Tuesday, May 09, 2006

Purchasing Card (P Card) in Accounts Payable

A lot of companies have been going for use of Purchasing Card to reduce their administrative costs. Purchasing Card or P Card programs were originally introduced in the late 1980s in response to the US Federal Government’s initiative for automated payment structures, particularly for small-dollar purchases. The success of this program led to a Purchasing Card program for the entire US Federal Government in 1989. While a Normal Credit/Debit Card is basically for streamlining individual’s purchase, the objective of a Purchase Card is for streamlining the procurement and settlement in the corporate as a whole. Also, if a company only follows the normal Procure-to-pay process, then one follows the entire process of raising PO's, approving, purchasing, receiving, matching and ultimately paying. This invloves lot of administrative costs and the entire process is also time consuming. However, the process is relatively shorter in case the company adopts Purchasing Cards. But, not all goods and services can be purchased using Purchasing Cards. Purchase Cards are meant primarily for routine high-volume, low-dollar purchases. A Procurement Card system involves issuing a large number of credit cards having some sort of control to a large group of employees for small purchases. The controls on the card could be on basis of: Dollars per Transaction, Transactions per day, Dollars per day/month, Dollars per Standard Industrial Classifications (SIC) Code or Number Transactions per SIC code, etc.In order to setup Purchasing Card system, one has to have the requiste agreements with the card issuing organisation. Also one has to ensure that the monthly statements that the card company sends is of a fixed format, so that its easy to upload to the AP system. The other Setups include:
1) Creating the Credit Card Code Sets by navigating to Setup->Credit Cards->Credit Card Code sets. This requires entering Standard Industrial Classifications (SIC) codes.
2) Defining the card issuer, card type, and credit card code set in Credit Cards->Credit Card Programs.
3) Define the GL accounts sets in Setup->Credit Cards->Procurement Card->GL Account Sets. A GL account set is a list of values that cardholders can use to change accounts when validating their transaction notification.
4) Under, Setup->Credit Cards->Procurement Card->Credit Card Profiles you attach the Credit Card program, assign the GL account sets, define the default GL account, the exception clearing account, employee verification options, and manager approval options. If the Employee Notification Method (ENM) option is set to none, meaning the employee is not notified at all, then the transaction will not be selected by the process and is already set at a status to proceed in processing. If the ENM is set to Notification Only, the status is set during the process of the workflow to allow it to proceed and the employee is notified of the transaction. Also, one can set the status as verification required on the Credit Card Profiles form, so that the employee can set the transaction to Hold, Personal, Disputed, or Verified. Similarly if the Manager Notification Method (MNM) is setup to None or Notification Only, then the status of a Verified transaction is automatically set to Approved.
5) In the Credit Card window, one assigns the card to a cardholder and also tie all theprevious setup steps together. One can also choose a Credit Card program (which includes the Credit Card Code Set) and a Credit Card Profile (which includes the GL Account Set).
6) If the organisation is using any specific processes then they need to customize their workflows or else one can use the the predefined Credit Card Transaction Employee Workflow and Credit Card Transaction Manager Workflow, available with the Self-Service Web application, to verify and approve credit cards.
Once the monthly/weekly statement flat file comes from the card company, it is loaded using SQL Loader to the table AP_EXPENSE_FEED_LINES_ALL. Depending upon the Employee Notification Method setup and the Manager Notification Setup in the card profile options (Step 4 in setup), the employees and managers verify and approve the transactions. The "Procurement Card Invoice Interface Summary" program is run to import the data into the Payables Open Interface tables AP_INVOICES_INTERFACE and AP_INVOICE_LINES_INTERFACE. These tables are read by the Payables Open Interface Import program, which creates invoices from these records. These invoices are then ready for accounts payable approval and payment.
References:
1) 'Procurement Cards Basics : Setup and Processing' by Cynthia Bruno, Philip Merlano, and Michael V. Milano of Oracle Corporation.
2) Oracle Payables User’s Guide, Release 11i, Oracle Corporation.

7 comments:

Krishanu Bose said...

Sure.

sukhi_area said...

blogging too much....gud...keep it up

Anonymous said...

Hi,
How to upload the data for Travel Card ?

Mihir

shannon said...

there's got to be an easier way to process credit cards....

Krishanu Bose said...

Hi Shannon,

For Credit Card data processing the setups required are bit different than for Procurement card. Here i wish to state that if you are trying to capture employee expenses made by credit card then you can try and implement Oracle iExpense. This will reduce the amount of time and effort required to submit, approve, process and pay expense reports. Approvals are handled automatically using Oracle Workflow and Approvals Management.

Krishanu

kirti said...

i m working in a company and i need to give advice to my client company about pros and cons of using p-card. could u please tell me that how withholding tax is deduced while making the payment thourgh p-card.. i would be really thankfull to u if u can help me out.. im unable to find the ans of same on net

12345 said...

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Krishanu's Oracle Applications Blog - Oracle Apps consulting services scenario in India. Also, an inside view of Oracle Apps outsource services in India. Also the blog features new developments in Oracle Apps and my learning's in this field. The views expressed are my own only and not of my employer Wipro Technologies. The views and opinions expressed by visitors to this blog are theirs and do not necessarily reflect mine.