pCards for Schools Streamline Your Procurement and Accounts

p-Cards for Schools: Streamline Your Procurement and Accounts Payable Process Spring 2008 Ronald E. Everett

Myth: n The more paper, the better the paper trail

The Traditional PO Process Can Be Painful… n n n 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)

What does it actually cost to process a PO from start to finish? Requisition n Approval n Purchasing n Receiving n Accounts Payable n

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 n n n Accenture US Bank Fifth/Third Bank American Express Chicago Public Schools - Elgin U-46 - Rockford

Real example of reducing paperwork Naperville 203 o 2001 - 9, 847 PO’s o 2006 – 4, 724 PO’s o Saved 5, 123 PO’s n

Savings of Time and Money for Naperville 203 PO’s Eliminated 5123 * $75 = $384, 225 n PO’s Still Used But With Improved Efficiency 4724 * $35 = $165, 340 Total: = $549, 565* n *Assumes MINIMUM savings rate based on cited research studies.

P-Cards Should Not: n Eliminate all of the Purchase Orders a district uses – whether paper or electronic! Only the many small PO’s will be eliminated.

Bench Marking Questions How many non-payroll checks are written each month? n What percentage are for less than $1, 000? n What percentage are for less than $500? n

Why is the Streamlining of Small Purchases Significant? The majority of transactions in most organizations are for relatively small amounts n District 203 – 58% of AP checks are for less than $500 n District 204 – 58% of AP checks are for less than $500 n Private Sector Business case study: 60% of purchases for less than $1, 000

The reduction of PO’s has also resulted in the reduction of checks written Naperville 203 (Cont’d) n 2001 – 16, 954 Checks Written n 2006 – 8, 689 Checks Written Savings of 8, 265 Checks! Postage savings alone = $3, 388 n

Savings for Naperville 203 caused by writing fewer checks n n 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.

Ask yourself: What can you eliminate? n What can you save? n

Bench Marking Questions How many “petty cash” transactions per year? n How many “emergency/reimbursement” checks written per year? n How many “imprest fund” checks written each year? n

Could all of these small transactions each month be consolidated into one payment?

Who are the employees creating all of these small purchases? Get the cards into the hands of people who do the purchasing.

Key to Consolidating Small Purchases into one payment: n As a minimum – Get p-Cards into the hands of as many employees as you can who are currently making small purchases/ generating PO’s of less than $1, 000.

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

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

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

Advantages of an Association Sponsored Program Single Contract n Creates a user group/support network n Negotiation clout n Due diligence costs eliminated n Rebates n

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

Rebate History 2003 -04 n 2004 -05 n 2005 -06 n 2006 -07 n 2007 -08 n $0 $46, 101. 51 $125, 522. 01 $295, 899. 63 $? ?

Current Rebate Schedule 5/1/2007 Tier 6 Tier 5 Tier 4 Tier 3 Tier 2 Tier 1 $70, 000+ $50, 001$30, 001$20, 001$10, 001$5, 000, 001 - $70, 000 $50, 000 $30, 000 $20, 000 $10, 000

p-Card Growth - Districts Month 2003 -04 2004 -05 2005 -06 2006 -07 2007 -08 May 5 48 84 137 205 June 7 53 88 141 207 July 12 58 88 145 213 August 16 61 93 146 217 September 18 66 99 152 220 October 20 68 103 158 220 November 21 71 106 161 220 December 24 72 109 163 246 January 26 76 113 177 265 February 30 80 114 183 265 March 36 81 117 187 287 April 41 83 133 194 295

p-Card Growth – Purchasing Volume 2003 -04 2004 -05 2005 -06 2006 -07 2007 -08 May 1, 200 355, 405 1, 025, 004 2, 562, 422 3, 512, 633 June 30, 500 420, 569 1, 018, 773 2, 558, 846 3, 806, 285 July 24, 300 356, 835 1, 140, 360 2, 354, 778 3, 392, 511 August 24, 700 452, 171 1, 499, 626 3, 374, 260 5, 023, 218 September 101, 400 697, 709 1, 499, 395 3, 376, 079 4, 270, 506 October 186, 900 664, 393 1, 405, 328 2, 622, 251 5, 203, 320 November 192, 100 623, 687 1, 448, 102 2, 719, 870 4, 617, 983 December 217, 000 733, 780 1, 374, 497 2, 607, 935 4, 057, 096 January 194, 200 709, 256 1, 606, 136 2, 534, 792 4, 341, 755 February 254, 700 987, 478 1, 763, 880 2, 466, 692 5, 264, 745 March 357, 400 885, 233 2, 257, 205 3, 227, 319 5, 059, 284 April 318, 600 1, 181, 706 2, 454, 114 3, 475, 371 6, 398, 865 1, 903, 000 8, 068, 222 18, 492, 420 34, 344, 057 55, 017, 907

Customized Card Design Individual Card n Department Card – No Fraud Coverage n Ghost Card – No Plastic – No Fraud Coverage n

Billing Cycle Requirements n n n School District may choose a billing cycle cut-off of the 5 th or the 20 th 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

Only 3 Possible costs to participating school Late fee n ATM Charge – IF cash advance option is selected n Interest owed on any cash advance n

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

Why was Master. Card selected? Superior vision with technology and e-commerce n Fraud Protection insurance n Dedicated group to sign up suppliers n Customized card design displaying the name of card holder, school district and/or tax exempt number n

Why was Master. Card selected? (Continued) Individualized training n Global acceptance at over 35 million locations n Retailers benefit from low transaction charge n

Online Capabilities (24/7) n n 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

Vendor Benefits n n n Reduces paper processing/billing Reduces vendors’ time/costs of processing/depositing 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

Benefits of a p-Card Program for Management Easier on Accounts Payable n Submit one monthly payment vs. multiple payments to multiple vendors n Reduction in paperwork n Fraud prevention and protection through the Bank and Master. Card n Detailed reporting available 24 x 7 n Easy online administration and dedicated customer support n Control on spending limits and accepted vendors

How to Get Started 1. 2. 3. 4. Download documents www. illinoispcard. 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

The Next Step Order Cards n Training with Harris Bank/BMO n Distribute Cards/Train Cardholders n Reconcile Bills n

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

A Sampling of Major Textbook Companies who accept the p-Card:

Sample of Suppliers who accept the p-Card:

Partners : n n n Illinois Principal Association (IPA) Illinois Association of School Administrators (IASA) Illinois Association of School Boards (IASB)

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

Holly Wallace 815. 753. 9083 (tel) 815. 753. 9367 (fax) hwallace@niu. edu

p-Cards for Schools: Streamline Your Procurement and Accounts Payable Process Spring 2008 Ronald E. Everett