EXPANDING THE USE OF PURCHASING CARDS
The Government has approved the use of a
purchasing card in its purchasing processes.
The purchasing card is intended to provide an
efficient and convenient alternate method for
the purchase of high volume, low value
consumable goods and services, and for the
payment of work related travel and
accommodation expenses.
The Purchasing Card Growth Project has been
established to provide assistance to Public
Authorities to achieve increased savings
through the expanded use of the purchasing
card. Savings, in this case, are measured by
reduced administrative effort in terms of
purchase-to-pay cycle, from placing an order
to paying the supplier, and direct purchasing
dollar savings.
Purchasing Cards provide a real opportunity to
maximise savings through the elimination of
requisitions and approvals, and reduction of
process costs, allowing purchasing officers
(cardholders) to deal directly with suppliers,
using pre-determined spending limits and
consolidating invoices. When purchasing with
a purchasing card is not made in-person,
delivery of items can usually occur within a
couple of days.
Research has shown that the implementation
of an Expense Management System to support
the use of purchasing cards provides increased
transparency
of
purchasing,
increased
opportunity for spend analysis and reporting,
and increased budget compliance.
As with any reengineering of business processes,
the policies, guidelines and procedures
underpinning purchasing processes within each
Department or Public Authority will need to be
examined and amended as appropriate.
OPPORTUNITIES
According to international benchmarks, the
average savings achievable from use of a
purchasing card over traditional Purchase-toPay processes is approximately $19 to $52 per
invoice. Also, historically 90% of Government
invoices processed are valued under $5,000.
Using this information as the basis for a simple
analysis would indicate there are opportunities
for Public Authorities to realise significant
savings.
EXPENSES FOR GOODS & SERVICES
Purchasing Cards provide a real opportunity to
maximise savings through the elimination of
requisitions and approvals, and reduction of
process costs, allowing purchasing officers
(cardholders) to deal directly with suppliers,
using pre-determined spending limits and
consolidating invoices.
TRAVEL RELATED EXPENSES
Travel and related expenditure is one area of
focus identified to provide the opportunity to
realise increased savings through the use of the
purchasing card.
This is also a preferred
process for the payment of travel and related
expenses within the Office of Shared Services.
Introduction to WA Government Purchasing Cards
The Government has approved the use of a
Purchasing Card in its purchasing processes.
The Purchasing Card is intended to provide an
efficient and convenient alternate method for
the purchase of high volume, low value
consumable goods and services, and for the
payment of work related travel and
accommodation expenses.
The Purchasing Card Growth Project has been
established to provide assistance to Public
Authorities to achieve increased savings through
the expanded use of the Purchasing Card.
How do Purchasing Cards provide you
with cost savings?
Purchasing Cards provide a real opportunity to
maximise savings through the elimination of
requisitions and approvals, and reduction of
process costs, allowing purchasing officers
(cardholders) to deal directly with suppliers,
using pre-determined spending limits and
consolidating invoices. When purchasing with a
Purchasing Card is not made in-person, delivery
of items can usually occur within a couple of
days.
The provision of a purchasing card to staff for
general expenditure signals to staff that they
are highly valued and trusted in the use of the
purchasing card for this purpose. The benefits
to each Department from empowering staff can
also be considerable.
Research has shown that the implementation of
an Expense Management System to support the
use of Purchasing Cards provides increased
transparency
of
purchasing,
increased
opportunity for spend analysis and reporting,
and increased budget compliance.
Why are the security
Purchasing Cards?
benefits
of
As the Purchasing Card is issued to an
individual, every transaction can be tracked to
that individual. Where spend exceeds normal
limits (rogue behaviour), this can be easily
identified
and
actioned
accordingly
in
significantly less time compared traditional
methods of payment.
With purchase orders and direct invoices, it is
often difficult to identify the person who
authorised the transaction in the first instance.
Often the only people associated with the
transaction are the accounts processing staff.
Why travel is perfect for Purchasing
Cards
Travel and related expenditure is one area of
focus identified to provide the opportunity to
realise increased savings through the use of the
purchasing card.
This is also a preferred
process for the payment of travel and related
expenses within the Office of Shared Services.
Contact
If you require any further information regarding
Purchasing Cards, please contact:
Nivia Pryor-Wright
Contract Manager
Department of Treasury and Finance
Tel: (08) 9222 5538
Management Controls
A common fear, is that issuing purchasing cards
increases exposure to risk, and reduces controls
over spend.
Whilst discussions indicate a
perception of risk of misuse / abuse with using a
purchasing card as compared to a formal purchase
order, there is in fact increased key management
controls associated with the purchasing card use.
This is due to the increased transparency of
purchasing card transactions.
Although some
controls available through purchase orders are
eliminated, purchasing cards have other
compensating controls.
Controls associated with Purchasing
Cards:
•
•
•
•
Monthly limits on purchases (Attempts to
exceed the established limit results in
purchases being automatically declined at
the vendor, prior to completion of
purchase).
Card Administrators monitor card program
and can provide assistance, advice or
training to cardholders.
Managers can receive, monitor and review
statements of account to make sure
purchases are legitimate and within
delegated authority levels.
The purchasing card has a formal dispute
resolution process established.
Additional Controls associated with use
of an Expense Management System:
•
•
•
•
Single purchase value guidelines,
determined prior to issue of card,
monitored through EMS
Transactions are available to scrutiny the
next day.
High-risk purchases can raise alerts or
result in notification being sent to
managers.
Notification of purchases over preset
approval limits or purchase type can be
•
•
automatically sent to managers for
approval.
Reports can be easily generated providing
a variety of management information and
be customised to the specific needs of
management levels.
Cardholders can reconcile invoices daily
or weekly.
Controls lost by not using formal
purchase orders:
•
•
•
Formal hard-copy documentation
Multiple approval levels
Centralised control over purchasing
decisions
Public
Authorities
should
ensure
that
appropriate policies and procedures are
established to provide management with
reasonable assurance that key management
controls will provide sufficient control against
the possible occurrence of fraud, waste and
abuse.
There is little evidence to prove that rogue
spending (business related purchases that
exceed normal purchasing rules) is more
prevalent on purchasing cards than for other
payment methods. This is particularly the case
where expense management systems are used in
conjunction with the purchasing card.
The benefit a purchasing card does provide is
that as the card is issued to an individual, every
transaction against a card can be tracked to
that individual. Where spend exceeds normal
limits (rogue behaviour), this can be easily
identified and actioned accordingly. With
purchase orders and direct invoices, it is often
difficult to identify the person who authorised
the transaction in the first instance. Often the
only people associated with the transaction are
the accounts processing staff.
Increased Management Controls
A common fear of government and corporations,
is that issuing cards increases their exposure to
risk, and reduces their controls over spend.
Whilst discussions indicate a perception of risk
of misuse / abuse with using a purchasing card
as compared to a formal purchase order, there
is in fact increased key management controls
associated with the purchasing card use. This is
due to the increased transparency of purchasing
card transactions.
Although some controls available through
purchase orders are eliminated, purchasing
cards have other compensating controls.
Controls lost by not using formal
purchase orders
•
•
•
Formal hard-copy documentation
Multiple approval levels
Centralised control over purchasing
decisions
Controls associated with Purchasing
Cards
•
•
•
•
Monthly limits on purchases (Attempts to
exceed the established limit results in
purchases being automatically declined
at the vendor, prior to completion of
purchase).
Card Administrators monitor card
program and can provide assistance,
advice or training to cardholders.
Managers can receive, monitor and
review statements of account to make
sure purchases are legitimate and within
delegated authority levels.
The purchasing card has a formal dispute
resolution process established.
Additional Controls associated with use
of an Expense Management System
•
•
•
•
•
•
Single purchase value guidelines,
determined prior to issue of card,
monitored through EMS
Transactions are available to scrutiny the
next day.
High-risk purchases can raise alerts or
result in notification being sent to
managers.
Notification of purchases over preset
approval limits or purchase type can be
automatically sent to managers for
approval.
Reports can be easily generated providing
a variety of management information and
be customised to the specific needs of
management levels.
Cardholders can reconcile invoices daily
or weekly.
How to support Purchasing Cards
Appropriate policies, procedures and guidelines
should be established to provide management
with
reasonable
assurance
that
key
management controls will provide sufficient
control against the possible occurrence of
fraud, waste and abuse.
There is little evidence to prove that rogue
spending (business related purchases that
exceed normal purchasing rules) is more
prevalent on corporate cards than for other
payment methods. This is particularly the case
where expense management systems are used in
conjunction with the Purchasing Card.
For assistance with policies, procedures and
guidelines please refer to the contact details on
the reverse.
Benefits
The Government Purchasing Card saves time and money by reducing the need for
requisitions, approvals, purchase orders, invoices and cheques, giving staff time to focus
on more value-added activities. WA Government Purchasing Cards don’t attract card
fees or interest payments and offer a simplified cost-effective purchasing process.
Purchasing Cards:
• Are free, simple to introduce and operate;
• Have been created as a result of a rigorous State Supply Commission compliant
procurement process;
• Replace inefficient and outdated manual systems with option of implementing a
streamlined electronic process (additional Expense Management System);
• Greatly reduce administration time and the cost of processing invoices and orders;
• Eliminate the potential for manual keying cost centre errors (automated coding for
selection using Expense Management System);
• Protect the environment by reducing the use of paper;
• Generate invaluable management information about individual procurement activity and
purchasing patterns (optional EMS);
• Promote financial transparency and accountability;
• Provide protection for purchaser and supplier; (not carrying cash, insurance against
fraudulent use, fraud detection and control, guaranteed payment)
• Empower employees, giving them responsibility and authority to commit government to
purchases;
• Make an important contribution to a range of Government policies aimed at increasing
efficiency, modernisation, and sustainability;
• Ensure rapid payment to suppliers promoting enhanced relationships and improved
performance;
• Utilise the vast Visa network of merchants and support systems; and
• Are fully endorsed by the Department of Treasury and Finance, and the Office of the
Auditor General.
Inhibitors vs. Enabling Propositions
Identified inhibitors to the expanded use of Purchasing Cards include:
•
Lack of trust exhibited in staff to make appropriate purchasing decisions, demonstrated by the
reluctance to issue cards and delegate purchasing authority to staff.
•
Current cardholders being mainly senior staff.
•
Autonomy of purchasing decision-making being restricted by and to managers.
•
Managers’ concerns relating to exposure resulting from misuse of purchasing cards and
fraudulent activity.
•
The majority of administrative staff undertaking purchasing not being issued with purchasing
cards. If required, they ‘borrow’ a purchasing card from another cardholder. (This is a breach of
the NAB terms and conditions of card use).
•
Fear of misperception of legitimate expenditure levels by ‘management’, restricting use of
purchasing cards by staff. Worried about the end of month report showing large $ spend.
•
Lack of knowledge of appropriate use of purchasing cards by some administration staff limiting
use of purchasing card.
•
Lack of knowledge of opportunity to use cards when purchasing by administration staff.
•
Current purchase-to-pay processes habitual, resulting in the use of the Purchasing Card not
being the first option for low value purchasing.
•
Staff may only require access to a Purchasing Card on a few occasions throughout the year, so
issuance of a card not seen as necessary or required, or staff do not see a need to be issued with
a card.
•
Ordering systems not conducive to use of cards for payment at time of confirmation of order
(i.e. GEM).
•
Perception of increased time required reconciling statements at the end of the month.
•
Worry over misplacement of supporting documentation.
•
Preference for use of Petty Cash and travel allowances.
•
Financial Policies and procedures unclear and outdated.
PLEASE TURN OVER FOR ACTIONS THAT WILL OVERCOME THE ABOVE INHIBITORS
Inhibitors vs. Enabling Propositions
Actions enabling the support and expansion of the use of Purchasing Cards include:
•
Issue cards to all staff undertaking travel during the year. If managers are hesitant to issue a
card full time, cards can be held centrally and signed out for the periods required.
•
Identify and issue cards to those staff undertaking regular purchasing of goods and services
regardless of role level. Card limits and monitoring of statements will reduce non-compliance.
•
Run a regular series of short sessions with groups of administrative staff involved in purchasing
to highlight opportunities to use card appropriately and provide support and encouragement in
the use of the card.
•
Work with procurement staff to identify opportunities for using the Purchasing Card for
purchasing through Common Use Arrangements.
•
Provide simple template to assist in the end of month reconciliation of the card statement and
sign off by manager.
•
Raise awareness of card use opportunities with ‘Tip of the Month’ inclusion on the Intranet.
•
Seek Managers’ agreement to raise Purchasing Card use at Team Meetings, promoting their
support for the expanded use of the card.
•
Seek Managers’ support to mandate the use of Purchasing Card for specific purchasing or for
specific $ range. i.e. Travel, Catering, Venue hire, stationery, or any purchase under $500.
•
Issue cards to regular users of Petty Cash.
•
Work with systems area to identify opportunities and methods for using Purchasing Card through
online purchasing systems.
Guide for Chief Finance Officers to Expand Use
Action
Revise policies to support the increased use of
purchasing card
What you need to do
•
•
•
•
Be mindful of purchasing card targets set by the
Treasurer
•
•
•
Consider an Expense Management System to assist
in the management of purchasing cards
•
•
Encourage Line Managers to issue purchasing cards
for their staff making low value transactions
•
Identify any areas where the policies do not
support the use of the purchasing card.
Policies should be used to limit the exposure to
potential risk, whilst remaining flexible enough
to make the use of the card easy and
desirable.
Review and update policies where necessary to
ensure best practice
Ensure policies are accessible.
Analyse purchasing behaviour in order to
achieve targets for purchases under $5000 to
be made on the purchasing card:
Identify high volume, low value transactions
that cardholders are not, yet should be using
the purchasing card for.
How does your agency plan to gather the data
to report against the targets?
Discuss with DTF the possibility of participating
in the implementation of the NAB Expense
Management System
Implementation of an Expense Management
System to support the use of purchasing cards
provides:
o Transparency of purchasing
o Increased opportunity for spend analysis
o Increased opportunity for reporting
o Increased budget compliance
Communicate with Line Managers that
efficiencies and cost savings can be achieved
through using purchasing cards
Guide for Managers to Expand Use
Action
Increase the number of cards
What you need to do
•
•
•
Increase expenditure limits on the cards
•
•
•
Review current transactions in order to identify
new cardholders
Review supplier relationships in order to maximize
the benefit of the purchasing card
Transactions under $5,000 should be encouraged to
be made on the purchasing card
Review expenditure by those making frequent low
cost purchases and increase limit to make best use
of the card.
Individual card limits should ideally be set to suit
buying patterns of staff.
•
Identify staff making high volume, low cost
transactions by purchase order or other paper
based methods, and consider issuing them with a
purchasing card.
•
Provide reminders to cardholders that suppliers are
encouraged to accept payment by purchasing card
under their CUA.
Encourage cardholders to raise discussion about the
usage of purchasing cards with suppliers
Check with CUA Contract Manager if merchant fees
are required to be waived by the supplier. This will
negate any surcharges associated with using
purchasing cards.
•
•
Ensure training for cardholders
Identify those people responsible for undertaking
purchasing, high petty cash users, and travelers to
ensure they are issued cards.
Purchasing cards should not be ‘borrowed out’ to
other staff therefore ensure necessary staff have
been issued with purchasing cards.
Purchasing Cards do not incur setup or ongoing fees
therefore deployment should be for all staff making
purchasing, however infrequent.
•
•
•
Organise training sessions so that cardholders are
comfortable using purchasing cards
Make training material available on the intranet
Administrators will be experienced with the
electronic statements/EMS, therefore ensure that
their knowledge is available to other staff
Guide for Cardholders to Expand Use
Action
How do I get a purchasing card?
What you need to do
•
•
Examine all purchasing to identify which
transactions the purchasing card is applicable for
Identify suppliers who will accept payment by
purchasing card
Let suppliers know that you prefer to pay by
purchasing card
Use the card to pay and gain savings for prompt
payment
•
•
•
•
Review the value of transactions and the total
monthly spend
Dms6585233
Transactions under $5000 are encouraged to be
made on the purchasing card
Read through your agency’s policies around the use
of purchasing cards and use as the preferential
method pf payment where applicable
Identify a list of suppliers who accept payment on
purchasing cards.
Use the purchasing card when making purchases
with these suppliers.
•
The transactional efficiencies available from using
purchasing cards can benefit suppliers as well as
public authorities.
o The most significant for the supplier is that
payment is guaranteed to occur within 48 hours.
•
Suppliers may be prepared to give better terms and
discounts for prompt payment, above and beyond
any charge they incur for accepting purchasing card
payments.
Work with your suppliers to gain better price
savings or better service terms.
•
Review all transactions to identify other purchases
the card can be made for
If you undertake travel or regular purchasing
activities in your role, you should talk with your
manager about being issued with a purchasing card
for these activities.
Your manager can contact the agency card
Administrator, for the appropriate application
forms.
•
All transactions under $5000 should be reviewed in
order to determine if the purchasing card is a
suitable method of payment
•
It may be necessary to request the limit of your
card be increased to ensure all suitable
transactions are made on the purchasing card
Transaction limits and monthly limits can be set
therefore ensure you have the scope to make all
necessary purchases.
•