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Problems with Company Procurement Cards

Most companies have their employees make purchases with various types of credit cards, for which they are reimbursed by the company. This approach reduces the risk of liability for excessive purchases made by employees, though employees are put at risk of not being reimbursed in a timely manner for possibly substantial company-related charges. A common alternative is to issue individual company-sponsored purchasing cards to selected employees, who are authorized to make a variety of purchases within certain restrictive limits.

The trouble in both cases is that employees may circumvent centralized purchasing rules, so that the company cannot take advantage of bulk pricing deals with a small number of preferred suppliers. Also, in the case of company-sponsored cards, a relatively high level of control is generally applied, so that they are given to only a small minority of employees, thereby making it more difficult to roll out the comprehensive use of credit cards for small-dollar purchases. Finally, purchases with these cards may be applicable to a variety of departments, requiring a detailed and sometimes difficult month-end reconciliation to determine which purchases are to be charged to each department.

The Ghost Card

An alternative that resolves some of these issues is the ghost card. A ghost card does not involve the use of an actual card. Instead, each department is given its own ghost card number, for which it can make a variety of purchases that will be charged back to that department. By centralizing such purchases with a single account number, payment processing is made considerably easier. Also, since the company is directly responsible for all purchases made with the ghost card, it will be billed by the card provider in a timely and predictable manner (as opposed to the use of personal cards, where expenses may not appear until months later).

Another use for the ghost card is to provide it to preferred suppliers for ongoing use, with each supplier being given a unique ghost card number; the suppliers automatically charge it when purchases are made by employees. This greatly streamlines the more common approach of charging the plastic card of whichever company employee shows up to make a purchase.

Another advantage of the ghost card is that some suppliers are now providing direct input of charge information into corporate ERP systems, so that purchases can be charged directly to the correct department with no manual data entry needed.

Podcast

A discussion of accounts payable best practices is available on Episode 81 of the Accounting Best Practices podcast. Listen Now.