Last editedJun 20222 min read
How does your business manage its employee expenses? From corporate credit cards to business debit cards, there are several options when it comes to giving employees access to company funds. Approximately 70% of U.S. companies use P-Cards to pay for their goods and services, making this another popular option. What is a P-Card program exactly, and how does this work in accounting? Here’s what you need to know.
What is a P-Card program?
Also known as procurement cards or purchasing cards, P-Cards are a specific type of company card. Employees can use P-Cards to purchase goods and services for the business without going through the full request and approval process. The traditional purchase order (PO) procurement process costs time and money, which makes it inconvenient for smaller purchases. A P-Card is primarily used for these smaller purchases as well as business travel expenses including flights and hotel reservations. P-Cards are shared between employees.
P-Cards vs Corporate Cards
Businesses often restrict P-Cards to a dollar threshold or for specific categories of purchases. The card balance is then paid off in full at the end of each billing cycle. By contrast, corporate cards typically come with fewer restrictions, and can be used for larger dollar amounts with the balance carrying over into the next billing cycle. In return, employees submit expense reports at the end of the month when using corporate cards.
P-Card meaning: How do P-Cards work?
Companies use P-Cards as an alternative to purchase orders and requisition forms. As a result, they offer greater flexibility to the employee.
For example, imagine that an office manager needs to purchase a new packet of pens. Using traditional procurement procedures, the manager would need to fill out a request form for supplies and submit it to the appropriate department for approval. Once approved, a purchase order would be issued, and the pens purchased for the office. This is an inefficient process, taking time and employee attention.
With a P-Card program the office manager would simply take the company card and purchase their own supplies. At the end of the month, the accounts payable department simply pays the P-Card balance.
Most businesses issue P-Cards to departments for shared use, rather than issuing them to individuals. They can input spending controls such as per-card dollar limits. Businesses can also restrict use to specific merchant category codes, such as office supplies or other essentials.
Advantages and disadvantages of P-Cards
As with any procurement method, there are pros and cons to using P-Cards.
Advantages of P-Cards include:
A quicker way to make purchases
Faster payments to company suppliers
Reduction in invoices and paperwork
Spending limits to restrict unauthorized purchases
Ability to track expenses for greater spending insight
Greater overall control over company spending
Disadvantages of P-Cards include:
Shared cards can be inefficient if employees must ask administrators for card use
Reduced visibility for real-time transactions in comparison to credit cards
Time lag between purchase and appearance in online reports
What is the P-Card meaning in accounting?
If your company relies on P-Cards, it’s a good idea to use accompanying P-Card software that integrates with your bookkeeping systems. This ensures that transaction data is automatically imported into your accounting spreadsheets, for easier P-Card reconciliation. Employees can also photograph and automatically upload their receipts. Expense tracking is an important part of business accounting, so enabling this automatic tracking can significantly streamline your AP process.
Cloud-based accounting software not only integrates with P-Cards, but also with payment providers like GoCardless for a fully joined-up workflow. GoCardless integrates with over 300 partners including accounting software like Xero and Chargebee, ensuring you can track expenses, pay vendors, and tackle invoicing all from a central platform.
We can help
GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.