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Commercial Cards for streamlined and cost-effective procurement
“Corporate procurement departments and treasurers are always on the lookout for solutions that use efficient processes and deliver cost savings”, says Lewis Sun, Regional Head of Product, Asia Pacific at HSBC. In this second article in a series of four, he explains how by introducing HSBC’s Commercial Cards into its procurement process, a company can save time and money when purchasing goods and services.
Every company needs to purchase goods and services as part of their day-to-day operations. These might be business travel and entertainment expenses, marketing budget spent on sponsorships or digital advertising, or physical asset purchases – such as IT equipment. All of these purchases have to be processed, which makes efficiency and cost effectiveness key priorities for the treasury team – especially during the challenging business environment created by the COVID-19 pandemic, where cost savings are even more valuable than normal.
Traditional payments – such as automated clearing house (ACH) or real-time gross settlement (RTGS) payments– rely on processes that are not fit for the digital age. Manual invoices can often be the norm, which have to be posted or couriered to a client, and passed from department to department, before securing final approval for payment. Not only is this time consuming, there are risks that the invoice could be lost, which could bring the whole process to a halt and cause a late payment.
Furthermore, paper-based payments leave information scattered across multiple documents, making it hard to complete relatively straightforward reporting, and as a result complicating budget management. Spending analysis and working capital optimisation can also be difficult to conduct.
Commercial Cards are an easy-to-implement method for corporate procurement and treasurers who are looking for efficient alternatives to traditional payment options. By taking advantage of the full range of functionality that Commercial Cards provides, a procurement and treasury department can replace manual processes with more efficient digital alternatives, quickly making significant improvements to procure-to-pay process and operational costs.
By taking advantage of the full range of functionality that Commercial Cards provides, a procurement and treasury department can replace manual processes with more efficient digital alternatives
Increasing operational efficiency
In short, Commercial Cards help streamline procurement so that relevant stakeholders can enjoy efficient processes that reduce labour and other operational costs. Electronic invoices play an important role here as they avoid the time-consuming steps associated with traditional payment methods. By spending less time on day-to-day processing, treasury is able to concentrate more on strategic issues.
The shift from paper to electronic invoices might not sound like a big difference, but the removal of manual processes is a real cost saver. Companies can save US$11 per invoice after implementing an automated invoicing solution, due to lower processing costs1, while automation reduces the invoice processing time from 14.3 days to just 3.7 days2. For a sizeable company processing a large number of transactions, these benefits add up to meaningful savings, as the treasury becomes more efficient at completing a growing number of payments.
Increasing expense visibility and control
Keeping track of so many purchases can be cumbersome, especially when it comes to reporting and reconciliation.
One of the pain points that treasurers often encounter is making sure that employees understand the policies relating to how they can use Commercial Cards to make both regular and ad hoc purchases. At the same time, keeping track of so many purchases can be cumbersome, especially when it comes to reporting and reconciliation.
To overcome this, HSBC’s Commercial Cards provide an online management and reporting tool, Mastercard’s Smart Data that centralises all transactions for the treasury team to keep track of purchasing patterns and spending. Online reporting gives visibility of all cardholder accounts, to view and report on transactions, statements and payments to enable the treasury team to conduct timely reporting and analysis across cardholder spends for multiple accounts balances.
In addition to visibility, HSBC’s management and reporting platform Mastercard’s Smart Data provides a high visibility and flexibility to monitor and control employee spending.
Commercial Card usage is kept compliant via criteria that determines how it can be used. Spend category controls can be managed to apply restrictions on how and where payments are made. For example, a company might block its cards in casinos or retail outlets. It may also wish to implement spend limits on certain transactions, in alignment to the type of service on offer. For example, a company can set a limit to courier services which are typically smaller amounts, and another limit on flights which are more expensive.
As more suppliers accept Commercial Cards as a form of payment for goods and services, procurement departments and treasurers have the option to apply the efficient working practices of cards solutions to a broader range of their procurement process.
To find out more about how your company can use HSBC’s Commercial Cards to make improvements to your procurement process, please contact your relationship manager. The next article of this series is a deep dive into how using Commercial Cards can improve expense analysis and cost negotiations.
Commercial Cards for optimised working capital
Purchasing patterns and cost analysis with Commercial Cards