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Why virtual cards are the solution to all supplier payments

3-minute read

Man paying with card at the till

Wed Sept 26 2018

Virtual cards may have their roots in the travel industry, but they’re increasingly being used by businesses as a convenient way of streamlining a wide variety of supplier payments.

  • Not only do virtual cards deliver process efficiencies and take the hassle out of supplier payments - they can simplify expense claims, make it easier to keep track of cash flow, and open up a new line of credit to your business.

  • And according to data from RBR (Retail Banking Research), by 2022 virtual cards will account for almost a quarter of commercial card spending in Europe as they become more widely used for high-value B2B and travel-related expenditure.

  • With this in mind, it’s useful to have a closer look at the benefits of virtual cards and why procurement teams might be interested in using them for more than just travel and entertainment.

What are virtual cards and how do they work?

Virtual cards are a unique, single-use card created for a specific transaction, or chain of transactions.

They can be requested and approved through an online portal or an app and are given a specific validity date and one-time value when they’re issued. Virtual cards can also be restricted for use with specific supplier spend categories, which means procurement teams can have very close control over their spending and rich data when it comes to reconciliation.

While some suppliers still don’t accept card payments, which can throw a spanner in the works when it comes to procurement, the best virtual card solutions are able to convert card payments into a bank transfer.

It’s time to say goodbye to the frustration of paper invoices and payment order numbers.

Simplified reconciliation and process efficiencies

One of the main benefits of using virtual cards for procurement is that the technology simplifies reconciliation and also delivers process efficiencies. For example, cards can be requested and approved online or via an app, linked to B2B buying portals, or set up and integrated with existing finance systems so that funds are pushed to suppliers like BACS.

The technology allows the buyer and the seller to bundle a transaction or a series of transactions under a single-use card number.

The statement is then automatically matched to the purchase order, making reconciliation an automated process. Virtual cards help you cut down on the time you’d otherwise spend reconciling payments and hunting for missing paper records.

And you won’t need to manually approve each payment. A mechanism known as ‘straight through processing’ streamlines payments by eliminating the need for a person to approve each stage of the process. Approval steps can be configured and determined by you.

Virtual cards can also save you the cost of processing an invoice – research by document management company Cleardata suggests that the admin cost of paying a single invoice could be up to £50.

Another enormous benefit to implementing virtual card technology is the fact that it can help you save time setting up new suppliers. If your business handles hundreds of suppliers and frequently makes one-off, low-value payments, virtual cards are a great way of streamlining the process.

Ability to manage working capital

Staying in control of cash flow is an essential aspect of smart capital management.

That’s why Barclaycard Precisionpay and other virtual card technologies allows businesses to stay on top of their daily cash flow with an easily navigable online dashboard (and an app). Traditional payment technology often makes it more challenging to manage working capital because it’s hard to get an overview of what you’re spending day to day.

Virtual cards also open up a line of credit to businesses who want to make smart investments but don’t want to miss supplier payments. This ensures that suppliers are paid within 3-5 days while the buyer can benefit from a range of settlement periods.

Keeping on the right side of suppliers

Good supplier relations can be jeopardised by sluggish legacy payment systems. Late payment of invoices can cause friction with suppliers and can have an impact on the outcome of negotiations further down the line.

Small businesses in particular are often more vulnerable to cash flow issues, so it’s worth considering how digital payment tech can help keep them onside.

Virtual cards can ensure your business pays invoices quickly and with a minimum fuss, so you’ll have fewer tense conversations with suppliers and more time to focus on what your business does best.

Putting paid to security issues

Another benefit of virtual cards is that they reduce the risk of fraud linked to online suppliers storing card data on their site. The card numbers are single-use and only valid for specific suppliers, meaning they’re useless in the hands of fraudsters.

Most virtual card solutions are also backed by state-of-the-art encryption, which again reduces the risk of data being stolen.

Ultimately, if procurement teams aren’t using virtual cards as one of their supplier payment methods then they are missing out on a number of potential business benefits.

Traditional payment methods should still have a place in a business’ payment strategy, however the flexibility, rich data and process efficiencies that come from using virtual cards will deliver tangible improvements to the way procurement teams operate. 

Go to our supplier payments hub to learn more about Barclaycard's virtual card and digital payment solutions.

Virtual payments

A great alternative to cheques or transfers, Precisionpay allows visibility of business spending and supplier payments 

B2B payments

Help boost business efficiency and cut costs when you build a future-proof payment strategy with Barclaycard