What Is A P-Card? How P Cards Work | Hydrogen
What is a Purchasing Card (P-Card)?

What is a Purchasing Card (P-Card)?

Businesses tend to use traditional purchasing and reimbursement processes for employees who need to make business purchases. However, many of these methods are tedious and inconvenient. P cards are a much more convenient and flexible method that can be used by employees who need to make business-related purchases for items like office supplies or gas. If you are looking to assign P cards to your employees, trust Hydrogen to issue the best cards for your organization.

P Card Meaning

What is a P card? A P card is a purchasing card that allows your business to take advantage of the credit card infrastructure so your employees can make electronic payments for business expenses. P cards are similar to consumer credit cards and are also referred to as corporate procurement cards, purchase cards, and payment cards. 

P cards don’t just come in the form of plastic cards. Instead, they can also come as a non-plastic account number, or virtual card. With P cards, employees can make payments for services or goods on behalf of the employer without going through the process of request, approval, and reimbursement. 

Businesses use P cards to lower the transaction costs for typical, everyday expenses. Without P cards, the process of requesting and approving has a high transaction cost, regardless of the worth of the item purchased. If your business’s transaction costs frequently exceed the value of the items purchased, it may be time to consider issuing P cards.

How Do P Cards Work?

A business issues corporate purchasing cards to certain employees to use when making purchases. Employees with these cards must follow the organization’s policies on using the cards. Rather than fill out a request for each small purchase, an individual can simply use the P card to buy the item. 

Companies can use these P cards to track what workers are purchasing and how much is being spent. For instance, an employee can buy office supplies from a supplier’s website. Due to the enhanced efficiency of a P card, businesses save money when they issue these cards to employees. Along with suppliers and cardholders, the following parties are involved in the P card payment process:

  • Issuer: An issuer works directly with end-users to issue cards, implement programs, and invoice transactions. Issuers use processors’ and networks’ services to facilitate card issuance, provide data, and authorize transactions. 
  • Merchant acquirers: A merchant acquirer enrolls suppliers in the process of card acceptance and implements related software solutions and equipment. Additionally, merchant acquirers facilitate payment flow. 
  • Processors: A processor provides services to merchant acquirers and card issuers. These services include statement printing, card production, data delivery, and authorization.
  • Networks: A network facilitates the movement of transactional data between merchant acquirers and issuers, along with setting the rules pertaining to card acceptance by suppliers. Networks are also referred to as the card brand and include organizations, like Mastercard and Visa. 

Who Should Use P Cards?

P cards are a great option for business owners who want to issue employee purchase cards that can be used to pay for services and goods over other payment methods. If you are tired of Automated Clearing House (ACH) transactions or checks, P cards may be the right option for your business. 

Organizations using P cards tend to be in the government, education, and corporate sectors and are typically called end-users. Individual employees who receive a P card to make payments with are referred to as cardholders. Choose P cards if:

  • Your business is growing: P cards are recommended for organizations with traditional purchasing processes and growing business needs, especially if you want your company to have efficient business-to-business transactions and cut costs.
  • Your business is looking to streamline the payment process: With P cards, your company can simplify payments and easily manage business-to-business purchases. These purchases can include office supplies, equipment, and technology like software or hardware.
  • You want your business to earn discounts for early pay: Your business may be able to pay the accounts receivables early by using P cards if your service providers or suppliers accept credit cards. If so, you may get early pay discounts.

Benefits of P Cards

Some advantages that P cards can offer your business include:

  • Enjoy convenience and flexibility: Employees won’t have to worry about getting approval for purchases beforehand or being reimbursed later. For business owners, P cards can free you of the hassle of reimbursing expenses and make tracking expenses easier, as receipts can be uploaded instantly to help analyze spending. 
  • Control business spending: You can set restrictions for each cardholder that include monthly limits and single-transaction limits. You can also set restrictions on where your employees can use their P cards.
  • Earn discounts for purchases: Your business can add to its earnings and offset costs by earning rebates and early payment discounts. If a supplier or service provider doesn’t offer rebates, you may want to ask about negotiating an early pay discount.

Disadvantages of P Cards

Some disadvantages of P cards include:

  • Policy development is necessary: Your business should develop a policy that outlines how P cards should be used. Developing this policy will take time, and it may need to be amended if roadblocks come up later on.
  • You may encounter possible card misuse or fraud: Your employees may misuse their P cards by making personal charges instead of strictly business expenses, especially if your workers don’t completely understand how to use these cards. If you issue physical cards, they may also be susceptible to theft or loss.
  • Balances must be paid in full: For P cards, outstanding balances should be paid in full each month. As a result, you can’t carry balances to the next billing period. If your business doesn’t pay in full each month, you may have to pay a late fee. 
  • There may be a lack of integration: Some disadvantages of P cards depend on how payments are set up. In addition to the P cards, you may have established several types of payments, which can confuse employees. Some programs for P cards may not integrate with your other purchasing data, and as a result, your business may not have a complete picture of your spending unless the purchase systems are streamlined.

Issue P Cards With Hydrogen

At Hydrogen, we can help your organization build its own card issuance. Our no-code Cards offering makes it easy to get started and also provides the business logic, analytics, and user interface (UI) your business needs to make your card issuing component successful. 

Regardless of whether you are just starting or have years of experience, you can start building today. Contact us today to learn more about issuing business P cards with Hydrogen, or move ahead with signing up.

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