4 Reasons Organizations Resist Virtual Cards

There are at least four reasons why some organizations have not yet adopted Virtual Cards or, more broadly, an electronic accounts payable (EAP) solution. Do any of the following pertain to your organization? Revisit the reasons for their decision and ensure they had the right information first. You might be able to reopen the case.

1. Few Regularly Used Suppliers

A common target for Virtual Card usage is regularly used suppliers. This list might be short for some organizations, thereby a Virtual Card program may not be the best fit. For example, one end-user told me they do not use Virtual Cards because, as a research laboratory, their suppliers were always changing due to their always evolving purchasing needs. They found that traditional Purchasing Cards worked best. This is a valid reason. However, for other organizations, there are few regularly used suppliers because no one has pursued strategic sourcing. Besides not gaining the benefits of a Virtual Card program, they are potentially losing out on cost reductions that can be obtained through negotiated pricing.

2. Too Hard to Convert Suppliers

Your organization might be under the impression—without concrete evidence to support it—that your suppliers will not accept Virtual Cards. Before casting Virtual Cards and other ePayables aside, work with your current Commercial Card provider (or even a provider who is trying to gain your business) to do a “supplier match.” You might be surprised at how many of your suppliers are already accepting Virtual Card payments from other customers. In addition, many providers offer supplier on-boarding services, with or without an extra fee, to make the process easier for you. It pays to explore provider options.

3. The ERP System Cannot Support It

In response to this excuse, I have to ask, “Are you sure?” ERP systems are more robust today than ever before and include many different payment choices (or you might be able to add one). Further, you might be able to apply a default payment type by supplier. To accommodate Virtual Cards, the “payment release” step of the accounts payable process may simply generate another output. Instead of just checks and an ACH file, there would be a Virtual Card file to upload to the provider. Talk with your ERP system vendor to learn more about the capabilities.

4. Organization Resistance to Change

This is the catch-all reason that, unfortunately, often prevails above logic. If decision makers reject a sound, factual business case for Virtual Cards, then there is not a lot you can do until there is a leadership change or shift in organization priorities. Wait for the right time to bring this up again and ensure your business case includes the fraud protection aspects of Virtual Cards/EAP. Read more about getting EAP in the door...

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Speaking of fraud, I encourage you to participate in the current survey by AP Now, Newer & Less-commonly Occurring Payment Frauds. It digs into all sorts of frauds that your organization might be overlooking.

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Separate the facts from the myths to ensure you are making a sound decision about Virtual Cards and other EAP solutions.

Separate the facts from the myths to ensure you are making a sound decision about Virtual Cards and other EAP solutions.



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About the Author

Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more

Getting EAP in the door.

When you think of electronic accounts payable (EAP) solutions like Virtual Cards and buyer initiated payments, what is the first end-user benefit that comes to mind? Chances are, it is the potential to earn revenue share/rebate. We have all seen or heard phrases like “turn AP into a profit center.” There is no denying the monetary appeal, but in this fraud-gone-wild era, I think the fraud protection benefit deserves more press. Whether you are an EAP provider or end-user trying to convince management to implement an EAP solution, be sure to stress the following five points in your business case.

The Protective Side of EAP Solutions

  1. Suppliers cannot overcharge you, charge too soon, or process duplicate charges that require your time and energy to resolve. Because payments to suppliers are based on the amount your organization approves, transaction disputes are rare (or dare I say non-existent?). 
  2. Checks reflect your organization’s bank account number; sensitive information is “out there.” EAP payments do not have this risk.
  3. Fraudsters cannot create a usable counterfeit card from a Virtual Card nor can they steal Virtual Card information to make fraudulent purchases.
  4. No need to pursue external controls like Positive Pay, which often come with a cost. (See definition at the end of the post.) EAP solutions are already secure.
  5. Unlike ACH payments to suppliers, EAP solutions eliminate the need for suppliers to provide their bank account information. Your organization does not have to store and secure this type of supplier data, which is a win for both of you.

Conclusion

EAP payments are not the best fit for every situation (e.g., one-time purchases/suppliers for which traditional Purchasing Cards are ideal). However, they are a good option to add to the mix. Ultimately, every organization needs to develop a payment strategy that best serves its needs; namely, one that minimizes costs and fraud risk.

Access more information about EAP solutions.

To get ePayables/EAP into your organization, ensure your business case stresses the protective benefits.

To get ePayables/EAP into your organization, ensure your business case stresses the protective benefits.


Positive Pay Defined

Positive Pay is a service offered by most banks. As part of the service, companies transmit to their banks their check issuance file each time checks are written. The file contains a list of check numbers and dollar amounts. When a check is presented for payment, it is matched against the file. If there is a match, the check is honored and the check number removed from the file. If there is no match, the check is handled according to the preset instructions from the company.

Payee Name Positive Pay is an enhanced product that includes the payee’s name along with the check number and dollar amount in the file sent to the bank.

Source: 101 Best Practices for Accounts Payable

Virtual Card acceptance made easy.

Do suppliers resist or refuse to accept your Virtual Card payments? If so, you are not alone. There are also suppliers who initially agree to Virtual Card acceptance, but later change their mind. A big underlying problem is a manual acceptance process. In addition, a growing list of Virtual Card-using customers can mean dozens of different systems for a supplier to access. The good news is you can expand your playbook for on-boarding suppliers by introducing them to a solution. Keep reading to learn more about supplier challenges and an available remedy.

Supplier Challenges

I recently spoke with Nick Babinsky, Director, Business Development, with Billtrust, a provider of accounts receivable (AR) technology. He elaborated on the manual acceptance process that causes pain for many suppliers. A typical scenario starts with the supplier receiving an email notification about the Virtual Card payment. In some cases, a supplier’s AR staff has to click multiple URLs before reaching the applicable card account number. Then, to process the charge, AR manually keys the card account information. It does not end there, as AR needs to close the related invoices in their ERP system, which can also involve manual keying of remittance data. This type of process does not help a supplier in terms of card acceptance fees either.

Nick summed it up by relaying three common supplier objections to Virtual Card acceptance:

  • We don’t have staff available to key any more Virtual Cards or P-Cards that come by email.
  • We’re concerned about the security of manually handling credit card numbers.
  • The cost of accepting card payments is too high.

A Solution

Billtrust’s Virtual Card Capture solution addresses the pain points noted above. Nick conveyed that it:

  • eliminates the need to enter a card number into a terminal
  • can automatically apply remittance information in the supplier’s ERP system (the solution also supports remittance pertaining to straight-through payments/push payments)
  • helps a supplier qualify for Level 3 and Large Ticket interchange rates

Of course, my immediate question was, “How does it work with the emails a supplier receives (pertaining to Virtual Card payments)?” The answer: Through the utilization of robotic process automation (RPA). The emails are re-routed to the Billtrust solution and RPA takes over.

According to the Institute for Robotic Process Automation and Artificial Intelligence (IRPA AI), “Robotic process automation (RPA) is the application of technology that allows employees in a company to configure computer software or a ‘robot’ to capture and interpret existing applications for processing a transaction, manipulating data, triggering responses and communicating with other digital systems.”

Overall, between the technology and a Billtrust team who handles exceptions, a supplier’s pain is alleviated.

Case Study

Download a two-page case study that offers additional insight and/or access more information from the Billtrust website.

Offering suppliers a potential solution to address their pain points can motivate them to accept card payments.

Offering suppliers a potential solution to address their pain points can motivate them to accept card payments.

How the Solution Affects You

As an end-user/buying organization, you can feel confident that your Virtual Card payments to suppliers who use the Billtrust solution will be processed in a timely manner (specifically, on the same business day they are sent). No more calls or emails about the Virtual Card not working because the supplier waited too long.

Final Thoughts: What You Can Do

To strengthen your partnership with suppliers:

  • Talk with them about their challenges related to Virtual Card acceptance.
  • Consider sharing the Billtrust case study.
  • Contact your provider for any suggestions they have about easing supplier challenges.
  • Ensure that, at a minimum, you are initiating payments to suppliers quickly, ideally less than 30 days (e.g, within 10 days of invoice receipt).

See more content related to ePayables and Virtual Cards.


About the Author

Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With more than 15 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more

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