Gone are the days when businesses regularly used checks in their transactions. In fact, checks are no longer convenient in the current digital world. The current economic climate requires businesses to embrace technology instead. If your business relies on outdated systems and manual checks, consider shifting to virtual cards for accounts payable.
In this digital payment solution, a 16-digit, randomly-generated card number is created for each vendor transaction between payer and payee. It modernizes the conventional processes, increasing accuracy and saving time. Many accounting teams prefer virtual cards because they’re convenient, highly secure, and cost-effective. Also, vendors that take traditional credit cards often accept this form of electronic payment.
Let’s dive deeper and see other benefits of using virtual cards for accounts payable.
1. It Enhances Internal Control
Single-issue virtual cards give companies more control since a specific supplier or vendor gets one card with a specific dollar amount. After that, the vendor processes the card as they would do with a traditional credit card payment. The only difference is that you won’t provide an open line of credit or a physical card.
There is no manual re-keying or extra paperwork in entering purchases into the accounts receivable management system of the supplier. The process is automatic, provided you use the appropriate virtual card program.
2. Enjoy Better Cash Flow Management
Cash flow management can be challenging. There is an agreed time frame within which your company needs to pay suppliers and vendors. However, confusion may arise when determining the amounts of money available to the accounts payable department.
Virtual cards for accounts payable can help businesses avoid this. It enhances reporting, and organizations can manage their cash flow better with the right program. Different payment types won’t need a separate AP analyst, which also increases efficiency throughout the entire department.
3. Virtual Cards Streamline the Accounts Payable Process
Virtual credit cards replace old-fashioned and burdensome paper checks and their related inefficiencies. They allow the account payable departments to concentrate more on financial responsibilities rather than processing invoices. You won’t have to write checks, stuff them in envelopes, and meter them anymore.
Therefore, you save time and also increase accuracy by eliminating the risk of human error. Issuing virtual cards will significantly help AP departments mitigate costly inefficiencies in the accounts payable process.
4. You Can Reduce Costs
Checks cost mid-sized companies at least $3.50 to $5.00, while larger organizations usually have to part with between $10.00 and $20.00. Check payments also include costs for supplies such as MICR toner, envelopes, postage, and check stock. This is without counting the time and labor costs; after all, checks require folding, stuffing, and posting to the mail. With a virtual card platform, you avoid these costs and can keep more money in your business.
You can eliminate most of these check payments if you have the appropriate automation software by transferring some to V-cards.
Also, unlike physical credit cards, there is more security with virtual card platforms. They allow you to pre-determine the actual amount you want to pay and tie it to the invoices. The card number for each payment is unique; you only use it once.
Since it is a virtual card, no one can steal or re-use it. Moreover, it expires after spending the maximum dollar amount. This digital payment solution significantly reduces the risk of fraud and theft since you don’t have to provide an open line of credit to suppliers and vendors.
5. Earn Cash Rebates
Virtual cards for accounts payable can also earn you extra revenue. They earn rebates as you pay suppliers or vendors. If you choose the right program, then every dollar you pay using the virtual cards earns a cash rebate.
For example, virtual cards that earn rebates at a rate of 0.5% per transaction will give back $5,000 for every one million dollars you spend. While it might seem small, remember these earnings come with little to no effort at all on your part, and they increase as you continue to transact.
All you need to do is research before signing a virtual card agreement. Several bank treasury programs pay the cash rewards to your accounts annually or even hold it until you hit a certain minimum. Of course, many businesses prefer programs that pay every month for a clearer impact on the bottom line.
At Util Auditors, we understand that a single line entry could cost your business if it represents several inaccurate or non-applicable charges to your company. For that reason, we identify and rectify utility and service contract billing errors for companies. Contact us today for assistance or to learn more about our services.