Transcript From Good to Great: The Ongoing Journey of Purchasing Card
© 2012 Financial Operations Networks LLC
Powerful P-Card Productivity Practices
About Your Presenter
Dr. Richard Palmer
President, RPMG Research Corporation
Richard is Chair of Accounting and Management Information Systems at Southeast Missouri State University. Prior to academic work, he held management positions in both public accounting and the banking industry. Richard is a frequent speaker at commercial card user conferences and the author of over 50 professional and academic publications, including award-winning articles about industry use of e procurement tools and commercial cards. Richard's e-commerce and commercial card research and insights have been quoted in U.S. Senate hearings, the Wall Street Journal, ABC's Good Morning America, Business Week, CNN Money, CBS News MarketWatch, American Banker, Business Finance, Purchasing, CFO, Treasury and Risk Management, Financial Executive, Credit Card News, Cards International, Credit Card Management, Federal Times, and Government Procurement, among others. RPMG Research Corporation is organized to serve business and governmental agencies through data collection, detailed analyses, and dissemination of information about current trends and practices in the business-to-business use of bank commercial cards, e-procurement technologies and other technologies affecting the expenditure cycle of organizations. Their projects to date include major market studies of e procurement utilization and the use of bank purchasing and corporate cards in North America. www.TheAPNetwork.com
Agenda • Introduction • Survey Response • Key Trends • Spending and Performance Metrics to Drive Performance • Conclusion www.TheAPNetwork.com
Purchasing Card Benchmarking Survey 2010
Survey Responses
Survey Statistics www.TheAPNetwork.com
Participating banks
: Bank of America, BMO, Commerce Bank, JPMorgan Chase, Citibank, Comerica, Comdata, Fifth Third Bank, FNBO, HSBC, M&T Bank, Mellon Bank, PNC Bank, Regions Bank, Scotiabank, SunTrust, UMB, U.S. Bank, and Wells Fargo; also members of the National Association of Purchasing Card Professionals or National Institute of Government Purchasing.
Respondents by Organization Type www.TheAPNetwork.com
Key Trends www.TheAPNetwork.com
Change Expected in Purchasing Card Spending by 2012 www.TheAPNetwork.com
Expected Growth Rates in P-Card Spending by 2012 and Through 2014
Corporate Sector Government and Not for Profit Category
Avg. Yearly Growth, 2009-2012 Avg. Yearly Growth, 2009-2014 12.7% 13.6%
All
9.33% 10.8% 10.6% 11.7% www.TheAPNetwork.com
Reasons for Past and Future Increases in Purchasing Card Spending www.TheAPNetwork.com
Payment for Transactions by Payment Mode and Dollar Value www.TheAPNetwork.com
Cost Reduction per Transaction by Purchasing Card Use www.TheAPNetwork.com
Cost Reduction per Transaction by Purchasing Card Use www.TheAPNetwork.com Time savings also critical for many.
Discounts • 26% of respondents report that their organization uses purchasing card spending data to obtain a higher discount for goods or services from a vendor, up from 22% in 2007 • Of those organizations that use purchasing card spending data to obtain higher discounts, 60% report obtaining a higher discount • The absolute improvement in the discount, on average, is 2.2%. In other words, if an organization was already obtaining a 3% discount, the use of purchasing card data in discount negotiations increased the discount to 5.2% www.TheAPNetwork.com
Percent of Organizations Using EAP Accounts, 2005-2012
2005 2007 2009 2010 (Projected Use) 2012 (Projected Use ) Category
Corporations Government and NFP All Respondents 8% 7% 8% 17% 10% 14% 22% 12% 16% 36% 22% 27% 58% 44% 49% www.TheAPNetwork.com
Organizations Using/Not Using EAP www.TheAPNetwork.com
Purchasing Card Spending in North America
(In $ Billions)
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Good to Grea
t
A Closer Look at Spending and Program Performance Metrics
To understand is to perceive patterns.
—
Isaiah Berlin
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Best Practice Criteria • “Good” – At least one top quartile (and no bottom quartile) metric across four key purchasing card program performance measures, including: ‣ % of under $2,500 transactions paid by p-card ‣ % of $2,500 to $10,000 transactions paid by p-card ‣ P-card spending as a % of annual sales revenue (or budget) ‣ P-card spending per employee • Great – above median performance across multiple criteria listed above www.TheAPNetwork.com
A Snapshot of Market Use of Purchasing Cards www.TheAPNetwork.com
Key Metrics www.TheAPNetwork.com
... Unlike [other] companies, the good-to great companies continually refined the path to greatness with the brutal facts of reality.
—
Jim Collins Good to Great (p. 71)
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Average and Median Monthly Spending www.TheAPNetwork.com
Monthly P-Card Spending per Employee www.TheAPNetwork.com
Median Annual P-Card Spending as Percent of Revenue/Budget www.TheAPNetwork.com
Transactions Placed on Card www.TheAPNetwork.com
Card-to-Employee Ratio www.TheAPNetwork.com
Monthly Transactions per Card www.TheAPNetwork.com
Spending per Transaction and Monthly Spend per Card www.TheAPNetwork.com
www.TheAPNetwork.com Innovation & Technology
Use of Innovative Card Accounts www.TheAPNetwork.com
Percent Reporting Seamless Data Integration www.TheAPNetwork.com
Buying Behavior www.TheAPNetwork.com
Purchase Behavior: Goods www.TheAPNetwork.com
Purchase Behavior: Services Opportunity 20-80% Good 30-90+% • • • • • • • • Lease and rental payments Media and advertising services Print and duplicating services Telecommunications service Temporary help services Transportation and delivery Catering Mail and delivery services Great www.TheAPNetwork.com
Action Steps www.TheAPNetwork.com
Actions to Reach Potential
More common actions
www.TheAPNetwork.com
Management Support and Control www.TheAPNetwork.com
Spending Limits per Transaction www.TheAPNetwork.com
Monthly Spending Limits per Card www.TheAPNetwork.com
Program Management program Rebate paid by the card issuer % of targeted small dollar spending or Number of active cardholder accounts Dollar amount of p -card purchases % of targeted vendors accepting p -card Number of transactions on p - cards www.TheAPNetwork.com Best Practice Group Needs Improvement Group 66% 84% 77% 75% 78% 82% 73% 77% 73% 77% 75% 54% 71% 70%
... Unlike [other] companies, the good-to great companies continually refined the path to greatness with the brutal facts of reality.
—
Jim Collins Good to Great (p. 71)
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... Unlike [other] companies, the good-to great companies continually refined the path to greatness with the brutal facts of reality.
—
Jim Collins Good to Great (p. 71)
Duh ... winning!
—
Charlie Sheen
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Taking the Journey from Good to Great • Value, culture, innovation, assessment, and execution • Focus on value creation and capture • Culture of leadership and communications • Keeping up with and adopting new technologies as needed to expand and improve the “card toolkit” • Assessment of potential www.TheAPNetwork.com
Taking the Journey from Good to Great • Action steps to reach potential • Policies, incentives and encouragement (e.g., Performance Measures, Decision Rights, Alignment) • Investing in People (e.g., Training) • Investing in Enablers (e.g.,Technology, Integration) www.TheAPNetwork.com
Breakthrough results come about by a series of good decisions, diligently executed and accumulated one on top of another.
—
Jim Collins Good to Great (p. 69)
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Questions www.TheAPNetwork.com
Thank You!
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© 2012 Financial Operations Networks LLC