How Virtual Cards are Revolutionizing the Accounts Payable Process

MineralTree’s Vice President of Payments, Mike Railey, was joined by the President of Brousseau & Associates, Mark Brousseau, for a webinar hosted by IOFM and sponsored by MineralTree, Inc. about the role of virtual cards in the accounts payable process.

How the Pandemic Became a Catalyst for the Rapid Shift to Electronic Payments

Mike started the conversation by outlining the fact that before the pandemic, companies were starting to make the transition to electronic payments, but the progress was uneven across companies and within them. However, there was no sense of urgency to make the change. He stated that the pandemic forced everyone into a work from home environment where there was now an impetus to move forward with electronic payments in a more meaningful and faster-paced way than before.

ACH is a component of the electronic payments. It is a payment method that has been around for a long time and one that companies are familiar with. However, when seeing the potential that virtual cards can offer, it makes sense to skip over, or “leap-frog” as Mike states, ACH transitions wherever you can.

The Way Businesses Pay Suppliers is Crucial

Both Mark and Mike emphasize the fact that businesses should take a hard look at the way it pays its suppliers, which can help a business thrive no matter the economic situation. According to a study done by IOFM, 91% of AP departments are working at home at least in-part, and this shift to remote working has posed operational challenges and risks.

Mark reviewed data that said many AP departments are concerned with how they are doing and are reporting more fraud and compliance risks. On top of that, they are also experiencing difficulty with getting suppliers paid on time and spikes in inquiries from suppliers regarding payment status. He stated that the uneasiness that many AP leaders have speaks to the fact that many rely on manual outdated processes for paying suppliers.

Another survey done by IOFM earlier this year (prior to the pandemic) showed that most businesses were not doing a great job of managing their spending, as 74% admitted that they needed to improve. The same survey showed that before the pandemic, at least 41% of businesses made at least half of their payments to suppliers by check, but since the start of the pandemic, the percentage of businesses that make at least half of their payments by check has declined by 7%. Before the pandemic, none of the surveyed businesses paid all their suppliers electronically – now, 3% of businesses do so. Mark stated that, “in the past six months we have made more progress towards moving away from paper checks than we have in years.”

Watch the Webinar On-Demand! Click Here

The Case for Virtual Cards

Mark pointed out that the pandemic has exacerbated the shortcomings in the manual outdated ways that most were paying suppliers. He cites the fact that studies show that it costs about $5.95 to pay a supplier with a paper check from beginning to end. In the remote working environment, there isn’t time to deal with all the manual steps involved in this process.

Virtual cards and electronic payments were being adopted before the pandemic for the benefits that they provide over paper checks. Specifically, virtual cards cost less, are less risky, suppliers like them, and they settle faster. Payments made by using virtual cards can be deposited into a suppliers’ account much faster than paper checks, arrive with remittance data, they are traceable, cannot be intercepted or white-washed like paper checks, and they can arrive in the suppliers account on time. These are all key reasons why suppliers are much more likely to accept virtual cards now. In addition, buyers can earn cash back rebates, have more opportunities to earn early pay discounts, and can extend their days payable outstanding without impacting existing payment terms to suppliers.

For AP departments, paying suppliers electronically frees up staff to focus on tasks that will add more value to the business such as data analysis and supplier management, things that will help a business return to growth. Virtual cards help AP departments do more with less. They help modernize their processes, and they deliver both departmental benefits and provide a payoff for the entire business as well as suppliers.

SilverPay: MineralTree’s Virtual Card Program

Towards the end of the webinar, Mike spoke on the benefits that automating your manual AP process with an end-to-end automation solution could provide for AP departments as well as how you can start implementing virtual cards into your business by explaining the features of MineralTree’s Virtual Card Program.

Mike restated the fact that there is an increase in demand for electronic payments by suppliers due to the pandemic. He outlined that there are many ways to start using virtual cards, but easiest way is to adopt virtual cards as a broader end-to-end automation of your AP processes.
Speaking on MineralTree’s virtual card program, SilverPay, which he stated is a plastic-less card. Each payment results in a new 16-digit credit card number that didn’t exist before. He explained that all virtual card programs run on one of the major card networks which vendors already accept, and MineralTree’s runs on the Visa network. MineralTree’s process relies on a quick approval process which involves a simple payment application that in most cases is approved with a quick credit check. Instead of having an additional statement to reconcile each month, MineralTree’s program allows for simple reconciliation so transactions are posted directly to your bank account as they are processed by vendors. The program also allows for cash back rebates for all virtual card purchases.

Virtual Cards provide a number of financial benefits such as cash back rebates, early pay discounts, cost savings, and interest earned by keeping funds in your account longer. They also provide increased security features with their one-time use and fixed dollar amount per use. There is a 30-day expiration on the virtual card and neither you nor the vendor has to exchange any bank account information.

Mike walked through each step that companies can take to get started with virtual cards. The first step being signing-up with a payment automation provider, then discussing your program objectives with the provider you choose. From there, the automation provider will take your list of vendors and develop an outreach campaign, which you will approve, to accept or enroll your vendors in the program. Once your vendors are enrolled, you can use your provider’s platform to make all your payments in one place.

The webinar concluded with Mike discussing some Case Studies where companies implemented virtual cards and solved many of the AP process issues they faced. You can watch the webinar on-demand, just click the image below!

Watch the Webinar On-Demand! Click Here

To learn more about all the digital payment options MineralTree offers, including virtual cards, contact us today!

MineralTree

We're transforming accounting by automating Accounts Payable and B2B Payments for mid-sized companies. Our award-winning solution has helped over one thousand businesses transform accounts payable from a source of inefficiency and fraud risk to a secure and strategic profit center that provides visibility into key cost drivers.