Recent advances in p-card technology now permit A/P to retain processing and control, while still authorizing an individual supplier to collect a specific payment to settle a specific invoice from a p-card account. Because the card is only funded when payment is approved and only for the amount of the invoice, companies can reduce disputes and capture transaction-specific detail up front, making reconciliation almost automatic. Hence, the unfunded p-card approach carries distinct advantages over the older system of dispersing high-credit-limit cards to only your most trusted suppliers. "P-cards are finding a growing role in the centralized buying process," notes Greg Hammermaster, a managing director and payments guru at SunTrust Bank, which is actively marketing its own advanced p-card solution. "Companies now can leverage available technology to put pre-purchase controls and visibility of purchasing requests onto a p-card product that has been fitted to play a role in settling A/P purchases."

For instance, when Pep Boys pays an advertiser, it performs a two-way match to see that they were being billed for what had been ordered and what actually ran. Next, they authorize payment of that specific invoice in their A/P system. But rather than initiating a check run, the A/P system, using PNC's ActivePay, loads the card number for the supplier to be paid with the exact amount approved for payment and e-mails remittance advice to the vendor, who can then collect. Until the card-run from A/P, that account has no funds that can be claimed. After collection, the card goes back to that unfunded status. "Pep Boys is taking the card to a higher level," insists Jeff Felser, PNC's senior vice president for commercial payment services. "They've wrung out the cost of check payments–the postage, check stock, bank fees and labor costs–and replaced it with something that is not only free but counts toward the revenue share they get through rebates," he points out. "Most transactions reconcile automatically by dollar amount and outside purchase number. They're gaining control over their cash and simplifying the reconciliation at headquarters on the back end."

If a supplier has no account, PNC keeps a "jukebox" of available card numbers that can be assigned and then eventually recycled. Pep Boys is a poster child for the movement, even relying on the system to pay for television and newspaper advertising and settle auto insurance claims, warranty repairs on cars and collision repairs.

Bank of America calls its new A/P-p-card linkage ePayables. It uses similar supplier ghost cards, which are unfunded until a particular transaction has been approved through A/P channels, explains Jennifer Petty, senior vice president and senior product manager. But BofA took the process one step further: This year it integrated ePayables into PayMode, its payment outsourcing service. Finance staffs can now send a single file of approved payments from their A/P systems to the bank for execution–not just checks, wires and ACH but also the increasingly important p-card payments. Treasurers are getting closer to something they've been wanting for years: a single track for making all payments, regardless of type. P-cards are still not integrated into a single reporting platform, but that will come, Petty promises. Companies can use PayMode even if BofA is not their p-card issuer or if they are disbursing other payments from accounts at other banks.

While opinions vary on the best means of attaining better control and efficiency in A/P, there is no debate over whether that goal is essential in the current governance and risk management environment. By centralizing A/P, treasuries can potentially have only one disbursement account to fund, cutting down on unproductive cushions kept in multiple accounts in case someone writes an unreported check. "It helps companies lower working capital and make better short-term cash forecasts," explains Joergen Jensen, head of product management for Trema Group. With visibility and control over the whole process, a treasury staff can not only see and consolidate payments to suppliers, it can net out settlement when a supplier is also a customer. And, of course, centralizing, consolidating and netting should lower bank fees.

But achieving this kind of precision requires considerable coordination with other parts of the company, such as procurement, where the real problems may lie in the first place. "Best-practices companies don't try to fix A/P alone," says Nick Williams, who leads A/P transformation efforts for the Hackett Group, an Atlanta-based consulting firm that is owned by AnswerThink Inc. "In many shops, purchasing and A/P are two different cultures, often hostile ones. But in world-class companies, A/P and purchasing leaders meet regularly and try to fix the root causes of problems."

For Royal Appliance, a critical part of A/P is making outbound freight payments. The 100-year-old company, based in Glenwillow, Ohio, and now owned by China's Techtronic Industries, distributes Chinese-manufactured vacuum cleaners that it ships from three U.S. warehouses. This produces 1,700 to 1,800 invoices a month (2,000 in a peak month) that have to be received, matched, recorded and paid.

In 2005, Royal Appliance decided it needed to cut overhead. "As a reseller of OEM (original equipment manufacturer) products, there's not much we can do to control the cost of our merchandise," explains Jim Mann, Royal Appliance's controller. "What we can control are our freight costs and our operating overhead."

The solution: U.S. Bank's PowerTrack. In a float scheme that resembles a p-card but is not, PowerTrack pays Royal Appliance's trucking companies in one to three days, but accepts a 1.2% discount on the invoice price, which compensates the bank for advancing the money. "That's a lower discount than they could get on any card settlement," Mann observes.

Royal pays U.S. Bank once a month. "We gain about 20 days of float a month," says Mann, "and we know by the 10th of the month what will be debited on the 21st, so our cash manager can fund the account to be debited at just the right time with just the right amount. Before, we didn't know until the morning of the debit how much would be needed."

Until last year, Royal Appliance knew what it was paying for freight but had no idea how that cost should be allocated among its different products and had blurry vision of the economics of its logistics–for instance, which warehouse needed to be stocked with how much of each product to ship the orders it received most economically. PowerTrack provides a clear view of freight costs; allows Royal to use its warehouses more efficiently; and finally provides the necessary data for Royal to assess which products and which customers were truly profitable and adjust its pricing, if necessary. "Now," says Mann, "we're doing a much better job of controlling what we can control."