What locks down and liberates your accounts payable process at the same time?
Here’s a hint: It travels in the form of a randomly-generated credit card number that can only be charged one time for one specific amount. The answer, of course, is a virtual card; and the implications virtual cards have on accounts payable teams are hard to ignore.
Virtual cards are raising the bar for what it means to securely process payments, and simultaneously creating new efficiencies.
While virtual cards are new, they are not complex. On the contrary, transitioning to vendor payments with virtual cards is a simple process, and can be accomplished within a brief time window. A short list of benefits teams that pay with virtual cards can start to realize immediately after making the transition include:
- Bolstered protection against fraud
- Faster payment processing
- Thousands of dollars in cash-back rebates
This article will explain how virtual cards are creating all of these benefits, but first let’s review how virtual cards work.
What are Virtual Cards?
Virtual cards are randomly-generated credit card credentials that are delivered for payment on behalf of your static credit card data. These credentials are generated through a process called tokenization, and can only be charged one time for one amount. Additionally, virtual card payments can be set up to expire if they aren’t charged within a designated time window.
The key difference between virtual cards and traditional credit cards comes from the fact that your static credit card information is protected through tokenization. With a traditional credit card payment, you are required to expose your credentials every time you make a payment. This information is often stored by vendors, and once stored, can easily fall into the wrong hands. Exposing this information to more vendors makes it more likely that credit card fraud will happen. With virtual cards, on the other hand, you never need to share your actual credit card information with anyone.
From the perspective of an accounts payable team, very little changes from the traditional pay-by-card procedure. Popular credit card issuers like Mastercard, Visa, and American Express offer virtual card pay platforms alongside of their traditional business credit cards. Your vendor can opt in to receive virtual card payments from you in the same way that they receive credit card payments.
What Do Virtual Cards Mean for Accounts Payable?
Whether you are making the payment or are on the receiving end, virtual cards are creating improvements for all parties involved in accounts payable. Beyond the aforementioned boost in security, businesses that pay and receive payments with virtual cards are improving their approach to B2B payments in a variety of ways.
Optimized working capital
In a B2B payments world that is still dominated by paper checks, virtual cards are enabling a more strategic approach. While paper checks require several days to print, pack, postmark, and mail to vendors, virtual card payments can be executed instantly. The ability to pay faster enables teams to hang on to large payment sums for more time, and collect more returns on them as working capital. Faster payments also translate to more on-time payments, strengthening your relationship with a key stakeholder in your business: your suppliers.
Cash-back rebates on every payment
This point is a matter of simple math. Let’s say your virtual card earns you 0.5% cash-back on your invoice payments. At that rate, for every million dollars your business spends, you get $5,000 back. This may seem like an unimpressive number, but consider one thing: It required almost no effort at all to earn. As your business – and list of vendors – continues to grow, your rebate total will grow too, and start adding up to a tidy sum to be re-invested into your business.
Less manual labor
Something that accounts payable and accounts receivable teams can agree on wholeheartedly is that paper is no fun to process. Printing, signing, packing, postmarking, and mailing checks is arguably the most tedious and painful component of the accounts payable process. Likewise, tearing open envelopes, endorsing, and depositing dozens of checks at a time could be considered even worse. Paying with virtual cards makes life better for your team and the teams that you’re paying by creating new efficiency. Additionally, it liberates both teams to focus on more engaging and interesting work that can move the business forward, rather than simply maintain the status quo.
The Best Way to Get Started with Virtual Cards
Paying with a virtual card is very similar to the process of paying with a traditional credit card, but attempting to manage either processes on your own will leave many opportunities for greater efficiency on the table. To pay with any card, businesses have needed to utilize a distinct login credential with their credit card issuer, and then go through a set of steps within that portal to get credit card payments out the door. Accounts payable automation platforms simplify all of this down to just a few clicks.
Accounts payable automation platforms streamline the process of paying with virtual cards by centralizing the AP process into one cohesive workflow. The entire process, from the time you receive an invoice to the time you pay that invoice, is accelerated by cutting manual intervention out every possible step. This includes the steps for capturing data on vendor invoices, securing invoice approvals from department heads, getting payment authorizations executives, and executing the payments. With an implementation process of just a few days, AP automation offers the most viable path to building virtual card payments into your teams B2B payment process.
Curious to see what your team can look like with virtual cards and AP automation? Contact MineralTree for a personalized demo.