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Accounts Payable Best Practices
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company’s procurement cards. Most major national suppliers of credit cards can
supply Level II or Level III data.
The American Express Corporate Card has now expanded the range of uses
to which its procurement card can be put, by allowing for the inclusion of many
recurring business expenses, such as long-distance phone bills, Internet services,
monthly parking, wireless phone bills, and office security systems. By having
suppliers send their bills to American Express, the accounts payable staff can
consolidate the quantity of check payments that it must make to a single pay-
ment. American Express also provides a “Summary of Account” that itemizes all
of the business expenses for which payments are being made—which provides
sufficient proof for account auditing purposes.
There are two ways to set up invoices to run through this procurement card.
The first approach is to refer to American Express’s list of existing companies
that are willing to provide this service (which can be obtained from American
Express). The list includes such organizations as AirTouch Cellular, GTE Wire-
less, SkyTel Communications, MCI Worldcom, Sprint, America Online, Brinks
Home Security, Fortune magazine, and the Boston Globe. If the company wants
to add a supplier to this list, it can contact American Express, which will call the
supplier to request a rebilling to it.
One issue with this service is that the company must notify its suppliers if its
American Express card number changes, since they will continue to send their
billings to the old number until otherwise notified. Also, it may take a number of
months to line up a sufficient number of suppliers to see a significant reduction in
the number of checks issued by the accounts payable department.
An alternative service is offered by MasterCard, through its Air Travel Card
MasterCard. This procurement card splits airfare charges from all other charges
made to the card and bills them directly to the company. This makes it easier for
the accounting department to segregate and analyze corporate air travel costs.
Though this best practice may appear to be nirvana to many organizations,
the following issues must be carefully considered in order to ensure that the pro-
gram operates properly:

• Card misuse. When procurement cards are handed out to a large number of
employees, there is always the risk that someone will abuse the privilege and
use up valuable company funds on incorrect or excessive purchases. There are
several ways to either prevent this problem or to reduce its impact. One
approach is to hand out the procurement cards only to the purchasing staff,
who can use them to pay for items for which they would otherwise issue a
purchase order; however, this does not address the large quantity of very
small purchases that other employees may make, so a better approach is a
gradual rollout of procurement cards to those employees who have shown a
continuing pattern of making small purchases. Also, the characteristics of the
procurement card itself can be altered, either by limiting the dollar amount of
purchases per transaction, per time period, or even per department. One can