pCards for Schools: Streamline Your Procurement and Accounts Payable Process

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p-Cards for Schools Streamline Your Procurement
and Accounts Payable Process

• Spring 2008
• Ronald E. Everett

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Myth

• The more paper, the better the paper trail

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The Traditional PO Process Can Be Painful

• Paper Intensive / Mountains of Paper
• Multiple Departments Involved
• Same Process Regardless of Transaction Value
• High Average Per Transaction Cost to School
  District
• High Average Per Transactions Cost to the Vendor
• Not Cost-Effective for Small Purchases
• (Less than 2500)

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What does it actually cost to process a PO from
start to finish?

• Requisition
• Approval
• Purchasing
• Receiving
• Accounts Payable

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What are the Experts Saying?

• The average cost of processing a purchase order
  manually is between 75 - 200. Automating
  procurement reduces that cost to between 10 -
  40... The Return-On-Investment (ROI) is
  amazing. Deloitte Consulting
• Accenture
• US Bank
• Fifth/Third Bank
• American Express
• Chicago Public Schools - Elgin U-46 - Rockford

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Real example of reducing paperwork

• Naperville 203
• 2001 - 9,847 POs
• 2006 4,724 POs
• Saved 5,123 POs

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Savings of Time and Money for Naperville 203

• POs Eliminated
• 5123 75 384,225
• POs Still Used But With Improved Efficiency
• 4724 35 165,340
• Total 549,565
• Assumes MINIMUM savings rate based on cited
• research studies.

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P-Cards Should Not

• Eliminate all of the Purchase Orders a district
  uses whether paper or electronic!
• Only the many small POs will be eliminated.

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Bench Marking Questions

• How many non-payroll checks are written each
  month?
• What percentage are for less than 1,000?
• What percentage are for less than 500?

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Why is the Streamlining of Small Purchases
Significant?

• The majority of transactions in most
• organizations are for relatively small amounts
• District 203 58 of AP checks are for less than
  500
• District 204 58 of AP checks are for less than
  500
• Private Sector Business case study
• 60 of purchases for less than 1, 000

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The reduction of POs has also resulted in the
reduction of checks written

• Naperville 203 (Contd)
• 2001 16,954 Checks Written
• 2006 8,689 Checks Written
• Savings of 8,265 Checks!
• Postage savings alone 3,388

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Savings for Naperville 203 caused by writing
fewer checks

• Actual Savings from Checks NOT Written
• 2.50 5123 12,807
• Postage to mail each check
• 0.41 5123 2100
• Total 14,907
• Cost of check, envelope, stuffing and mailing.

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Ask yourself

• What can you eliminate?
• What can you save?

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Bench Marking Questions

• How many petty cash transactions per year?
• How many emergency/reimbursement checks written
  per year?
• How many imprest fund checks written each year?

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Could all of these small transactions each month
be consolidated into one payment?
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Who are the employees creating all of these small
purchases?Get the cards into the hands of people
who do the purchasing.
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Key to Consolidating Small Purchases into one
payment

• As a minimum
• Get p-Cards into the hands of as many employees
  as you can who are currently making small
  purchases/ generating POs of less than 1,000.

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What are Procurement Cards?

• They look and operate similar to credit cards
• They do not carry a revolving line of credit
• Usage and authorization parameters can be
  reviewed and managed via the internet by district
  administration

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• Specific card use parameters
• can be established for each card
• Transaction limits per charge
• Monthly limits
• Preferred Supplier Restriction
• You control what can be purchased, where it can
  be purchased from and limit amount per
  transaction

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• Customized Card
• design can display
• Card holder name
• School District name and number and/or
• Tax ID
• 2 Lines of text per card

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Advantages of an Association Sponsored Program

• Single Contract
• Creates a user group/support network
• Negotiation clout
• Due diligence costs eliminated
• Rebates

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Rebate Distribution

• Rebates are calculated in May and distributed in
  June to Illinois ASBO
• We then turn around and distribute to each
  district

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Rebate History

• 2003-04 0
• 2004-05 46,101.51
• 2005-06 125,522.01
• 2006-07 295,899.63
• 2007-08 ??

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Current Rebate Schedule 5/1/2007

• Tier 6 70,000,000
• Tier 5 50,000,001- 70,000,000
• Tier 4 30,000,001- 50,000,000
• Tier 3 20,000,001- 30,000,000
• Tier 2 10,000,001- 20,000,000
• Tier 1 5,000,001- 10,000,000

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p-Card Growth - Districts
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p-Card Growth Purchasing Volume
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Customized Card Design

• Individual Card
• Department Card No Fraud Coverage
• Ghost Card No Plastic No Fraud Coverage

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Billing Cycle Requirements

• School District may choose a billing cycle
  cut-off of the 5th or the 20th
• Payment is due at Harris Bank within 21 days of
  billing cycle cut-off
• Penalty for late payment (Prime 7) on all
  transactions in the billing cycle
• Penalties can be avoided with pre-planning and
  monitoring online usage reports

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Only 3 Possible costs to participating school

• Late fee
• ATM Charge IF cash advance option is selected
• Interest owed on any cash advance

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Billing and Payment

• Monthly Billing Statements
• Consolidated Billing Statement (Available online)
• Cardmember Report (available online)
• Individual Reports
• Payment Methods
• Automated Clearing House
• Check

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Why was MasterCard selected?

• Superior vision with technology and
• e-commerce
• Fraud Protection insurance
• Dedicated group to sign up suppliers
• Customized card design displaying the name of
  card holder, school district and/or tax exempt
  number

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Why was MasterCard selected? (Continued)

• Individualized training
• Global acceptance at over 35 million locations
• Retailers benefit from low transaction charge

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Online Capabilities (24/7)

• Online Program Management
• Submit, approve, and cancel Card accounts
• Instant Account Activation
• Adjust spending limits/manage Cardmember profiles
• View Cardmember charges
• Change accounting information
• Online Information Services
• View/Manage Program Information
• Access to Web reporting tools

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Vendor Benefits

• Reduces paper processing/billing
• Reduces vendors time/costs of processing/depositi
  ng payments
• Reduces vendor transaction costs
• Vendor paid by Harris within 48 hours of
  shipment/pick-up
• Reduces the issues of partially filled orders
• Reduces vendors time/costs of processing
  depositing of payments

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Benefits of a p-Card Program for Management

• Easier on Accounts Payable
• Submit one monthly payment vs. multiple payments
  to multiple vendors
• Reduction in paperwork
• Fraud prevention and protection through the Bank
  and MasterCard
• Detailed reporting available 24 x 7
• Easy online administration and dedicated customer
  support
• Control on spending limits and accepted vendors

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How to Get Started

• Download documents www.illinois-pcard.com
• Submit resolution to local board of education for
  purchasing card participation
• Identify local p-Card administrators
• Complete application packet send to State ASBO
  affiliate

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The Next Step

• Order Cards
• Training with Harris Bank/BMO
• Distribute Cards/Train Cardholders
• Reconcile Bills

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Side Benefits

• More time on task
• Less wasted time
• Reduction in the publication of the annual
  Statement of Affairs
• Reduction in time/cost of monthly bank statement
  reconciliation
• Better investing/cash management

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A Sampling of Major Textbook Companies who accept
the p-Card
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Sample of Suppliers who accept the p-Card
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Partners

• Illinois Principal Association (IPA)
• Illinois Association of School Administrators
  (IASA)
• Illinois Association of School Boards (IASB)

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• For more information, word
  documents and other tools, or to
  download all available files, please go to
  www.illinois-pcard.com.

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Holly Wallace815.753.9083 (tel)815.753.9367
(fax)hwallace_at_niu.edu
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p-Cards for Schools Streamline Your Procurement
and Accounts Payable Process

• Spring 2008
• Ronald E. Everett