What is a P-Card? (How Procurement Cards Work) (2024)

The typical procurement process has multiple steps to verify what’s being purchased and for what amount before it’s approved.

This line of defense is intended to save businesses precious dollars on unnecessary costs.

But the time it takes to complete the process could potentially cost businesses by being a drain of time and resources. Not to mention any losses that come from making a necessary purchase days, weeks, or even months after it was needed.

There’s a simpler way to protect cash reserves while giving teams the autonomy to buy what they need when they need it.

The answer: P-cards

What is a P-card?

P-cards (also called procurement cards or purchase cards) operate similarly to corporate credit cards. P-cards are given to employees to make purchases on the business’s behalf to expedite the procurement process.

Where P-cards most significantly differ from corporate credit cards is the controls available to the business.

A P-card can have spending limits, vendor limits, or restricted types of purchases. These limits act like pre-approvals of purchases—rather than reviewing every expense, the transaction will only go through if it meets the set criteria.

Controls can be set up for each card. For example, the P-card for the office manager could be set to work at office supply stores while the P-card of the marketing manager could be limited to paid ads accounts.

What are P-cards used for?

P-cards are used by businesses to allow employees to make purchases on the company’s behalf without giving them complete freedom to spend on anything.

With a corporate credit card, an employee could buy anything from any vendor without what’s being purchased being verified.

Without a corporate credit card, purchases often need to go through a lengthy procurement process.

This creates a gap of time between when the thing being purchased is needed and when it’s bought, something that’s untenable for businesses that need to move quickly.

P-cards solve both these problems.

The procurement process is expedited because the rules are set in advance and finance teams have confidence that only verified purchases are being made.

Who uses P-cards?

Any business that has a procurement process could benefit from using P-cards.

P-cards are versatile tools used by a wide array of businesses. They can be used to overhaul your procurement process or make a small, incremental change to streamline certain purchases.

In particular, if you want to expedite certain purchases and save the admin work, a P-card might be a solution for you.

Some possible P-card uses are:

• Per diems for employees while traveling
• Business meal budgets
• Office supply purchases by office managers
• Project costs for in the field workers
• Marketing budgets in a given period of time

The benefits of P-cards

Implementing P-cards in your company can help in a big way. Below are just some of the benefits that come from using P-cards.

Empowering employee purchases

The time lag of procurement could make a huge difference for a team when they need something to complete their work. P-cards empower employees to make these purchases to have what they need when they need it.

to enable their team members who are in the field every day and need to make purchases to complete projects promptly. Setting daily budgets ensures a team member doesn’t overspend while enabling them to act fast.

Beyond that, giving employees P-cards shows trust. Studies have linked trust to improved performance, employee happiness, and turnover.

Built-in spending controls

In an ideal world, a finance team and leadership have complete control over every expense that runs through a company. This is obviously impractical as their time needs to be committed to much more important tasks than reviewing every transaction.

Since P-cards have built-in spending controls that limit usage by vendor or amount, leadership gets oversight into every purchase made without having to look at every single one.

This change means less micromanaging and more focusing on the bigger picture.

Improved visibility into expenses

Many P-cards (including ours) integrate with accounting platforms to import real-time information about what’s being purchased.

Compare that to importing receipts of purchases which creates a gap in time between when something has impacted your bottom line and the understanding of how.

By setting limits on what can be purchased, transactions are easily matched to expense categories. RLJ Financial noticed their clients saved time on every transaction without any loss of information or need to dig into transaction details.

Bold Property Restoration takes it one step further by using BILL Spend & Expense to track project costs. It saves them precious time on admin tasks while creating instant visibility into the profitability of each job they take on.

P-card challenges and how to avoid them

While P-cards bring a lot of positives to the table, there are also risks that need to be understood.

Catching employee misuse

P-card controls do an excellent job of limiting usage to only approved expense types, but there are still opportunities for misusage.

For example, if a lawn care company gives P-cards to their employees for gas purchases while out in the field, the P-card could still be used to purchase gas for their personal vehicle.

This is a common risk if you allow purchases at general retailers like Amazon or Wal-Mart. The more options a store offers, the more options an employee has to buy something that isn’t approved.

Avoid this by:

• Collecting itemized receipts of purchases
• Setting stricter rules that can be relaxed for exceptions
• Only issuing P-cards to employees of a certain seniority
• Monitoring P-card usage per employee to identify irregular spending

Lost or stolen P-cards

Just as a credit card can be picked up off the ground and put to use, so too can a physical P-card.

Generally, an employee will report a P-card as missing as soon as they notice. But in the time in between, someone may have already made multiple purchases using the business’s money.

Since P-cards can only be used at approved vendors, you’re less likely to notice unusual transactions as they’re recorded.

Avoid this by:

• Issuing virtual P-cards (like those offered by BILL) that enable spending through a digital wallet or for online payments
• Having strict transaction rules to limit fraudulent spending opportunities
• Keeping physical P-cards in a centralized place when they aren’t in use

Identifying fraudulent transactions

Just like invoice fraud or credit card fraud, giving a supplier payment information opens up the possibility of them making additional charges to your account or attempting to use it elsewhere.

If they attempt to use the P-card payment information elsewhere, the controls could save you from the fraud attempt.

But if they are processing additional charges, you might not catch them until some time has passed.

While this risk isn’t unique to P-cards, it highlights how P-cards aren’t a “set it and forget it” solution.

You still need to audit purchases regularly to ensure your rules are working as intended and vendors aren’t doing anything fraudulent.

Avoid this by:

• Auditing P-card transaction histories for repeat transactions or unverified purchases
• Using two-way matching or three-way matching when paying invoices with P-cards
• Reviewing the set rules and controls to see if they’re accomplishing what you set out to do

P-cards that do more than purchase

Thinking about adding P-cards to your business? Look for an option that does more than just purchase.

With , you get access to P-cards with credit limits of up to $5 million, limitless virtual cards, fraud protection, and automated expense management software.

That means getting all the control of a P-card in a simplified and powerful package and upgrading your expense management and reporting with one easy change. Get started with a demo.