Overview & Use Cases
Payment technologies have evolved and transformed over time. Now more than ever, there are many payment options in the financial marketplace. Cash, check, wire, and ACH transfers have longstanding histories, but increasingly, organizations are looking to streamline payment methods, implement cost saving strategies, and take advantage of rebate opportunities.
One key payment method recently introduced is the virtual card. Below, we’ll explore what a virtual card is and when it makes sense to use it.
Virtual cards are randomly generated for a single-use, and then can be used with suppliers to procure goods and services. Virtual cards are provided and backed by financial institutions such as banks and credit card companies. Each service provider has their own portal in which users can log in, access the virtual card, make changes to spending limits or update terms for when the card is paid off.
Virtual cards have numerous benefits over physical corporate cards, checks, invoices, ACH, wire, and PO processes. Beyond saving time and money by forgoing the need to physically print checks or draft invoices, virtual cards can’t be lost or stolen. How temporary your virtual card is up to your organization.
Virtual cards can easily be changed or replaced. What’s more, virtual cards have the ability to deliver real-time payments and also offer easier expense tracking and integration with your ERP system.
A key advantage of virtual cards is the ability to maintain control over how, when, and why money is being spent. You’re able to take back control over how money is spent, and with virtual cards, there is no need to give employees high-limit corporate credit cards that can be subject to fraud and security breaches.
Employees can instead create spend requests and generate a virtual card that is specific to that particular vendor and purchase. There is more control over approving purchases and setting spending limits from the get-go.
By granting vendors access to your credit card information, you’re providing them with the ability to charge you at their set cadence. Oftentimes notices of autorenewals and/or price increases can go unnoticed until the charges are already processed. Virtual cards ensure that there are no surprises. Customizing vendor-specific spending limits gives you more control to ensure you’re being charged your previously agreed upon amount.
In the long run, most organizations will see the value in moving away from manual paper-based payment systems. Though this will be a cost and time saver in the long run, making the switch from manual to more automated processing is a big change and doesn’t come without its challenges. This can be a particularly burdensome barrier to entry for many organizations, and navigating a large process change like this can be all encompassing no matter the size or scope of your organization’s accounting and treasury team.
Undergoing the shift from manual to automated processing requires buy-in from key personnel in all levels of your organization. Leadership needs to be able to see the ROI of implementing an automated process, and the day-to-day accounting team need to be able to see how automated processing will improve their daily workload and create more time for more value-add, strategic accounting efforts.
Ensuring that all groups are on board and can see the shared strategic vision is no small task, and oftentimes brining in a team of experts is the best thing you can do when looking to update your processing and take advantage of the cost savings of being able to utilize virtual cards.
The ability to take advantage of rebates, hang onto and invest your organization’s cash, replace checks, ACH, and other payment methods, increases security, and ease of the reconciliation process is going to benefit organizations in all industries. Including a team of experienced consultants in this process of moving from manual to automated payment methods will help make the case for the long-term ROI of leveraging these 21st centry tools and payment technologies.
Even though navigating the transition from manual payment processing and integrating and using virtual cards with your ERP system can be a challenge, Elire’s experts are here to help. For current Cloud ERP customers, we can help develop your e-payables strategy to adopt virtual cards and make them a part of your payment processing. We can help with selecting a service provider, supplier enablement, and integrating your payment tool.