As biotech firms know all too well, the cost of doing business is high. For every drug that knocks it out of the park, there are so many others that end in failure, requiring these firms to continually invest huge sums of money in R&D. According to the Congressional Budget Office, “Only about 12% of drugs entering clinical trials are ultimately approved for introduction by the FDA. In recent studies, estimates of the average R&D cost per new drug range from less than $1 billion to more than $2 billion per drug.”
It’s no wonder that other departments in the company – especially back-office operations like Finance and Accounts Payable (AP) – need to run lean on a tight budget, with limited headcount, and somehow find ways to do more with less. This can often feel like an impossible task, given the challenges these departments face. But imagine if there was a way to not only cut costs, but actually bring in revenue to your company. Savvy biotech finance departments are doing this right now through electronic payments, particularly virtual cards.
The high cost of checks
The cost of issuing paper checks and other manual payments is high, especially for financially strapped AP departments. The task of preparing, printing, getting signatures, folding, sealing, stamping, and mailing checks is very time-consuming, and when combined with the hard costs of paper, ink, toner, and stamps, it ends up costing your company $6 or more per check. Imagine how quickly that adds up if your business needs to pay thousands or tens of thousands of invoices each year.
Then, there’s the cost of late payment penalties due to delays in the manual process or the time it takes checks to reach suppliers through snail mail. And, because of all this wasted time, biotech firms typically miss out on early payment discounts.
Electronic payments cut costs
Savvy biotech finance teams are turning to AP automation with built-in electronic payments to overcome these issues and realize much-needed savings. Automation reduces costs by eliminating the manual tasks and hard costs involved in preparing and issuing checks. With a faster workflow, late payment penalties can be a thing of the past, further saving you money.
On top of that, you gain the visibility and control to decide when you will pay suppliers to best capture discounts, and manage cash on hand.
Earning money with virtual card rebates
While saving money is a necessity for biotech firms, that’s just the first step. You can gain added value and bring in much-needed funds to your company just by using virtual cards. Now, for every supplier payment you make, you’re actually earning cash-back rebates, and that can add up quickly. These rebates help biotech firms achieve fast ROI from AP automation, and some are even able to turn their AP department from a cost center into a profit center.
Imagine what you could do with a new revenue stream. It can be used to cover your ERP or procurement system costs, or to help fund R&D initiatives at your company to support ongoing business activity and growth. Rather than having to somehow get by with a tight budget, you could actually be contributing to your company’s bottom line – just by doing your job.
Additional benefits of virtual cards
Rebates are just the tip of the iceberg when it comes to the value of virtual cards. Additional benefits to biotech finance teams include:
- Ease of use – A recent survey of finance professionals revealed that ease of use is the #1 driver of payment types. Virtual cards are built seamlessly into many AP Automation platforms, allowing you to make these payments without any additional effort or workflow change.
- No cost – While all electronic payment types are cheaper than paper checks, virtual cards are free. There are no associated transaction fees to make these payments, which when combined with cash-back rebates, makes virtual cards a financially attractive form of payment.
- Suppliers prefer them – Paper checks create as much friction and complexity for buyers as they do for suppliers. That’s why most suppliers actually prefer to be paid via virtual card. They get paid faster, with the added benefit of assurance of funds.
- More secure – Fraud costs businesses $4.5 trillion dollars per year. Virtual cards help safeguard against this loss by providing a randomly generated 16-digit number, or token, that can be only used once and for a specific amount. That helps explain why only 3% of companies using virtual cards experienced attempted or actual fraud, compared to 74% using checks, according to the 2020 AFP Payments Fraud and Control Survey.
Join the savvy finance teams who are already reaping the benefits of virtual card
Biotech firms have a lot to gain by turning to electronic payments, particularly virtual cards, which are growing in popularity, and for good reason. The transaction value from these cards is expected to triple over a five-year period from 2020 -2025, reaching over $5 trillion, according to Juniper Research. Just think of what you could do with the added revenue you could earn for your company.
Check out this E-book to learn more about how lean finance teams can leverage AP automation to gain efficiencies, reduce costs, and generate revenue streams!