Corporate Buyer Rolls Out Single Card Solution

<B> Corporate Buyer Rolls Out Single Card Solution</B>

By Lynn Woods

<I>Baltimore</I> - Youth Services International, which provides facilities for at-risk kids, has instituted a pilot project to consolidate its travel and entertainment, purchasing and fleet costs under a centrally billed PHH/Paymentech MasterCard Corporate Fleet Card.

YSI director of purchasing and support services P. John LaPorta said the point of the project is to reduce administrative overhead, realize economies of scale, better control credit card expenses, simplify the reporting and billing process, and create an automated database that will aid the company in its negotiations with vendors.

LaPorta and YSI's vice president of finance first met with PHH and First USA in May 1997. Bolstered by the CEO's interest in a purchasing card, YSI's management approved the new program and signed a contract with PHH/Paymentech in August. Implementation of the pilot--which is being conducted at corporate headquarters in Baltimore and two locations in South Dakota--began in December. This month, YSI, which has annual revenues of $100 million, is rolling out the new system to all 20 of its corporate locations--a process it hopes to have completed in April.

Out of 2,000 YSI employees, 300-400 travelers will be issued cards. Each employee will be assigned to one of four subcategories: purchasing, T&E, fleet or all-inclusive (meaning the cardholder can use the card for all three purposes). Credit limits will be set for each user individually, according to need. "The chairman of the board has a large limit because he travels a lot," said LaPorta. "Others have much tighter limits."

Initially, YSI is limiting card usage to purchases of $500 or less, enough to cover most T&E and fleet charges. On the procurement side, the company will resort to purchase request forms for more costly items.

The all-inclusive card program represents a sea change in the accounting practices at YSI, which previously was using the American Express card for T&E and had no purchasing card. PHH was managing the company's fleet, but without a card program. YSI employed a patchwork of gas, facility and vehicle cards for its 220 vehicles. These now are being replaced by the PHH/Paymentech card, which will be issued to 150 vehicles, identified by unit number. The remainder of the fleet is located at sites which are equipped with fuel supplies, so a card isn't necessary.

The card will be controlled by the fleet or business manager at each location, who will be responsible for reconciling all statements before they are sent to corporate headquarters for approval and auditing.

On the travel side, YSI is not changing its traditional travel policy as it switches cards. However, now that the company, and not the employee, is liable for T&E expenses, LaPorta said YSI is scrutinizing more carefully than before which employees will receive a card. "Ghost" cards are being issued at each site to cover the needs of employees who do not travel frequently enough to justify having their own cards, but might have to take a trip in an emergency.

In addition, LaPorta said, "we're really stressing the education part. We don't want abuses or mistakes." Employees who knowingly abuse the card will be subject to severe penalties, including possible termination of employment.

Although LaPorta worried that vendor acceptance of the card might be a problem, his fears have proven to be unfounded. Vendors "like the card because they get paid quickly," he said. "There were only three situations in which we had to do some talking, and only one vendor had never accepted a credit card." Ultimately, that merchant agreed to sign up for MasterCard.

More problematic have been vendor SIC codes. "We had blocked out some convenience stores, but since some sell gas, we had to adjust our program," he said, noting that two of the locations of the pilot were in remote areas where branded gas stations were few, forcing employees to buy gas at the convenience stores.

As it rolls out the program, YSI also is switching from paper to e-mailed statements, though these are still being printed out and handed over in paper form to supervisors for approval. Supervisors then forward the approved statements to the program administrator at the corporate office, who takes care of the billing and retains a copy for auditing purposes.

YSI also is taking advantage of the reporting and billing information available from Paymentech on the Internet. Access is "on a user ID basis, which we regulate because the information is so sensitive," LaPorta said. While the reports that can be downloaded from the site are canned, he called the service "a great tool for looking at something quickly."

Moving to a one-card system also is expected to result in more efficient billing. Card issuer First USA provided YSI with Procard software that takes an electronic feed from MasterCard, sorts out the expenses and routes them to YSI's internal general ledger. Once the software is up and running, the company will pay a single bill instead of the current 4,000-5,000 a month--and save the cost of writing thousands of checks.

LaPorta is confident that the changes will save YSI a bundle as the firm expands. "We can add another 20 locations without having to grow our accounting staff," he said. "That's where we'll get tremendous economies of scale.