Purchasing card: Overview, definition, and example
What is a purchasing card?
A purchasing card (also known as a procurement card or p-card) is a type of corporate credit card issued to employees of a company or organization for the purpose of making business-related purchases. These cards are typically used for purchasing small, low-value items or services without the need for a formal purchase order or invoice process. Purchasing cards are often used to streamline procurement processes, increase efficiency, and reduce administrative costs associated with managing traditional purchase orders. The cardholder is typically required to adhere to company policies on spending limits, allowable purchases, and documentation requirements.
Why is a purchasing card important?
A purchasing card is important because it simplifies the procurement process by enabling employees to make purchases quickly and efficiently, without going through complex approval processes for every small purchase. This helps organizations save time, reduce paperwork, and manage expenses more effectively. Additionally, purchasing cards provide a clear record of transactions, which can be easily tracked and audited for compliance purposes. They also help companies control spending by setting limits on the cardholder’s usage and restricting purchases to pre-approved categories or vendors.
Understanding purchasing cards through an example
For example, a company issues a purchasing card to a department manager, allowing them to buy office supplies as needed. The manager uses the purchasing card to buy paper, pens, and printer ink directly from a supplier without needing to complete a purchase order or wait for approval from the finance department. The transactions are automatically recorded, and the company’s accounting department can easily track the purchases through the card’s transaction history.
In another example, a government agency issues purchasing cards to its employees to handle small expenses such as travel-related costs, including hotel stays, meals, or transportation. The employees can make purchases within set limits, and the agency can track and verify each transaction for compliance with government spending policies.
An example of a purchasing card clause
Here’s how a purchasing card clause might appear in a corporate policy:
“Employees are authorized to use the Purchasing Card for the purchase of approved items, up to a maximum of $500 per transaction. All purchases must be in accordance with the Company’s Procurement Policy, and itemized receipts must be submitted within five business days of each transaction. Unauthorized use of the Purchasing Card may result in disciplinary action.”
Conclusion
A purchasing card is a valuable tool for businesses and organizations, allowing employees to make necessary purchases quickly and with minimal administrative overhead. By streamlining procurement processes, controlling spending, and providing an easy-to-track record of transactions, purchasing cards help organizations improve efficiency, reduce costs, and maintain better control over their expenses. Proper policies and guidelines ensure that the cards are used appropriately and in line with organizational goals.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.