Virtual Card Payments

Balancing the Ying & Yang of Buyers and Suppliers

Are B2B Virtual Card Payments the Answer?

Author: Terri Cunnion

Selling products and services generates cash for any business, but managing and optimizing cash can be a challenge. In some organizations it is finely tuned, yet for others it is a month-to-month balancing act.  Every business needs to get paid in a timely fashion in order to manage cash as well as acquiring tools to grow their business. This dance is as old as time.  Fortunately, there is a creative payment method for B2B organizations which benefit both buyers and suppliers. virtual card or single use account credit card payment just may be the answer for advancing payment optimization within the  B2B segment.

But what exactly is a virtual card?

Virtual cards are auto-generated credit card numbers given by a buyer’s accounts payable department. A unique card number is generated for the transaction, and a notification is sent to the supplier.  Once the supplier accepts the payment, the funds are remitted to the supplier’s bank account.

In today’s business world, the most common payment method within B2B are checks.  But checks are costly, time consuming, and riddled with friction throughout the payment remittance process. 

Virtual cards provide significant advantages over checks and other payment methods for both buyers and sellers.  For buyers, they include:

  • Costs savings
  • Accelerated settlements
  • Improved cash forecasting
  • Efficient reconciliations
  • Fraud control

Supplier benefits include:

  • Faster Payments
  • Enhanced Security
  • Amore controlled receipt process
  • Reduction of administrative costs for payment reconciliation
  • Improvied record-keeping
  • Deposit time to increase cash flow

What will this cost to implement?

With the adoption of anything new into a well-established process, costs must be weighed compared to the status quo.  One of the costs associated with virtual cards is the interchange fee charged to suppliers.  This is often presented as a barrier, but as the industry better understands this innovative payment method, it’s actually a process improvement. Virtual cards can reduce costs and optimize payments. With fewer friction points and greater control, buyers can maximize cash flow efficiencies and begin to capture discounts (including dynamic discounts) offered by suppliers.  And suppliers can get paid more quickly, reducing their receivables time outstanding with faster access to cash. 

Embracing a virtual card framework enables secure transactions, better controls and reconciliation of cash (which is in the best interest of both buyers and suppliers).  With buyers holding on to their cash as long as possible and suppliers wanting to get paid as quick as possible, virtual cards can assist both sides in realizing their business goals.

0