Recharging transactions

There are a number of ways in which the expenditure, managed using a procurement card, can be handled in terms of charging the transaction to the appropriate cost centre. In some institutions, a percentage is taken from each cost centre, within the cardholder’s area, and placed in a ‘holding’ cost centre from which payment is made each month.  The benefit of this system is that it is simple to administer with each card billable to a single cost centre.  The downside is that some areas will be paying an inappropriate amount towards goods/services that they do not receive.

More common, is the desire to charge each cost centre for the goods and services it actually receives.  The procurement card itself can only be mapped to a single cost centre, so some means of either transferring funds from the ‘paying’ cost centre into the ‘holding’ cost centre must be devised.  This may be handled in one of two ways

  • An electronic journal is prepared as the card is used and uploaded, on a regular basis, into the financial system. This acts to transfer funds from the ‘paying’ cost centre into a ‘procurement card holding’ cost centre.  If the journal is uploaded in a regular basis, say weekly, the cost centres can see the debt in its commitment accounting information.
  • The information prepared in the spreadsheet is used, once reconciled against the bank statement, to upload the information (again as a journal) and transfer the necessary funds from the ‘paying’ cost centre into the ‘procurement card holding’ cost centre ready for payment to the bank on the due date. The drawback with this system is that the commitment information is not as timely with up to a 6-week delay between a commitment being made and the reconciled charge being ‘taken’ from the paying cost centre.

A drawback with both systems is where the recharging action (either by regular journal or a reconciled monthly journal) is delayed and there is a risk that there will be insufficient funds on the ‘holding’ cost centre to meet the commitment thereby causing it to run at a deficit.  In practice, every procurement card should have a default cost centre and where there is a delay in the detailed journal transfer. The card holder would then have to manually journal the recharged information at a later date.