Today, companies are constantly on the lookout for new ways to electronically capture and utilize detailed transaction information, also known as Level 3 data. Innovative payment solutions and finance-management technologies now enable companies to electronically track data on global sales, expenses, inventory and all the related payment details that used to be buried like needles in the haystacks of paper invoices, receipts, purchase orders, expense reports and cancelled checks. These solutions eliminate the need for most paper-based records, offering benefits and savings that accrue to a company's bottom line while reducing processing times and increasing productivity.

Purchasing Cards: A Powerful Solution
Corporate purchasing card programs are a simple yet powerful solution for managing business expenses, and can have an immediate and significant positive impact on operations and financial results. With corporate purchasing cards, businesses, government agencies and other public-sector entities such as colleges and universities have unprecedented control over how funds are spent. Organizations decide which employees receive the cards, and cards can be issued with pre-set parameters for certain categories of purchases and with spending limits.

Information on the transaction data captured at the point-of-sale -- what was purchased, when, by whom and for how much -- is transmitted back to the company. Purchasing managers can use this information to negotiate better deals with suppliers, maintain tighter financial and accounting controls and make overall smarter purchasing decisions.

With purchasing cards, companies are able to create an accurate, reliable audit trail, maintain tighter controls over spending, streamline the time-consuming process of filing and processing expense reports, and reduce fraud.

Corporate purchasing card use in the U.S. doubled in two years, to $80 billion in the year ending January 2003, according to the 2003 Purchasing Card Benchmark Survey published by RPMG Research Corp. Company spending on purchasing cards nearly tripled in those two years, rising to an average of $1.6 million per month in 2003 from $633,000 in 2001. The study forecasts that purchasing card spending will double again in the next four years, topping $160 billion by 2008.

The magnitude of the potential bottom-line benefits is linked to the amounts companies spend and their willingness to wean themselves off paper checks, which still account for the overwhelming majority of corporate payments. Research firm Celent Communications reported that U.S. corporate payments totaled $31.3 trillion in 2001, with about two-thirds (65 percent) of that paid by paper checks and less than 1 percent by purchasing cards.

Companies that have switched to purchasing cards from paper-based systems are saving $23 billion annually, according to estimates in the RPMG study. By 2007, that savings number is expected to be closer to $40 billion.

Integrating the Financial and Information Supply Chain
Solutions now available enable the integration of corporate purchasing card programs and procurement information with leading enterprise resource planning (ERP) systems and accounting packages. By utilizing these tools to integrate the financial and information supply chain, companies will enjoy unprecedented control over their business finances. In addition to electronically capturing important transaction data, organizations are able to view statements online and monitor how and where their resources are being spent, without having to wait until the end of the month or quarter.

For example, MasterCard e-P3 is a new electronic payment and information management service that integrates MasterCard settlement solutions in electronic invoice presentation and payment systems to provide businesses with paperless end-to-end e-commerce. The service allows buyers and sellers to collaborate within a single environment, streamline their respective processes and use the MasterCard Corporate Purchasing Card for payment. MasterCard e-P3 is easily deployed and supports a variety of ERP and accounting systems, including Oracle, PeopleSoft and SAP.

For organizations with international offices, the right corporate purchasing card program and integrated system affords the simplicity of having one global card issuer instead of a different one in each market. This enables the headquarters office to audit global expenses and track spending by country and currency, allowing for more reliable expense analysis and forecasting.

Payroll Cards for 'Unbanked' Employees
Cashless organizations also add value for employees. Payroll cards are taking the place of paper paychecks, providing convenience, security and flexibility for "unbanked" workers and lowering payroll-processing costs for companies. Employees receive their salary on a plastic card that can be used like a debit card everywhere payment cards are accepted, with purchase amounts deducted from the available balance. Statements may be viewed online and cards used to withdraw cash from ATMs. Employees also enjoy greater security, as lost or stolen payroll cards are easily replaced, with available balances remaining.

Celent Communications estimates that about 8.5 percent of the 14 million U.S. households without bank accounts used payroll cards in 2003. Further, Celent predicts that by 2006, 25 percent of unbanked households will be using payroll cards.

Employers can cut their costs as much as 65 percent by switching from paper check payments to payroll cards. According to the American Payroll Association it costs a company between $1 and $2 to process a single check and about $9 to replace it, while an electronic payment through a payroll card program costs 20 cents. U.S. companies that used payroll cards saved $114.4 million in 2003, reports Financial Insights, a research and advisory firm.

Similar types of stored-value cards are being used to disburse funds in employee flexible spending accounts (FSA) and allocate medical and pharmaceutical benefits. Employees simply present their card at participating providers -- doctors, hospitals, pharmacies -- and have the cost of the service deducted from their benefit card. For employees, that means no more medical forms to complete, checks to write, matching receipts with reimbursement claim forms, trips to the post office to mail the paperwork or visits to the bank to deposit reimbursement checks. Companies eliminate the expenses associated with an outside claims-processing service and the lost productivity that results from chasing all the paper.

Paperless Payroll Survey Do the gains in efficiency outweigh the costs to implement a paperless payroll?

Embracing the Cashless Concept
Companies around the world are embracing the cashless concept and integrating related technologies to optimize their expense monitoring, reporting and auditing functions, reduce costs and improve productivity. Paper petty cash vouchers and advances, expense reports, payroll checks and medical claim forms, like the manual typewriter, will soon be just relics of the past. They are being replaced by payment options and systems that are better suited to the realities of today's highly competitive business environment that requires organizations to be agile, responsive and able to track and control expenses around the world in any currency, as well as integrate related data and generate reports at a moment's notice.

With cash no longer a necessity, organizations that continue to rely on it could well be placing themselves at a competitive disadvantage. Cashless businesses are advantaged, as they are empowered to gather the critical data they need to compete effectively and profitably.

STEVE ABRAMS is Senior Vice President, Corporate Payment Solutions of MasterCard North America. He can be reached at steve_abrams@mastercard.com

FEI's flagship publication, Financial Executive magazine, has won another award -- an Eastern Regional gold (first place) award from the American Society of Business Press Editors (ASBPE) in their annual competition. FE won in the editorial division for its March 2002 special section on "Best Practices." This is the fourth juried award FE has won in the past two years. The award was presented in Boston on Monday, June 9.