By Paula Loverich, Marketing Manager and Karen Kroll, Independant Journalist
If you’re looking for a way to streamline your purchase-to-pay process while also boosting control, virtual cards can help. What’s more, they provide an opportunity to earn cash back on payments you’re already making.
As their name implies, virtual cards aren’t physical cards. Instead, they’re digital payment instruments.
One feature that sets virtual cards apart from other types of purchasing cards is the degree to which you can control their use. Your organization can program a virtual card so it can only be processed for a single use or a specified time period, for a set dollar amount or item, and/or with a specific vendor. Potential payments that fall outside these parameters are declined. In fact, virtual cards are also known as “one-time use cards.”
Another appealing benefit of virtual cards is the opportunity to earn cash back. The more payments and particularly the more high-value payments your organization places on its virtual cards the more cash back. Similarly, the more of your vendors that accept the cards the better. The cash back can offset the costs of your accounts payable and/or help shift a traditional expense center to a source of revenue.
Virtual cards boost the efficiency and security of your purchase-to-pay process by replacing many transactions currently handled by paper checks. Estimates of the cost to process a single check run as high as twenty dollars, given the manual steps involved. In fact, 80 percent of respondents to the 2015 Payments Cost Benchmarking Survey by the Association for Financial Professionals (AFP) said their organizations are shifting from paper checks to electronic payments for B2B transactions.
Checks are also the payment method most vulnerable to fraud. The 2015 Payments Fraud and Control Survey, also by AFP, found checks accounted for more than three-quarters of payment fraud. That put it far ahead of credit or debit cards and wires.
By reducing manual steps, virtual cards also can cut the likelihood of errors. That’s because the need to re-enter information—always an opportunity for mistakes—is minimized. Instead, information can flow through the system with little human intervention.
Moreover, virtual cards can easily integrate into many ERP and accounts payable systems, and replace traditional check payments across the globe. The changes required to existing processes are minimal.
As mentioned above, vCards are very different from traditional credit cards and P-Cards (purchasing cards) and offer greater control. At some organizations, management is leery of offering purchasing cards to more than a handful of employees. They’re concerned a few unauthorized transactions wouldn’t be noticed until it was too late to correct them.
The spending controls that can be put in place with virtual cards slash this risk. The account number can be programmed to become invalid after a specific date and eliminate any potential payment to unauthorized vendors. What’s more, these controls are put in place before the payments even occur, reducing the risk of unauthorized payments.
In addition, you can embed virtual card solutions into your electronic procurement system. This eliminates the need to share the account numbers with trading partners, further enhancing security.
Another control feature is the detail that can be provided at the transaction level. This information can tie payment data to a specific invoice(s), as well as purchasing information and associated documents.
The job of reconciling your bank statement is also streamlined. For starters, you need to make just one payment to the card company. That means you’re no longer trying to reconcile volumes of checks that have been issued to different vendors. You can receive electronic feeds to automate the reconciliation process.
At IPS, integration of the purchase-to-pay process drives automation and further streamlines the process. This allows your organization transparency into all transaction data without having to examine your bank statement.
Suppliers and vendors can easily work with virtual cards, using the same credit card processes and computer systems they’ve already deployed.
Vendors who accept virtual cards gain several benefits. They no longer have to worry that “the check is in the mail”. They can obtain detailed information on payments with greater transparency and automation..
Given the benefits of virtual cards, perhaps it’s not surprising that their use is growing rapidly. The benefits of virtual cards—cash back, efficiency, and control—make them a valuable addition to many organizations' suite of payment options.