By Maria Parpou, Barclaycard Commercial Payments
Over the last decade, many companies have started to use virtual cards to facilitate payments between buyers and suppliers. Virtual cards first became popular in the travel space, when big bundles of trips – from airfare to hotel rooms – were bought and sold, and it’s still being used today. When a travel agency books travel on behalf of their customer they can generate a virtual card and pay the travel provider in real time and simply reconcile the booking to the billed transaction.
But virtual cards aren’t just for travel programmes – far from it. In fact, they can be an essential tool to cover wider business costs and managing the payment process with suppliers, too, given the increased amount of data and efficiencies they offer. Here are three ways the increased data provided by virtual cards can greatly improve the everyday procurement process.
Virtual cards offer many of the features of traditional plastic cards plus other benefits, including simplified reconciliation. Purchases on a virtual card come with a greater amount of transaction detail in comparison to legacy payment solutions. For instance, instead of a single reference number there is the ability to capture as many reference fields as the business needs. This makes it much easier to achieve a single view of overall spend through a virtual card mechanism than through a traditional PO and invoicing system.
And while cards are often overlooked when making large transactions, virtual cards can actually be used for payments in excess of £100,000, depending on the financial position of the business.
Virtual cards not only simplify reconciliation – they can help companies unlock wider process efficiencies. Increasingly, virtual cards are integrated with companies’ existing finance and e-procurement systems, so this payment option is readily available in procurement professionals’ usual workflow – so they don’t need to exit the platform to generate the virtual card. Thanks to this integration, finance systems can collect, store, manage and interpret the increased amount of data provided by the systems.
By linking a virtual card with an existing system, a business can use Straight Through Processing (STP), a mechanism which automates and removes manual intervention in payments. In using STP, businesses benefit by speeding up their transaction processing time. By reducing the time it takes to process a transaction, businesses can often increase the likelihood that a contract or agreement with suppliers can be settled on time.
Building better relationships with suppliers
The benefits of virtual cards extend to the suppliers receiving payment, too. Businesses not only benefit themselves from the richer data generated by this payment method, but can also provide this to their suppliers when making payments, in line with the company’s needs and preferences. In doing so, the company’s paper trail is enhanced which makes the reconciliation process simpler.
If a supplier knows that they can rely on a company to pay them on time, it can help build a positive relationship in the long term. This may even mean the business can negotiate an early settlement discount for future purchases – and the benefits to the bottom line of this are not to be underestimated.
The advantages of settling supplier payments benefit both supplier and business, however when looking at the full range of payment options available, it’s easy for businesses to stick with the payment processes that are familiar to them.
Nevertheless, while purchase orders and the traditional invoicing system still play a role in the procurement process, cards can offer more flexibility to businesses when making commercial purchases – they’re not just for travel. Instead, they are an important part of any modern payments strategy.