtained: Cost Savings/ Process Efficiencies Benefit Obtained: User Satisfaction Benefit Obtained: Control Rationale: Reduces the amount of time spent on card payment reconciliation and reduces errors associated with manual processing Rationale: Facilitates cardholder reconciliation efforts Rationale: Ensures allocation of the correct G/L codes to track spend and improve the budgeting process IMPLEMENTATION ACTION STEPS: 1. Determine and implement an automated statement delivery mechanism with the Issuer 2. Work with Issuers to develop G/L code and cost center mapping and incorporate it into electronic statement information 3. Incorporate the revised reconciliation process into cardholder training and card procedures information IMPLEMENTATION SUCCESSES and TRENDS 54 percent of surveyed companies have implemented automated delivery of electronic card statements to minimize the most time-intensive activities reported: buyer reconciliation and assignment of cost center. Several survey respondents linked predefinition of codes with success of reconciliation automation efforts and purchasing card programs. Implementation of an automated reconciliation system facilitated the management of spend through a Visa Commercial One card program. One survey respondent that predefines G/L codes reduced invoice payment transaction costs from its computed industry benchmark average of $2.50 to $1.90. Visa Commercial Card Practices 48

25 Practice Program Reporting Pre-populate expense reporting with commercial card data practice companies seek out ways to minimize low-value tasks of their employees. One of the most time-consuming, administrative tasks required of traveling professionals is travel expense reporting. According to Aberdeen, the average employee spends approximately 30 to 45 minutes to complete a manual expense report, with a cost of approximately $45 to process it on the back-end. An automated report, prepopulated with card data, on the other hand, can be completed in 10 to 15 minutes (a 67 percent improvement from manual reporting) and reduce the processing costs by 80 percent. Additionally, the system helps reduce reconciliation errors associated with manual data entry and encourages T&E card use compliance. In order to reduce the costs associated with expense reporting, companies have begun to implement automated expense reporting systems. These systems provide an automated form that can be accessed from the user s desktop and allow for integration with the data feed from the T&E card provider. When the user accesses the system, they receive an expense report that has been pre-populated with T&E card data. Fields are created for allocation to cost centers and entry of out-of-pocket expenses. After completion, the form is electronically routed using workflow rules (included with the system) for automated manager approval and subsequent delivery to the Accounts Payable (A/P) department for reconciliation and reimbursement. Receipts are forwarded to A/P in a separate envelope. Of companies surveyed, 26 percent have implemented an enterprise-wide, pre-populated expense reporting solution, which is better than the nine percent industry average. While automated expense reporting is viewed as an innovative T&E best practice, it has not been as widely adopted as predicted. This low adoption has been attributed to other Procure-to-Pay solutions, such as e-procurement, Strategic Sourcing, and ERP implementations that have eclipsed automated expense reporting in priority. Additionally, the market for automated expense reporting solutions was less mature than it is today and did not provide companies with an extensive amount of functionality required to justify the implementation. The results of the survey indicated that companies will begin to adopt these tools more rapidly going forward. continued on next page 49

25 Practice Pre-populate expense reporting with commercial card data continued In addition, compared to five years ago, the number of companies offering expense reporting solutions has grown dramatically. ERP and e-procurement vendors have developed automated expense-reporting solutions and marketed them as second-wave initiatives. Other third-party products have developed strategic alliances with card providers and software companies to provide more robust functionality. Mid-size companies that do not necessarily have the resources to spend and implement an expense-reporting solution have explored cost-optimal alternatives such as outside hosting of the expense reporting package or creation of in-house, automated expense templates. IMPLEMENTATION ACTION STEPS: 1. Evaluate third-party expense reporting packages for ability to meet functionality and integrate with existing platform 2. Work with Issuers to receive automated feed, define cost center codes, and create workflow rules 3. Pilot expense-reporting package within a business unit to optimize solution and build initial momentum 4. Develop and deliver comprehensive training program to ensure user acceptance and satisfaction with the product 5. Rollout expense-reporting package, including comprehensive training MARKET APPLICABILITY: All Companies Benefit Obtained: Cost Savings/ Process Efficiencies Benefit Obtained: User Satisfaction Benefit Obtained: Control Rationale: Significantly reduces cycle time, data input, and input errors Rationale: Users appreciate the ease, convenience, and time savings of pre-populated expense reports Rationale: Pre-population of data increases control over data and reduces possible data input errors IMPLEMENTATION SUCCESSES and TRENDS In addition to the 26 percent of study participants who have already implemented an enterprisewide expense reporting solution, 36 percent plan to implement one in the next two years. One large corporate participant reported the average time to complete a pre-populated, automated expense report is two minutes; this is a 93 percent improvement from the industry average for completing a manual report. 100 percent of the companies that implemented an enterprise-wide solution expressed satisfaction with their product and the associated cost savings. Visa Commercial Card Practices 50

26 Practice Program Reporting Develop solutions that support the reporting and payment of sales and use taxes Leading organizations understand and manage their businesses within the labyrinth of tax regulations imposed by local, state, and federal jurisdictions. Understanding anticipated tax liabilities is a key factor in developing sound ROI evaluations, business case assessments, and managing overall spend. As companies implement automated procurement processing technologies and adopt commercial card products and programs, it is also an appropriate opportunity to implement solutions that support the reporting and payment of sales and use taxes. In this survey, businesses reported using software solutions like Vertex, TaxWare, and InfoSpan to collect and manage tax-related information. practice companies endeavor to understand the liabilities associated with underpayment. The most successful tax strategies ensure collaboration between commercial card program and Corporate Tax administrators. Generally, the most accurate and auditable results have been obtained in programs where taxes are calculated without cardholder involvement. Leading organizations develop a tax compliance methodology that combines the amount of electronic transaction data delivered to the program administrator with assumptions regarding the tax consequences of certain types of purchases. For example, some programs assume that if the transaction data shows that the cardholder and vendor are located within the same state, the transaction was correctly taxed. Programs make this assumption because, in most jurisdictions, the vendor would charge tax unless presented with a valid exemption certificate. Tax determinations between cardholders and out-of-state vendors rely on a variety of approaches, such as enhanced transaction data to substantiate tax paid or certain characteristics of the out-of-state vendor. After eliminating the exempt transactions and transactions where sales tax was paid, use tax is accrued on the remaining transactions. Commercial card transaction receipts are retained until the state s authority to audit expires. Finally, best practice companies implement a process that documents the transactions where sales tax was collected by the vendor, identifies purchases of items exempt from tax, and calculates the use tax accrual on taxable purchases where tax was not charged by the vendor. continued on next page 51

26 Practice Develop solutions that support the reporting and payment of sales and use taxes continued MARKET APPLICABILITY: All Companies Benefit Obtained: Cost Savings/ Process Efficiencies Benefit Obtained: Control Rationale: Tax record management processing and appropriate tax accrual calculation Rationale: Provides visibility over tax liability IMPLEMENTATION ACTION STEPS: 1. Partner with Corporate Tax to understand procurement tax liability 2. Implement a tax tracking mechanism and train users 3. Continually monitor program compliance and adjust accordingly IMPLEMENTATION SUCCESSES and TRENDS 86 percent of study participants have implemented strategies and accounting systems designed to expedite tax reconciliation and accrual and move responsibility away from the individual employee. These companies no longer consider reconciliation of sales and use tax a timeintensive activity. One study participant worked with the company s Corporate Tax department to design a purchasing card statement and receipt-retention process that augmented the company s existing sales and use tax compliance and reporting capabilities. Through accurate reporting and thorough record keeping, the company has been able to effectively estimate and pay its taxes and comply with IRS regulations. Visa Commercial Card Practices 52

27 Practice Program Reporting Gain a comprehensive view of spend by integrating data from multiple sources (e.g., e-procurement, travel, ERP, Visa Purchasing cards) Leading procurement organizations consolidate commodity spend data from multiple sources. A comprehensive view of spend assists with management of sourcing and Procurement/Accounts Payable (A/P) functions. Spend data is typically consolidated within a General Ledger (G/L) from multiple sources: A/P systems, expense reporting systems, card statement data feeds, and travel agency booking systems. Companies can consolidate spend data via the following tools, depending on spend volume and complexity of desired reporting: Access and Excel databases Accounts Payable/General Ledger/purchase order reporting tools Data mart/data warehouses The integration of transaction-level card data into a G/L can be automated through the following steps: Develop G/L and cost-center default mappings for card transactions based upon cardholder and vendor name or MCC; defaults can be changed by the cardholder as needed Reformat the card transaction file for integration with the receiving financial system Allocate single, monthly bank payment for the card to an In-Process G/L account When reconciled, integrate the line-item card transaction file into the G/L, offsetting the In-Process account Once all payment data is consolidated, companies can analyze the information to identify trends, manage vendors, and ensure compliance with procurement policies. continued on next page 53

27 Practice Gain a comprehensive view of spend by integrating data from multiple sources (e.g., e-procurement, travel, ERP, Visa Purchasing cards) continued MARKET APPLICABILITY: All Companies Benefit Obtained: Cost Savings/ Process Efficiencies Benefit Obtained: Vendor Management Benefit Obtained: Control Rationale: Enhances strategic sourcing efforts by examining comprehensive spend data Rationale: Assists in supplier negotiations as a company can inform the supplier of the total volume it is receiving from the company Rationale: Provides visibility across all sources of spend IMPLEMENTATION ACTION STEPS: 1. Identify the sources of payment data (e.g., e-procurement, travel, ERP, commercial card, etc.) 2. Define the information that should be consolidated by understanding information available through A/P as well as information available from vendors, travel agents and Card Issuers 3. Select the data repository in which to consolidate the data 4. Define and implement a process for initial load of the repository 5. Define a process for the periodic updates of the repository 6. Determine reports necessary to analyze data and prepare findings IMPLEMENTATION SUCCESSES and TRENDS One survey respondent initiated its strategic sourcing efforts by creating a spend analysis. The spend analysis integrated data from multiple sources and formed the foundation for its Strategic Sourcing successes. One construction company has automated the integration of card transactions into their G/L to enable a global view of spend and reduce the manual effort of keying the data details into their system. Visa Commercial Card Practices 54

28 Practice Program Reporting Share commercial card performance and savings reports with senior management to promote appropriate use of the card Leading companies have recognized that fostering ongoing senior management support (e.g., business unit lead, senior or executive vice president support) through regular communication of card program performance can maximize benefits of the card program. Companies have successfully maintained senior management support by developing regular and ongoing communication of the activities and successes of the card program through an executive-level report, which can contain the following: Process metrics: purchase order volume and trend, invoice volume and trend, T&E volume and trend, purchasing card usage and trend Savings metrics: dollars saved through expanded use of the commercial card Lost savings: dollars lost through non-compliance to card policies and procedures (e.g., maverick spend, low-dollar check payments) Current initiatives underway: high-level descriptions of efforts and expected benefits Companies have used innovative methods to share this information with senior management. This includes creating unique presentations, assigning business unit liaisons, and actively communicating successes through internal newsletters. In addition to simply communicating successes, organizations have actually shared their savings with their internal business customers to encourage further compliance to policies and procedures. continued on next page 55

28 Practice Share commercial card performance and savings reports with senior management to promote appropriate use of the card continued MARKET APPLICABILITY: All Companies Benefit Obtained: Cost Savings/ Process Efficiencies Benefit Obtained: Control Rationale: Frequent communication of successes and opportunities for improvement provides senior management with the incentive to continue support of cost-saving card program activities Rationale: Frequent communication of savings from compliance and lost savings from non-compliance to card program policies and procedures encourages senior management to promote compliance IMPLEMENTATION ACTION STEPS: 1. Develop cross-functional team to form senior management communication initiative 2. Proactively identify compelling and relevant card program metrics and review with senior managers to determine appropriateness 3. Develop communication initiative with related tools (e.g., Web casts, report layouts) 4. Adjust initiative to reflect feedback as received 5. Schedule periodic review meetings with senior management to share information and ensure active participation IMPLEMENTATION SUCCESSES and TRENDS One organization tied management s bonus objectives to achievement of procurement-related goals. Because of this, the procurement department regularly reported its progress relative to goals and successes to the other business units in the organization. Another survey participant shared procurement performance numbers, such as cost avoidance and cost savings, quarterly with his peers to obtain ongoing support of initiatives. One large market company s head of procurement is a member of the company s senior management team and thus provides procurement performance information at weekly planning and status meetings which include the company s president. One study participant s card program administrator provided the director of finance a monthly report that contained: major projects, training status, and department successes and savings. Visa Commercial Card Practices 56

29 Practice Program Reporting Use Issuing banks or card-provider analysis tools to review and improve your commercial card program performance practice companies use program expansion analysis tools and reporting solutions offered by their card provider or issuing bank to enhance the performance of their commercial card programs. Card providers and issuing banks offer a range of tools to their clients to assist in the ongoing identification of savings opportunities and in information management, such as card program performance. These tools can be categorized as follows: Online card program reporting tools can help companies make more informed business decisions, streamline operations, and improve their bottom line. Such tools often offer standard reports and customized reporting capabilities that facilitate: Spend analysis Program administration Travel management Tax reporting Return on Investment (ROI) tools allow companies to estimate the financial benefits from implementing or expanding a card program. These tools aid in quantifying the benefits of card program growth, such as net process savings, which reflect any costs associated with the implementation or expansion of the program Accounts Payable (A/P) Analysis tools determine opportunities to grow the card program by identifying vendors and spend categories in which card potential is not being met. Such tools give a company a view of its spend and areas for card growth by looking at: Current spend by payment method Current check spend with card-accepting merchants, categorized by transaction size Current card program compliance by vendor, business unit or cost center Benchmarking tools assist companies in comparing the performance of their Procure-to-Pay functions and commercial card program against best practice companies to identify opportunities for strategic and tactical improvement continued on next page 57

29 Practice Use issuing bank or card-provider analysis tools to review and improve your commercial card program performance continued MARKET APPLICABILITY: All Companies Benefit Obtained: Cost Savings/ Process Efficiencies Benefit Obtained: Vendor Management Benefit Obtained: Control Rationale: Reporting tools can simplify accounting processes by enabling system integration of transaction data; such tools can also reduce the manual process of card statement reconciliation. Card program analysis tools aid in identifying potential process savings associated with card program expansion Rationale: Reporting tools allow a company to review spend with key suppliers and use this information for effective negotiations Rationale: Visibility into cardholder spend is increased through use of card reporting tools, in particular through analysis of exception reports. A/P analysis tools can track compliance by business units to card program policies by identifying spend mandated/strongly encouraged for card use that is being paid by check IMPLEMENTATION ACTION STEPS: 1. Meet with the issuing bank to discuss the tools offered by the bank and card provider 2. Work with the issuing bank to evaluate areas of the card program requiring support and identify which tools assist in addressing those needs 3. Work with the issuing bank to implement and utilize the tools 4. Set quantifiable goals for realizing the opportunities identified by the tools 5. Continue ongoing communication with the issuing bank to track progress against the goals 6. Conduct periodic reviews to identify new vendors to target for expansion IMPLEMENTATION SUCCESSES and TRENDS One middle market company wanted to expand its card program in order to replace manual processes with electronic payment and was able to use the results of the A/P analysis tool to identify card program expansion targets to bring its spend on the card to its desired 25 percent of total spend benchmark. One large market manufacturing company implemented an initiative to pay all transactions under $1,000 with a card. The company wanted a mechanism to track compliance to its policy. It was able to use the A/P analysis tool to identify the business units that had the greatest compliance success and those with the greatest leakage. The company was able to educate those with the greatest leakage about the policy to increase compliance. ROI tools can typically quantify process savings from $15 to $70 per transaction due to card expansion based on how efficient processes are. Visa Commercial Card Practices 58

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2005 Visa U.S.A., Inc. V13093-11-04cbp