A Publication of Diamond Mind

Purchase CardsA Beginner’s Guide

Implementing a Powerful Purchase Card Program

TABLE OF CONTENTS

1. What is a Purchase Card?

2. Purchase Card Benefits

3. Planning and Policy Development

4. Controlling Cards and Limits

5. Eliminating Paperwork

6. Reporting and Transferring Data

7. Expanding the Program

8. Purchase Card Program Timeline

Appendix A: Commonly Used Terms

Purchase Cards:A Beginner’s Guide

Writing checks, reimbursing teachers, managing petty cash, all of these tasks have one thing in common, time. Checks and other cash have to be manually reconciled, asking teachers to submit reimbursement forms and then completing them take forever, and it’s not always secure to have petty cash around. Technology is constantly changing in our classrooms and it’s time that your back office solutions does as well. One particular solution that was designed specifically for organizations like independent schools is a purchase card program.

What To Expect From This GuideOnce you have read this guide, you’ll understand the seven elements of a powerful purchase card program. From planning the program, empowering employees, controlling limits, reducing your workload, transferring data into your current accounting systems, expanding the program, and understanding how to maximize all of your benefits, at completion your school will be able to successfully implement a program of your own. What You Will Learn

• How to successfully develop a purchase card program• The differences between personal cards, small business cards,

and purchase cards• How your school can benefit from implementing purchase

cards

CHAPTER ONE

What is a Purchase Card?

A purchase card, often referred to as a P Card, is a type of payment card that is paid off each month. This allows an administrator to limit the spending of each individual cardholder. Purchase cards differ from ordinary personal or corporate credit cards in that there is an expansive system to monitor and control spending, and categorize and manage spending by creating group presets on different cards for different people.

Purchase cards were originally designed for use in a business-to-business (B2B) setting to accommodate multiple cardholders; however, schools have adopted them for the same reason. By replacing the multi-step procurement process of requisition, purchase order, invoice and final payment with a single swipe of a card, purchase cards can save your school between 55 and 80 percent of traditional processing costs, and shave around nine days off the average procurement cycle time of 12 days.1 Purchase cardholders also typically save $74 per transaction, a tremendous business efficiency when making multiple, low-value transactions in particular.

1 Professional Association for the Commercial Card and Payment Industry Report.

What is a Purchase Card?

Purchase cards offer cost controls, reduce administrative time and encourage cost reductions. The following factors make purchase cards ideal for independent schools: Spending ControlsWith spending controls, you can request as many cards as you like and set spending limits and restrict purchases to specific categories on each card. Fast-track ReconciliationsBy increasing the use of a single campus-wide account, reconciliation and auditing can be automated and streamlined. One-stop Data AccessPurchase card statements provide detail equivalent to that of an invoice. As purchase card use increases across your campus, the statement will provide an increasingly comprehensive view of monthly spending.

Purchase Card Features

Quick and Easy PurchasesBy empowering staff to make purchases directly with their purchase card, supplies arrive more quickly and no one needs to wait to be reimbursed.

Cost SavingsMost programs have no annual fee and offer cash or point rebates. By streamlining the procurement process, schools can secure typical savings of $74 per transaction. By combining the purchasing power of all of your departments, schools might be able to convince vendors to offer a price reduction.

No Personal LiabilityWith a purchase card, the school assumes liability for the payment of any cards issued to school employees. This eases the burden on your employees and encourages them to use their cards. In summary, a purchase card program is an ideal solution for independent schools since it allows them to control cost, reduce administrative time and encourage staff to be mindful of spending.

Purchase Card Benefits

Auction Room, Christie's (1808): Use this space to provide credit to the original photo or graphic creator

Section wrap-up•Purchase cards are great for schools that require 10 or more cardholders•Online solutions make controlling the cards better•There is no personal liability, where as standard cards do

Chapter 1

Wrap up

CHAPTER TWO

Purchase Card

Benefits

Each Purchase Card Program is different and specific to the school who puts it in place, but there are many common benefits that each of them share. From controlled spending limits to unlimited cash rebates, purchase card programs save your school time and money. Right from the start, purchase cards have several benefits that make it easier for a school to start a program. Purchase Cards, like any corporate card, require some form of guarantee to ensure that a school can pay the balance each month. Unlike a small business or personal card, they don’t require a personal guarantee. This takes the financial hindrance off of any one person, and instead is based on the schools financial status. Further, because independent schools are in a stable market, their spending limits can be quite flexible.

Rewards and Guarantees

In addition to flexible spending, purchase cards come with solutions for managing group presets, viewing invoices, and controlling where the cards can be used. One of the primary benefits comes as a result of all three of these, which is time saved. By reducing the reconciliation process, cutting out most reimbursements, and being able to control who can spend what and where, on average a school will shave nine days off the usual 12 day procurement cycle. If a school is already using personal credit cards, having to reimburse teachers, and then track everything separately, a purchase card program can quickly cut that process down to a card swipe because most vendors accept them. From paying for fuel during a field trip, computer equipment for classrooms, to legal and accounting services, purchase cards can already be used with vendors you work with. Further, there are plenty of uncommon places that also accept purchase cards, such as: wig and toupee shops for theater classes, towing services for school vehicles, and even at an arcade. Unlike personal or small business credit cards, purchase card programs are designed to have 10 or more cards, have unlimited cash back options, they don’t accrue interest, and depending on the program the cards can be free.

Expandability and Control

Auction Room, Christie's (1808): Use this space to provide credit to the original photo or graphic creator

Section wrap-up•Purchase card programs save schools time and money•Reconciliation process greatly improved•Most vendors already accept purchase cards

Chapter 2

Wrap up

CHAPTER THREE

Planning and Policy

Development

Implementing a purchase card program is an easy task; however, developing a successful program that saves time requires some planning. There are two major parts that go into a purchase card program plan: policy development and roles and responsibilities.

Roles and Responsibilities

The majority of people involved in the purchase card program with be regular users that adhere to a policy, but there are a few key people that are also involved who have additional responsibilities. The names can vary from program to program, but in general someone fulfills the responsibilities related to each role. Each person within the program plays a vital role, and for those still trying to persuade others, it’s important to know who will play what. When persuading other stakeholders and employees, use the benefits listed in the previous chapter that apply to them. Once the program is up and running, be sure to continue to communicate any success stories.

Other optional roles may include purchase card coordinators, cardholder supervisors, and program analysts. Beyond the internal team, the purchase card program provider, such as Diamond Mind, often has resources and support available for the Web based management systems.

Roles and Responsibilities

Program AdministratorThe administrator is the primary point of contact for reviewing purchases either at the department level or group level. They interact as coordinators with the program manager. Administrators manage spending limits, where the cards can be used, and track invoices. When persuading a potential program administrator of the benefits of a purchase card program, focus on the time saved and almost entirely eliminating reimbursement requests.

Accounts PayableAccounts payable is the financial manager of the purchase card program. They receive signed and approved cardholder statements, original receipts, and related documentation. They also ensure that payments are made in full each month, and handle disputes. Some programs also allow the finance manager to transfer all related information into formats that are accepted by their current accounting system, which will save them time and resources.

Roles and Responsibilities

Program ManagerThe program manager is the primary point of contact for the program. They manage the administrators, send reminders for monthly invoice review, and can issue additional cards. A program manager will also benefit from a purchase card program because it saves them time.

CardholdersCardholders can range from teachers to IT managers, and everyone in between. Cardholders are the ones who can make purchases for their group, class, or department, but are often not major purchases that would need approval. Cardholders, especially teachers, will not have to worry about spending their own money for school related activities, which is a huge benefit to them. Cardholders neither owe a balance nor makes payments. Suppliers and VendorsSuppliers and vendors are the businesses that a school will purchase a product or service from. Many vendors already accept purchase cards, just like any other corporate card, but at times an agreement may need to be made in advance to ensure they do. Some purchase programs also require the vendor to be PCI compliant.

Roles and Responsibilities

Perhaps one of the more tedious, yet important tasks involved with a purchase card program is the development of a policy. Developing a strong policy sets a foundation for success. The policy also acts as a guide for communication, sets rules and regulations, and allows other stakeholders to know what role they play.

Once the policy has been established, it’s also important to establish the overall credit limit. This is often done with the purchase card program supplier, such as Diamond Mind. To establish a credit limit designed for a program with the flexibility to expand, estimate your highest spend in a given period while considering major purchases and calendar year changes, and double that number.

Policy Development

There are numerous fields that go into a policy, but some of the more common ones are as follows:

–Overview (including brief procedures manual and guidelines)–Card holder responsibilities–Roles and responsibilities sections, broken down by user type–Getting started guide–List of card types available and their uses–Card eligibility list and requirements–Training requirements–Card controls and functions–Transaction types available–Reconciliation and processing information–Maintenance and security best practices–Travel card information–Special contact information for program managers and administrators

For a closer look at what should be in your Purchase Card Program Policy, see our cheat sheet: http://bit.ly/pcardcheatsheet

Policy Development

Auction Room, Christie's (1808): Use this space to provide credit to the original photo or graphic creator

Section wrap-up•Understand the roles and responsibilities each person plays•Each stakeholder will have different benefits that appeal to them•Policy development is incredibly important, and changes as the program grows

Chapter 3

Wrap up

CHAPTER FOUR

Controlling Cards and Setting Limits

Unlike standard corporate cards, purchase cards are designed for schools and organizations that have many internal cardholders. Because each cardholder has different needs and budgets, it’s necessary to have an in-house administrator who can manage spending limits, which vendors can be used, and what they can be used on. With a purchase card, teachers might not need thousands of dollars, where as an IT department would. By controlling limits on purchase cards, each department will stay within budget and overall paperwork is reduced. With a policy in place, your school will have stakeholders who each play a vital role in the use of purchase cards. While cardholders are responsible for knowing how much they can charge, administrators and managers set limits, can view reports and approve charges, and have access to more detailed information than standard invoices. Though some of these features are available for standard credit cards, there are quite a few differences.

Card Control | Stakeholders

Unlike a personal or small business card, purchase cards allow schools to set up their own controls and policies. Where standard cards require the school to speak to the bank about extending credit lines, the school purchase card manager or administrator will be able to handle all of that in-house, using simple Web based solutions available from the program provider. Each standard credit card has it’s own set of rates, rewards, and balance requirements; however, purchase card programs are simplified. The simplicity also results in an easier reconciliation process, not having to worry about balances carried forward since they are paid in full each month, and there is no interest because there is no balance. Further, rather than worrying about a third-party reward provider or capped cash back, purchase card rewards offer unlimited cash back at a rate that the provider negotiates on your behalf, and the more schools in the program the greater potential benefit.

Comparing Card Types

Does your maintenance and grounds keeper have the same budget as the coach for your basketball team? Not likely. Rather than having to go through the bank each time or worrying about reimbursing faculty and teachers, purchase programs allow the school to decide what vendors they can use, how much they can spend, and approve expenses all in the same place. As an administrator or manager, it’s important to align credit limits with organizational needs and vary them based on group presets. However, depending on available resources, some responsibilities can be delegated. Rather than having the program manager approve each purchase, a department head can be appointed as an administrator for their group. This simplifies the process so that departments can take greater ownership of their spending, and the program manager can approve things at a high level. Regardless of the process, the program provider’s Web management system will provide access to real-time and daily reporting of all purchases. Finally, purchase cards can be used on foreign transactions, but are disabled by default. If a specific department has to make foreign purchases, administrators and the manager can grant them access.

Presets and Cardholder Types

Ghost CardsThere are never enough supplies at school, but for each teacher that makes an order, there is another receipt and purchase order to track. Rather than making individual payments, the school can create a ghost card for the supplies vendor. This makes it easier for the school to track one lump purchase, rather than many smaller purchases. Further, administrators or managers have to approve all the orders before the actual transaction is made, which reduces any rogue spending.

Detailed Data (Level III Data)When going to any retail store, you get an itemized receipt that lists each item, the sales tax, and some information about the store and card used; however, when you look at the statement online, it only lists the amount paid and the vendor name. With purchase cards, vendors have the ability to add level III data, which means rather than just single dollar amounts, an administrator can see an itemized list of what was involved in the purchase. Level III data can consist of various details also found in level II data, but more specifically also includes a list of every item in the purchase order. Level II data adds purchase numbers, customer numbers, extra descriptions, and additional details. This is particularly important for ensuring that the cards are not misused, there were no accidental double purchases, and even for identifying possible fraud.

Ghost Cards | Detailed Data

Perhaps one of the more tedious, yet important tasks involved with a purchase card program is the development of a policy. Developing a strong policy sets a foundation for success. The policy also acts as a guide for communication, sets rules and regulations, and allows other stakeholders to know what role they play.

Once the policy has been established, it’s also important to establish the overall credit limit. This is often done with the purchase card program supplier, such as Diamond Mind. To establish a credit limit designed for a program with the flexibility to expand, estimate your highest spend in a given period while considering major purchases and calendar year changes, and double that number.

Policy Development

Auction Room, Christie's (1808): Use this space to provide credit to the original photo or graphic creator

Section wrap-up•There are several differences between standard cards and purchase cards•Presets or cardholder groups make controlling spending limits easy•Level III data is available, and provides greater details

Chapter 4

Wrap up

CHAPTER FIVE

Eliminating Paperwork and Saving

Time

Reconciliation is not always the most straightforward process, but add in a few dozen receipts from different departments and teachers and you have a nightmare. Everything is done online or on computers now, and that should include all of your reporting and invoicing for school related purchases. Some programs also allow receipts to be uploaded into the system. By using a purchase card program, schools simplify expense tracking, reporting, and the approval process. With so many different methods for reconciliation, having a system in place that can support varied processes is important. For schools that use a multi-tiered approval process, the online controls and management system for a purchase card program are perfect. Administrators can approve purchases for their department, grade, or other group preset, and the program manager can provide final approval at a high level. Though not every school requires this approach, that’s twice the amount of paperwork saved as a result of an online process.

Lastly, if a school works with independent contractors or outside vendors, payments also required an accompanying 1099 form. Unlike other corporate cards, when using a purchase card to make a payment, the responsibility of providing a 1099 form is transferred to the banks and processors of the business who accepts it. Time saved, paperwork reduced.

Save Time | Reduce Paperwork

Auction Room, Christie's (1808): Use this space to provide credit to the original photo or graphic creator

Section wrap-up•Reducing paper work saves your school time•Web based controls and solutions make information more accessible•During audit season, data will already be in one place

Chapter 5

Wrap up

CHAPTER SIX

Reporting and Transferring

Data

Accounting and invoicing can often be a time consuming task, especially when a school has numerous departments and dozens of people making purchases at the same time. For schools that have reimbursement programs and accepts paper receipts in place, the average procurement cycle lasts an around 12 days. However, with the addition of a purchase card program, schools on average can reduce the cycle by nine days. This is all due the simplicity that comes from managing everything in one place, and the ability to transfer all the data to the school’s preferred accounting system. Each purchase card program provider has their own solution for managing and approving expenses, but each simplify the process from that of paper-based purchase orders. One of the benefits of a purchase card program is that transactions can have pre-assigned codes to improve the reporting process.

Reduce Procurement Cycles

These can either be auto-assigned or manually added one-by-one, and rather than adding a choke point to the process, the task can be delegated to administrators. Depending on the solution provided, the school should be able to export the data into a format that already works with their current accounting solution. When it comes to the dreaded audit season, a business officer will already be ahead of the game because each purchase will be in their system. Each purchase order will also have an accompanying set of transaction details will that will be listed along with level III data. Level III data contains all pertinent information that a business officer may need for reporting purposes.

Getting Organized

Auction Room, Christie's (1808): Use this space to provide credit to the original photo or graphic creator

Section wrap-up•Reporting allows managers and admins to review all purchases•Rogue spending reduces greatly due to transparency•Current accounting system will be compatible with the data

Chapter 6

Wrap up

CHAPTER SEVEN

Expanding the

Purchase Card

Program

Once a purchase card program has been put in place, it’s important to frequently reassess card limits, program guidelines, and other ways the school can benefit from it. Initially a program may start small, and cardholders may be selected to make purchases on behalf of entire departments or complimentary to current solutions; however, as the program expands, it can also be established as the default payment option. The first step in expanding the program is to empower employees. Empower EmployeesAs the purchase card program becomes more useful, consider issuing individual cards to everyone that needs to make purchases or incurs expenses. With the right guidelines and approval processes in place, a choke point can be prevented and administrators can focus more on the approval process rather than making purchases. Training can also be put in place so that each cardholder can track and manage their expenses from the online portal. In the long run, expanding the program also makes reporting easier, because each payment made will be tracked back to an individual. For larger, group based purchases like new office computers, a department card can be established.

Expanding the Program

The following tips will help your school successfully expand a purchase card program:

– Make it the default payment option

– Run a match of your vendors against acceptor services provided by card associations

– Target low-use areas such as telecommunications, transportation, media, and advertising expenses

– Encourage vendor acceptance

– Remind employees regularly of advantages (potential), rebate and convenience

– Spot new opportunities: regularly review check runs to identify potential purchases that could be paid more effectively with the purchasing card

Expansion Tips

Auction Room, Christie's (1808): Use this space to provide credit to the original photo or graphic creator

Section wrap-up•Communicate benefits to cardholder types for expansion•Have policies and documents in place to ease understanding•Encourage frequently used vendors to accept purchase cards

Chapter 7

Wrap up

CHAPTER EIGHT

The Purchase Card

Program Timeline

With a foundation and documentation now present, it’s time to take a look at one possible implementation scenario that a school may pursue. This was previously put in place by an independent school who successfully implemented a program over a year, and broke it down into four phases: planning, initial rollout, pilot program with select staff, and concluded with a broad rollout. After the program was made widely available, the process was formalized and support was adjusted as needed. This particular program was established using Diamond Mind’s Purchase Card offering, which means the cards and program are free. This resulted in the school being able to easily expand as the need for the cards increased.

A Successful Example

Phase 1: Planning (Q1)– Policy and guidelines established– Training provided for controller and manager– Current credit card limits analyzed and adjusted– Identify what needs to be customized to the school

Phase 2: Initial Rollout (Q2)– Program customized to their needs– Data formatted so that it could be transferred to current

accounting system– Training program established based on stakeholders and

cardholder types– Sample cardholder policy documents customized– Communication established for notifications and related

processes

Planning | Initial Rollout

Phase 3: Pilot Program (Q3)– Training provided to a few tech savvy staff members and

solicited feedback based on proposed program– Newsletter established with purchase card best practices– New program announcements made as purchase card use

increases– Best practices webinar made available through program

provider

Phase 4: Broad Rollout (Q4)– Group training on the system, approval process, and

reporting implemented– Communication on expected responsibilities and

expectations begins

Continued Support and Program Expansions– Annual surveys distributed to ensure program remains

successful– Best practices improved as the program expands– Establish a purchase card user guide and related

documentation

For an example of policies, agreements, and forms, see our Purchase Card user guide http://diamondmindinc.com/WDS/wdspcard.html

Pilot | Broad Rollout | Expand

Auction Room, Christie's (1808): Use this space to provide credit to the original photo or graphic creator

Section wrap-up•There are four phases to a successful purchase card program•Start with a pilot program and ask for feedback•Once fully rolled out, frequently make changes as needed

Chapter 8

Wrap up

Appendix A

Common Purchase Card Terms

and definitions

• Payment Card: Any plastic card including a debit, credit, charge, business or purchase card.

• Debit card: A payment card that pays funds directly from a checking account.

• Credit Card: A payment card that allows a consumer or small business to carry a balance forward.

• Ghost Card: Rather than using a physical card, users will be given a ghost card number.

• Charge Card: A payment card that must be paid off each month.

• Business Card: A payment card issued to a small business with few controls that generally requires a personal guarantee of the business owner.

• Purchase card: A charge card for large businesses that allows for controls over several separate purchasers.

Commonly Used Terms

Finding the Right Provider

When looking for a purchase card provider, there are many factors that should go into your decision. There are many solutions that are designed for businesses, but as a school, you should choose a provider who has programs designed specifically for your needs.

Call (888) 566-0945 ext 987

When looking for a provider, look for the following features and benefits:

• Free or low cost to setup• No annual fees or costs for each card• Insurance or extended warranties as purchase

protections• Zero liability fraud protection• Payment schedule• Sophisticated online management solution• Saves your school time and money

Each of these benefits and more are included as part of Diamond Mind’s Purchase Card offering. Interested in learning more about implementing a purchase card program at your school? Speak with a Diamond Mind subject matter expert today!