Purchasing cards: What are they, and how do they work?

Managing everyday business expenses can be a headache. From office supplies and software subscriptions to last-minute travel bookings, small but essential purchases quickly add up – and so does the paperwork. That’s where purchasing cards come in.

Purchasing cards simplify and streamline routine business buying, giving employees a controlled, efficient way to pay for approved purchases on behalf of their organisation.

In this article, we’ll cover what purchasing cards are, how they work and why they’re becoming a must-have tool for modern finance and procurement teams.

What is a purchasing card?

Purchasing cards (P-cards), also referred to as corporate procurement cards, are a type of corporate credit card employees can use to make business-related purchases on behalf of their organisation.

P-cards are typically used for low-value, high-frequency purchases – think office supplies, travel bookings, software subscriptions, training courses or emergency purchases.

Purchasing cards typically come with key features such as:

• Preset spending limits, which can be tailored to the employee, department or transaction type
• Merchant category controls, which restrict usage to approved types of suppliers – e.g. travel or office supplies
• Simplified expense management, as P-cards reduce the number of purchase orders and invoices the finance team have to deal with
• Improved cash flow visibility, as transactions can be tracked in near real time
• Centralised reporting, which consolidates data for better spend analysis and policy compliance

In short, they’re very handy – so if your organisation isn’t already using them, now’s a great time to get started!

How do corporate purchasing cards work?

In practice, using purchasing cards is pretty straightforward. Here’s how it works:

1. Card issuance

First, the company partners with a financial institution or card issuer (like Visa, Mastercard or a bank) to set up a procurement card programme.

Once that’s done, cards are issued to select employees with individual spending limits, merchant category restrictions and usage policies attached to each card.

2. Making a purchase

An employee uses their P-card to buy approved goods or services – typically for small, everyday business needs.

When the purchase is made, the card network, e.g. Visa, checks whether the transaction complies with the card’s spending limit and whether the supplier is an allowed merchant. If approved, the transaction is processed like a regular credit card payment.

3. Transaction data capture

The transaction details – amount, merchant name, date, category – are captured automatically by the card issuer’s system and made available through an online portal or expense management platform.

4. Reconciliation and approval

The cardholder (or a finance/procurement manager) reviews the transaction via an online system, assigns accounting codes and uploads receipts if required.

Next, the transaction is matched to pre-set categories or budgets and flagged for approval based on company policy.

5. Billing and payment

Unlike personal credit cards, P-cards often have consolidated billing: a single statement covering all cardholders over a set period of time. The company pays the card issuer directly for all charges – typically on a monthly basis.

6. Reporting and auditing

Finally, the finance team gets access to real-time reports showing total spend by cardholder, department or category, compliance with policies and exceptions or flagged transactions for review.

This data can be used for a range of activities, such as spend analysis, helping optimise budgets, supplier negotiations and policy enforcement.

And that’s basically all there is to it – simple, right?

The benefits of corporate procurement cards

So now we’ve established their key features and how easy they are to use, let’s take a look at the benefits that come with using corporate procurement cards:

• Streamlined purchasing: P-cards bypass the traditional purchase order and invoicing process for smaller buys, speeding up purchases and minimising admin bottlenecks.
• Lower transaction costs: By consolidating expenses into a single card payment, P-cards reduce the number of supplier invoices and the time it takes to process accounts payable, lowering the cost per transaction.
• Better spend visibility: P-card transactions are captured and reported in near real-time, helping your finance team spot anomalies quickly, track spend by category or department and make faster, data-driven decisions.
• Tighter spend control: With spending limits, merchant category restrictions and usage limits, you can control how, where and on what employees spend company money.
• Faster supplier payments: Suppliers get paid quicker when employees use a P-card, which can strengthen supplier relationships – and help you negotiate better terms or discounts.
• Better reporting: P-cards generate rich transaction data that’s easy to integrate into spend management systems, ERP platforms and reporting tools, allowing for more accurate spend analysis and reporting.
• Fraud mitigation: With preset limits, merchant restrictions, real-time monitoring and audit trails for every transaction, P-cards can reduce fraud risk – and that helps you save both time and money.

In short, there are plenty of good reasons to implement purchasing cards.

Enhance your company spending with Pleo

Traditional purchasing cards are great– but what if we told you Pleo’s corporate cards are even better?

Pleo’s corporate cards (physical and virtual) integrate directly with our expense management platform, giving you real-time tracking, automated receipt capture and seamless integration with your accounting systems.

Basically, it’s the P-card of the digital age, giving you a more flexible, transparent and efficient way to manage employee expenses.

Want to enhance your company spending and simplify the procurement process? Try Pleo today!