Purchasing cards are getting a makeover. Several banks, including PNC and SunTrust, are now peddling so-called unfunded p-cards that streamline vendor payments and disperse the ability to pay bills across the enterprise while providing centralized control over accounts payable.
An unfunded p-card, or "ghost card," is held by the supplier and holds no value until a purchase order is approved. Approval triggers an automatic loading of the exact dollar amount onto the card, which suppliers can then access by swiping the card in their credit-card merchant terminal. The added controls and automatic reconciliation offered by such a system, says Greg Hammermaster, senior vice president of Treasury & Payment Solutions at SunTrust Banks, mean that p-cards finally have "a viable role in the payments mix."
At Invacare Corp., a home-medical-care products company, about 400 suppliers have been given unfunded Visa cards over the past 10 months, says Christine Potoczak, manager of accounts payable. Since then, the company has paid for everything from drug-screening services to freight costs via the cards. Potoczak says the cards allow her company to take advantage of extended payment terms and also provide more security than the old system — a check in the mail. Proponents say that p-cards can reduce disputes, facilitate revenue-sharing programs, help reduce bank fees, and provide a "cash float benefit" because the billing cycle and payment terms are consolidated with the card issuer.
The cards are not a panacea, however, and will most likely coexist with ACH and check-payment services. Potoczak says that some suppliers will require encouragement and others may be reluctant to participate if they have already negotiated beneficial pricing and payment terms. Hammermaster acknowledges some "constraints," but says that suppliers should not feel "they're being beat up on" by customers who push for the use of p-cards.