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How to manage payment data

A look at the widening scope of online payment services provided by financial institutions.


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October 1, 2015 by Jacob Stoller

Photo courtesy Square
Photo courtesy Square

Much of what contractors do with software has to do with the handling of money. More than their peers in many other lines of business, contractors must monitor, record and attribute a wide, and sometimes unpredictable array of expenses. Getting it right often spells the difference between profit and a debilitating loss on a project. Furthermore, errors in reporting can have legal and regulatory repercussions.

IT systems that manage these chores have become more powerful and, with the help of cloud computing, more affordable. Contractors, however, should also keep an eye on a parallel trend – the widening scope of online payment services provided by financial institutions.

The charge has been led by credit card providers such as Visa and MasterCard. A decade ago, credit and debit cards were reserved for occasional purchases such as office supplies. Today, businesses are using these technologies increasingly for strategic expenditures that were formerly handled by purchase orders.

The key is a myriad variations on the traditional credit card that are collectively referred to as purchasing cards, or p-cards.

Unlike their forbears, p-cards often involve no plastic at all, but 16-digit virtual card numbers that can be assigned for specific cost centres and then returned to a pool and re-assigned. The advantage for businesses is that they gain access to sophisticated online portals for monitoring and tracking expenses, assigning spending authorities and reporting for regulatory purposes. Essentially, this allows them to outsource various aspects of their e-procurement.

“P-card use has expanded well beyond traditional plastic card usage by employees for the purchases of goods and services,” says Patrick Sulston, vice-president and senior business leader, commercial business development at MasterCard Canada.

According to a 2014 North American study conducted by the RMPG research corporation, 18 per cent of businesses are using p-cards for strategic spending, 10 per cent say they will in the next year and a further 20 per cent will over the next three years.

Mike Patterson, market management – Wholesale Card Solutions at Citi Canada, says p-card adoption for very large contractors is in step with other industries, but that smaller providers are lagging behind the curve. “Typically, adoption slows in the construction sector as you move towards the small to mid-sized businesses,” he notes.

Through the supporting management portals, the p-card systems give contractors access to a suite of expense-monitoring tools that allow managers to achieve a fine degree of control over the day-by-day spend.

Essentially, contractors are getting “an expense product that can help them streamline their processes, and at the same time give them information that consolidates where they spend money and who spends what,” says Don Manson, senior manager for Commercial Cards at Scotiabank. Restricting purchases to preferred vendors – allowing for volume discounts – is one aspect of this level of control.

An important feature is real-time reporting of irregularities. “You can use reporting tools to ensure compliance without process overload,” says Sulston. “Rather than having to monitor individual transactions, contractors can oversee and manage purchasing card programs by exception.”

Much of the benefit to the bottom line, Patterson notes, is around speed. RPMG, for example, reports a 60 per cent-plus improvement in the time between order and the receipt of goods. All this helps contractors improve their working capital, making them more competitive.

Contractors will find growing pressure from their customers to accept them. Since vendor fees finance the card systems, card providers are hoping that the appeal of a shorter payment cycle will encourage more contractors to sign on. To sweeten the pot, they have also begun to provide volume discounts on large transactions. As well, payment could get even faster. A method called straight-through processing, where payments are processed immediately upon invoice, is now being adopted by some organizations in the U.S.

Another improvement on the receivables front is mobile technology for accepting traditional credit cards. One that is attracting a lot of attention is Square, a system that allows anybody to collect payments in the field using a credit card through a portable device that attaches to a computer or cell phone.

A mechanical contractor, for example, could equip its service technicians with these devices, enabling them to collect payment for service calls on the spot.

“Square has many features perfect for contractors, such as a mobile invoicing feature and offline mode which allows you to take a payment even if you don’t have a reliable signal on your phone,” says Jenny He, communications lead, Square Canada.

Like the card providers, Square provides online tools for tracking of transactions, which includes integration with QuickBooks and other popular software packages.

Jacob Stoller is a principal of Toronto-based consultancy StollerStrategies.


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