FRASERS and Visa^®are pleased to bring you the sixth and final e-newsletter of 2007, designed to help enhance your commercial card program.  In our fifth issue, we discussed how an expanded purchasing card (P-card) program can yield more visibility in spend categories, thereby better leveraging your spend data. This issue demonstrates how your company, via a commercial card program, can control travel and entertainment (T&E) spending.

Compliance Is The Cornerstone

One of the fundamental best practices for a commercial card program is to maximize the use of the card for all eligible purchases. Increased compliance with a commercial card program reduces procurement processing costs and reduces the time and labour required to gather spending information.  Policies must be comprehensive, with the terms readily available in detail to the users. Communication from program managers must be made regularly, so that end users feel that they have been given discretion at the point of transaction. This feeling of empowerment will help increase user compliance with procurement policies.

Better Buy-in

Best practice companies strongly encourage and enforce use of commercial cards for their employees.  Consolidating travel expenses into a single payment channel improves a company’s ability to capture and analyze data for supplier negotiations and compliance reporting (e.g. tracking of spend against volume guarantees and use of preferred suppliers).

Companies use a variety of techniques to enforce commercial card use, each according to its unique corporate culture. One broadly used method is exception reporting: where users and their managers are notified by email of any non-compliant spend. This reporting can be broken down by commodity or other categories, as policy requirements dictate. Some companies report using an 'escalating' system where cardholders were initially given personal notice of non-compliant behavior. If necessary, this would be followed up at later stages by non-reimbursement of non-compliant expenses. Another idea is to institute a system of progressive, escalating, non-compliance notifications by e-mail, culminating in card suspension after a set threshold of non-compliant purchases is reached.

Compliance, especially in large enterprises, is enhanced if there are strict controls over who is issued a commercial card. This will help to later reduce the number of disciplinary actions. But the best guarantor of compliance is communication, to the users, to their supervisors, and to senior management in the organization. Business unit managers must be kept aware of how the commercial card program is helping to increase the efficiency of the T&E procurement process as well as any savings the program generates. Relevant levels of management must also be kept in the loop when opportunities for program expansion are identified, so that the organization can react as quickly as possible in pursuing potential new avenues of saving.

Smart Targeting

The control of commercial card use also involves routing spend to a company's preferred suppliers in order to take better advantage of volume discounts and to fulfill the terms of negotiated agreements. By enabling spending to be consolidated more effectively and comprehensively, a commercial card program can increase the spending volumes that are directed toward preferred suppliers.  This increases potential volume discounts and triggers further potential incentives such as special pricing and other negotiated arrangements as the volumes rise.

One company that participated in the Visa Procure-to-Pay Best Practices Study, 2004, mandates that all T&E purchases go through its enterprise resource planning (ERP) system, which is tightly integrated with the organization's T&E procurement processes. Any T&E purchase outside this system will not be reimbursed, and as the commercial card is required to make purchases within the ERP system, card use is ensured. Another company notifies its card issuer when employees find a supplier that doesn't accept its commercial card. The issuer then tries to encourage the supplier to agree to accept the card.  In the end, the company may notify the supplier directly that card acceptance will be required.

Loud and Clear

Best practice companies develop company-wide T& E policies and communicate them in ways that help maximize compliance.  The policy should be clear, easily accessible and widely disseminated.  Enhancing employees understanding and buy-in to the policy improves compliance, diminishes policy-related conflicts at point of booking and increases the benefits associated with compliance.  Leading companies ensure that T& E policies are aligned with their overall procure-to-pay objectives and are actively endorsed by senior management.

The development and distribution of a company-wide T&E or other purchasing policy has a broad range of benefits for organizations of all sizes. It will help increase compliance with preferred supplier programs, with the corresponding advantages noted above. It also gives individual employees a better understanding of what travel or purchasing restrictions are in place and why, helps keep them abreast of policy updates and changes, and puts decision-making power in their hands. A purchasing policy can reduce the administrative burden borne by the procurement function and increase buy-in at the user level.

The right approach to the process of developing a company-wide purchasing policy begins with the active engagement of employees to provide insights into how the card is used every day and where improvements need to be made. A review of current policy and data on travel spending is also required to know where the most promising improvements and changes can be implemented. Buy-in and sponsorship from senior management demonstrates corporate backing across the whole organization at all levels, helping to increase motivation and compliance. By the same token, it helps to guarantee that senior managers will themselves stay interested and committed over the long term.

Commercial card policy must be disseminated as widely as possible. The process should begin with the orientation of new hires, and continue with regular e-mail and voice-mail messages, as well as the maintenance of up-to-the-minute information on a company intranet. A user-friendly format, complete with frequently asked questions (FAQs), will prevent the program from seeming complex or intimidating to end users, and will instead draw them in, making them more likely to find their own answers to questions and giving them a sense of ownership. One company that participated in the Visa Procure-to-Pay Best Practices Study, 2004, found that communicating T&E policy changes and updates regularly has resulted in a reduction in travel costs from $13.5 million to $9 million. Communication is kept up on an ongoing basis and includes notification of successes, as well as traveler tips.

Just Say The Word

The best way to increase user compliance is through communication. Educating business unit presidents about card spending opportunities and highlighting the associated savings available to the corporation as a whole will assure nearly full compliance.  As well, mandating card use through senior management endorsement with zero tolerance for personal card use will also increase usage.

The quantity and quality of spend data that can be incorporated into spending reports through a commercial card program has the added benefit of being available to help encourage employee compliance. It enables program managers to keep accurate tabs on spending compliance, to correct 'maverick' buying habits, and to report program status and success to senior management. And internal competition, facilitated by detailed spending information, can be useful in fostering compliance when the success of one business unit is benchmarked against the success of others.

Ultimately, how companies communicate their policies and procedures depends to a great degree on their corporate culture, but the need to have documented and widely disseminated spending policies and procedures, and the need to update and review them regularly are both of utmost importance.

Visa Commercial Card Programs

Canadian businesses are continually challenged to gain control and balance of their procurement and travel & entertainment (T&E) expenses.

Visa Commercial Card Programs can help companies manage the purchasing process more efficiently to meet this challenge head-on. A commercial card program not only can help to lower costs, but can also speed up the delivery of goods and services, and free up time for more strategic business priorities.

For more information on Visa Commercial Card Programs and how they can help your business, or to contact a Visa-Issuing Financial institution, please visit www.visa.ca/largecorporate