Guest comment by Stuart Davenport
Never has the role of a finance professional been more daunting. Inflation, energy prices, staffing issues and more are all presenting major business challenges and making the future harder to predict. Most finance directors have to run at full pace just to not fall behind everything expected in these turbulent times.
For Finance Directors looking to streamline their operations, payments are a ripe ground for progress. Inefficiencies cost money, and the payments process has traditionally been one of the most time-consuming and resource-draining parts of a finance team’s day-to-day tasks. Manual processes, such as receipt tracking, ad hoc reimbursements or payroll updates are still undertaken for employee expenses. These businesses are being held back by inefficiencies while there are smarter ways of doing things.
In the forward march towards digitisation across multiple business operations finance teams can utilise the fastest growing payment solution available today: virtual cards.
What are they? Essentially, they’re digital versions of traditional credit cards. The technology allows an employee to make payments without having to physically hand over a card – simply provide the number, expiry date, and security code, just like a regular credit card. They differentiate from a physical card in that they can be individually created for a single purpose, such as supplier payments or business trips, meaning each expense is associated with its own card.
When decisions are made, the last thing a CFO wants is to be waiting on their team to onboard a supplier or a statement to arrive
Their use is growing rapidly worldwide – retaining all of the benefits of physical cards as a widely accepted payment method, but without the plastic. However, there are several areas where they provide added value when compared to plastic.
The pace of business is rapid. Cashflow is tight and getting paid quickly and efficiently is important. When decisions are made, the last thing a CFO wants is to be waiting on their team to onboard a supplier or a statement to arrive.
In just a few clicks, a virtual card can be issued and will be ready to be used for payments. No waiting for a card to be posted or handed over.
Staff can get instant controlled access to company funds to pay for expenses without having to pay themselves and claim back. For example, an employee can request a card to pay specifically for a hotel booking or ordering new office equipment.
This in turn, reduces the workload down the line, as automated reconciliation establishes a one-to-one relationship between the payment and the purchase data. Unlike traditional plastic or lodge cards, this cus the time and effort businesses invest in tracking receipts and invoices and reconciling payments to the purchases made.
Primarily adopted in the travel sector in the early 2000s, they have ultimately paved the way for the same payment innovation benefits to be applied to many areas of corporate payments
Handing over a physical business card to an employee can strike fear into even the most trusting manager as thousands of pounds are available to the employee at any time. However, when each virtual card is created, there is a set pre-agreed amount specific to the purchase and approved by a line manager before the card is issued. For example, a specific card could be set up pay an invoice or a recurring subscription.
Further controls can be applied. Merchant Category Codes can restrict where the card can be used and expiration dates can be set to ensure payments are only within a certain time window. There is no need to retrospectively audit expenditure as a manager has pre-approved the spending based on the card request. All the work is done before the payment is even made.
This control also helps make virtual cards more secure. Creating a unique card number for a specific purpose, with controls over how much money can be spent, when and where, significantly reduces the risk of misuse and/or fraud. Combine that with the fact that virtual cards are pretty much impossible to misplace or get stolen, they are a more secure option than plastic.
Virtual cards, primarily adopted in the travel sector in the early 2000s, have ultimately paved the way for the same payment innovation benefits to be applied to many areas of corporate payments. This applies to invoices, employee spend, procurement or elsewhere. One of the reasons virtual cards were first adopted by the travel industry is the ease at which payments can be made cross-border and in different currencies.
Not all virtual cards are the same. You may want different interchange levels for supplier payments or have local accounts to avoid FX fees and therefore it’s important to pay with the right one. Card requests can be routed based on when and where the payment is needed, without the hassle of setting up new accounts or the fees accrued from receiving and paying money in different currencies into the same account.
As the scope of the Finance Director continues to change to meet heightened pressures, business solutions will need to change too. Virtual cards are an important part of that transition.
Stuart Davenport, Chief Product Officer at virtual payments technology provider Conferma Pay