The Complete 2014 Purchasing Card Benchmark Survey Results

Richard Palmer and Mahendra Gupta, RPMG Research Corporation

Survey Overview

The 2014 Purchasing Card Benchmark Survey Results (the “Report”) is our eighth edition of the Purchasing Card series and it offers a variety of new insights and information to benefit the reader based on data and analysis from over 3,000 purchasing card users across North America.  

This complete report includes a PDF copy of the three separate reports that constitute the 2014 Results, including:

Each of the key findings from these reports is summarized below.

Market Trends and Best Practice Program Choices (“Main Report”):

Purchasing Card Spending in North America

Overall, purchasing card spending has continued to grow in a time of continuing economic challenges.  Between 2011 and 2013, purchasing card spending in North America grew from $196 billion to $245 billion.  Purchasing card spending growth in the past two years in the corporate segment (31%) was higher than the government and not-for-profit segment (23%).  Within the corporate segment, Large Market company purchasing card spending growth was lowest (29%).  Fortune 500-Size and Middle Market corporations reported 31% and 32% growth, respectively.  Among government and not-for-profit entities, purchasing card spending growth was lowest among state and federal agencies (5%), but notably higher among school districts (31%), not-for-profit organizations (30%), city and county agencies (25%), and colleges and universities (19%).  

Going forward, the predicted purchasing card growth is about 10.8% per year average over the next five years.  Annual purchasing card spending is expected to increase to $267 billion in 2014, $318 billion by 2016, and $377 billion by 2018.  Corporate respondents project an annual average purchasing card spending growth rate over the next five years (12.4%) that is higher than that projected by government and not-for-profit respondents (8.8%).  The two most frequently cited reasons for expected spending growth involve greater targeting of vendors (both for plastic card and Electronic Accounts Payable) and an increase in the number of employees given purchasing cards.  

Organizational Impact

The average administrative cost (including sourcing, purchasing, and payment activities) of a traditional purchase order-based process was reported to be about $90.  For purchasing card transactions, the cost to procure and pay for goods was reported around $20.  Thus, purchasing cards generated administrative cost savings of about $70 per transaction when compared to traditional PO-payment methods.  This translates into a transactional cost savings of approximately $38 billion within North America on an annual basis.  Based on our data, a typical Fortune 500-Size public corporation experiences annual cost savings attributable to purchasing card use of $15 million, a figure that represents an ongoing annual realization of improvements in the efficiency of the procurement process that accounts for (on average) a 1.6% improvement in the bottom line.  

Further, in comparison to a traditional PO process, purchasing cards reduce the procurement cycle time by approximately eight days, and generally result in a reduction or redeployment of staff in AP and Procurement functions.  Among organizations that use purchasing card spending data to obtain higher discounts, 66% report obtaining a higher discount.  The vast majority of respondents have a monthly billing arrangement with their card issuer and 73% of respondents report that improved cash flow by extending the time to payment is an important benefit of p-card use.  A significant portion of respondents report reductions in petty cash and cash advances and the avoidance of late fees and lost discounts due to purchasing card use.

Insights into Remaining Opportunities

Twenty-three percent of the $245 billion currently spent on purchasing cards in North America is for operating goods and supplies.  The remainder of p-card spending is spread across a variety of other types of goods and services.  Based on respondent estimates of their current capture of category spending on p-card (excluding travel), spending could grow by $168 billion if existing customers were to capture a higher percentage (a “top 20%” level) of the goods and services they already buy with cards.  Total p-card spending could grow by another $173 billion if respondents who currently do not buy within a given category begin to do so at the level of top 20% respondents buying in the category.  The potential for upward spending varies by category, but the areas of operating goods and supplies, office equipment and supplies, business services, and computers and software are the most prominent and perceived by respondents to be the most likely to be achieved.

Across the total sample, 33% of respondents project that monthly p-card spending would more than double, 16% project an increase of 51% to 100%, and another 20% project an increase of 26% to 50% if all of their suppliers accepted card payment.  We estimate that purchasing card spending would grow by 60% if all of the respondents’ suppliers accepted payment by purchasing card (which, if extrapolated to the entire market, would mean that current annual purchasing card spending in North America would increase from $245 billion in 2013 to $392 billion).

Other potential enhancements for card use examined in the report related to payments associated with e-procurement, “one card” use, use of p-cards outside of North America, on-boarding of new users, and adoption of “best practices” by current card-using organizations.

Best Practice 

As in the seven previous studies since 1998, the 2014 edition of the Purchasing Card Benchmark Survey examines best practices of high-performance purchasing card programs and sheds light on continuing market trends.  The 2014 edition provides unique and fresh insight into the role and impact of card distribution, card spending limits, supplier enablement, technology integration, expanded card toolkit options, card issuer support, optimization techniques, and program management and control practices associated with organizations that obtain the maximum benefit from purchasing card use.  The Report also offers many innovative suggestions from end-users on topics ranging from program management to technology.

Benchmark Averages

Benchmark data within the Report covers a variety of program outputs to which end-users can compare to their own programs.  For all respondent purchasing card programs combined, key averages are: 

Electronic Accounts Payable 

A section of the 2014 Purchasing Card Benchmark Survey Results is devoted to the use of and spending patterns associated with “Electronic Accounts Payable” (or “EAP”, defined as non-plastic purchasing card accounts used to pay for goods and services after an invoice has been received for those goods or services).  About 18% of respondents currently use EAP.  Of the 82% that do not, 10% of respondents plan to adopt EAP in the next year and 20% plan to adopt EAP within three years.  Thus, EAP use is expected to rise from 18% in 2013 to 43% in 2016.  The average EAP spending is $1,911,958 per month.  The average EAP transaction is for $4,727, over ten times larger than a typical purchasing card account transaction.  

Governance and Risk Management

The Report provides a summary of purchasing card governance and risk management tools employed by organizations of differing size and type.  Further, the Report explores how different levels of control over the purchasing card program affect purchasing card program performance and success within the organization.

Purchasing Card Program Profiles by Organization Type and Size:

This report presents purchasing card program benchmark data points for a variety of corporate and government and not-for-profit categories.  Purchasing card program benchmark data points include: average number of plastic purchasing cards, card-to-employee ratio, the average monthly p-card spending, median monthly p-card spending, the percentage of transactions (a) under $2,500, (b) between $2,500 and $10,000, and (c) between $10,000 and $100,000 placed on p-card, and monthly spending per employee.  In addition, cardholder activity metrics are presented, including monthly spending per card, monthly transactions per card, average transaction size, and the percentage of active cards in a typical month.  

Furthermore, we present data related to program governance and control.  Specifically, the report includes the percent with full-time card program administrators, the average monthly spending limit, the percent using and average per-transaction spending limits, the average number of suppliers currently paid with p-card, the percent obtaining card issuer support in expansion of supplier card acceptance, the percent of respondents using p-card data to obtain vendor discounts, percentage of good and service categories bought with p-cards, the percent that internally audit the p-card spending approval process at least annually, and the average percentage of p-card statements audited each month, among many other things.

Corporate Purchasing Card Program Profiles 

The corporate segment is broken into four size categories: “Fortune 500-Size” companies (annual sales revenue greater than or equal to $2 billion), “Large Market” companies (annual sales revenue greater than or equal to $500 million, but less than $2 billion), “Middle Market” companies (annual sales revenue greater than or equal to $25 million, but less than $500 million), and “Small Market” companies (annual sales revenue of less than $25 million).  

Government and Not-for-Profit Purchasing Card Program Profiles 

The government and not-for-profit segment is broken down into federal agencies, state agencies, city and county government, colleges and universities, school districts, and not-for-profit entities. 

The Card Issuer’s Role in Purchasing Card Program Success:

This report presents respondent provided data that relate to the role that card issuer’s play in purchasing card program success.  The major areas addressed in the report are as follows:

Economic Relationship 

Overall, card users appear to be very satisfied with the economic aspects of their purchasing card product.  Customers report increasing or stable levels of satisfaction with the most important elements of the economic relationship with their card issuer (e.g., liability protection for lost/stolen cards).  We find that satisfaction with the overall economic relationship with the card issuer is a meaningful driver of card program performance.

Support and Service

Customer ratings of the importance of and satisfaction with aspects of customer service and support have changed little since 2007.  Eighty-one percent of customers are “satisfied” or “very satisfied” with their card issuer’s account manager and there is a strong positive connection between account manager performance and satisfaction with overall customer service and support.  Weaker performance by the account manager is strongly correlated with the organization’s consideration of switching card issuers.  

Data Capture 

The completeness and quality of transaction data has been and continues to be an important demand of card-using organizations.  Thirty-seven percent of respondents input additional information about purchasing card transactions into their organizational records.  Most frequently the information added is of an internal nature--purchase order numbers or accounting codes—but often includes sales tax data as well.  Progress with capturing Level II and Level III data remains slow but steady.  Customers appear, on balance, pleased with the completeness of purchasing card spending data, with only 6% “dissatisfied” or “very dissatisfied.” 

Data Integration

Customer satisfaction with the ability to integrate purchasing card data with their organizational information system increased from 2005 to 2009 and has since leveled off.  Increases in the level of satisfaction with the ability to integrate purchasing card data with the organizational information system is associated with increases in the percentage of transactions paid with purchasing cards.

Thirty-six percent of all respondent organizations manually input some (or all) of the p-card data into their accounting information system, down from 43% in 2011.  Organizations with ERP software are less likely to re-input card data.  Data integration matters to customers—79% of respondents where purchasing card transaction data flows directly into the organization’s accounting system are “satisfied” or “very satisfied” with the overall integration of p-card spending data into their accounting or ERP system.  By contrast, only 16% of respondents that report that p-card data does not flow directly into their accounting system (and must be re-keyed) are “satisfied” or “very satisfied” with the overall integration of p-card spending data into the organization’s accounting or ERP system.  The dominant reasons for the failure to seamlessly transfer card data are: (1) a failure on the part of the card-using organization to attempt to integrate the data, and (2) a (real or perceived) technology limitation inherent in the card-using organization’s software that is affecting their ability to integrate purchasing card data. 

Reporting

Card-using organizations place a premium on reports that are comprehensive, customizable, and readable.  Customer satisfaction with the overall reporting package rose steadily between 2005 and 2011, where it has since leveled off.  Yet, there continues to be notable negative gaps between respondent ratings of the importance of and satisfaction with the ability to customize reports to the needs of the business, the ability to generate p-card program performance metrics, disputed transaction tracking, card misuse analytics, and spend analysis.  Additionally, a notable negative importance/satisfaction gap exists for the most important aspect of reporting--the readability of reports.

Satisfaction with the reporting package can affect the customer’s relationship with their card issuer.  Only 6% of organizations with median level or above satisfaction with their reporting package are considering switching card issuers.  By contrast, 20% of organizations that report below median satisfaction with the overall reporting package are considering switching issuers.

Technology 

Customer satisfaction with the most important aspects of card issuer technology rose steadily from 2005 to 2011, after which it has levelled off.  Greater satisfaction with the overall ability of bank technology to support p-card program management is associated with higher capture of transactions on p-cards, better integration of card data, improved communication with cardholders and managers, expanded supplier participation, higher card spending limits, and an expanded use of card data, all while increasing organizational comfort that the program is under control.

Impact of Card Issuer Satisfaction

To determine whether a relationship exists between satisfaction and card program performance, we summed the satisfaction scores from the fifty-one survey items across six categories of interest (economics, service and support, data capture, data integration, reporting, and card program management technology).  We then compared the response of similar-sized organizations that had High (top quartile) and Low (bottom quartile) Satisfaction.

In comparison to the Low Satisfaction group, High Satisfaction respondents report 43% higher average monthly organizational spending, 35% more cards distributed, 46% higher average monthly spending per employee, and notably higher capture of transactions on p-cards.  Further, the High Satisfaction group has a higher percentage of respondents that have card transaction data automatically integrated into their accounting system, report a complete and timely reconciliation of employee receipts to p-card spending occurring regularly or most of the time, a higher number of suppliers paid with p-cards, have received assistance from their issuer in the expansion of card acceptance, have card issuer-provided insurance related to fraudulent card use, and received a rebate or financial incentive related to p-card use in the past year.  The High Satisfaction group is also far less likely to be considering switching card issuers, more likely to expect growth in purchasing card spending and perceive that they have greater control over p-card spending.

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