U. of Mich. Credits Purchasing Card With Savings

<B> U. of Mich. Credits Purchasing Card With Savings</B>

By Mary Ann McNulty

<I>Washington, D.C.</I> - The University of Michigan is using a purchasing card for travel expenses to reduce cash advances and the number of purchase orders issued.

Although the dollar savings are just starting to roll in, customer satisfaction with the program was immediate its travel manager said at the recent University and College Travel Management Conference held here by the National Business Travel Association.

In a recent survey, travelers ranked the new accounts payable process nine out of a possible 10, said Marty Parsons, assistant manager of the financial operations, accounts payable and the travel office at the university's Ann Arbor campus.

Card users are happy because the new travel payment solution is centrally, rather than individually, paid, so they need only reconcile expenses monthly rather than after each trip. Each month, the accounting office mails them statements listing all charges on one side of the page. On the other side, cardholders list the cost centers for each amount or indicate if the charge, or a portion of it, is a personal expense. At the bottom, they write in any cash expenditures and tally the total due from the university by themselves.

For now, the accounting office manually keys in all data to the general ledger. However, the process should be totally automated this summer as the university implements PeopleSoft accounting and business software campuswide, Parsons said.

The university began using the First Chicago NBD MasterCard Purchasing card for travel about a year ago. Of the 2,400 purchasing cards issued, about 1,100 are authorized for use with travel vendors, Parsons said. Annual air volume for the university totals $10 million to $12 million.

It developed the statements with assistance from its banking partner. It also prepares all statements from the daily data downloads of charges made to all UM Purchasing Cards. The accounting department reviews all transactions daily, looking for patterns of abuse.

As one of the purchasing card pioneers, the university began testing the new payment vehicle in 1993-1994, when 150 employees were given the cards to pay for small dollar items like office supplies. The pilot was so successful that the university rolled out cards to all who requested them in late 1995. About that time, a committee was reviewing the travel policy and program, looking for ways to reduce $3.5 to $4 million in outstanding cash advances and a cumbersome reconciliation process.

As in most university environments, there is no mandate for employees to use the agencies or the payment system. Parsons hopes the move from an individually billed American Express Corporate Card to a centrally paid MasterCard will encourage more travelers to use the preferred payment system and improve travel data.

Cardholders are authorized to get cash advances from automated teller machines and charge their airline tickets to the card rather than having the agency bill the university. However, they must call the accounting office to get a trip number they then use to reconcile all costs associated with that trip. "Instead of doing expense reports for each trip, they do them once a month now. It's much easier and streamlines the whole process," Parsons said.

<B>Declining Advances</B>

In the last three months, Parsons said, outstanding cash advances have begun to decline--a trend he is hopeful will continue. Besides the lost interest, outstanding cash advances add cost because the accounting office must track them and mail monthly reminder notices to employees to submit expense reports to reconcile them. The Internal Revenue Service also requires employers to report cash advances not paid back in 120 days as income. "If we don't have to send out dunning notices, our image is greatly enhanced," Parsons said.

The purchasing card program also has resulted in an increased amount of travel data being reported, which Parsons hopes to begin using to negotiate volume discounts with air, car rental and hotel vendors.