Adopting digital cards to streamline AP operations 

Accounts payable (AP) departments manage a lot of numbers, data, and vital information to ensure their businesses run smoothly. What more could you ask for than an opportunity to make things easier when running your AP department? Here we’ll look at how adopting a digital card payments process can help you do just that.

What are virtual cards?

Virtual cards were created to help simplify running your business by automating accounts payable (AP) processes, reducing the cost of paying suppliers, and creating more secure payments. A virtual card provides a randomly generated single-use code that is used for the payment of goods and services. A virtual card is perfect for secure transactions because it can’t be used repeatedly and is created with a pre-set amount that is determined by the user making the payment. Once payment is processed by the supplier, the card cannot be used again. Since there is no physical aspect to a virtual card, the process improves the experience for all parties involved in AP.

What are virtual card payments?

Virtual cards can be designated for many types of payments and accommodate the varying payment needs of suppliers. A virtual card not only reduces the manual labor required of an AP department to pay suppliers, but it also has increased security measures that reduce the possibility of fraud impacting your business. Once a virtual card payment has been made, the virtual card can be set to expire if the charge is not made within the designated time frame. This feature increases security measures and reduces the likelihood of cards being charged wrongfully.

For companies that regularly pay the same supplier for goods and services, virtual cards can simplify repetitive payments. The AP department in charge of paying suppliers typically requires manual labor, mailing expenses, and more, but with the use of virtual cards, the entire process is simplified for all involved. When virtual cards are utilized, vendors can plan to get paid on time – and sometimes faster – instead of waiting for a physical payment to come through the mail.

Benefits from adopting a digital card for your business

Looking beyond the simplicity that comes from adopting virtual cards into your business, there are several additional ways that virtual cards can improve your business. Here are six benefits that businesses can experience when paying suppliers electronically:

Reduce fraudulent payments

• Virtual cards drastically decrease fraudulent payments by expiring once the dollar amount has been processed to the recipient. Since there is no physical card to steal or static credit card number to use improperly, this process reduces the chances of fraud impacting your AP.

Save AP costs and decrease manual processing

• The time and money taken to process and send physical payments is not insubstantial. Using a digital payment solution to pay suppliers eliminates dealing with paper checks, bank deposits, bank check processing fees, and shipping costs.

Act sustainably

• Moving to an electronic payment system means that your business decreases its usage of paper, which is environmentally sustainable.

Improve payment accuracy

• For AP departments that are swarmed with paying vendors, duplicate payments can occur by mistake. Virtual cards simplify this process because you can assign the amount, and the card cannot be processed more than once. Simplifying, securing, and speeding up transactions with suppliers can lead to stronger relationships

Optimize AP operations

• Virtual cards can increase the speed in which suppliers are paid. This benefits both parties and frees up time for the AP department to put efforts elsewhere. Faster payments translate to more on-time payments, and that can strengthen relationships with key stakeholders and suppliers.

Simplify the payments experience for all

• Using a virtual accounts payable system not only simplifies the life of the AP department, but it also creates an easier experience for vendors. Virtual card payments provide the convenience that every accounts payable department needs and wants, and accounts receivable teams can benefit, too. A payment sent electronically can be deposited into a supplier’s account much faster than a physical payment method. In addition, a digital payment is traceable and has significantly fewer fraud threats as it cannot be intercepted or white-washed like paper checks.

Gain competitive advantage by embracing technology to move your business forward

Take the next step to move your business forward and digitize AP operations. Converting to a digital payment solution helps your businesses stand out against competitors and stay ahead of technological trends in your industry. The future of business operations is transitioning to a digital format where everything can be easily accessed electronically. There is also a growing culture shift to measurable sustainability practices in businesses, which further justify the importance of going paperless. Stay competitive and integrate virtual card technology into your business.

By incorporating a virtual card system and online payments, AP departments – which traditionally are cost centers – can be made into revenue generators. Doing so also enables efficiency and security.

Making the switch from manually intensive payment processes, such as writing physical checks, to automated accounting systems can be an effective way to save money. Processing checks is costly for suppliers since banking and processing fees can vary greatly depending on the size of the business and its financial institution. For example, the average cost in 2023 to process a single invoice is about $10.183, which is an increase of 10 percent from the previous year. While automated clearing house (ACH) costs are usually lower, they still generate fees, which are often still paid by the supplier – and sometimes by both the supplier and the customer.

Small businesses that receive or write thousands of checks per year become burdened with costs for envelopes and stamps. Plus there is the time spent writing, mailing, collecting, and reconciling those payments. With virtual payment technology, those fees can be transformed into rebates and can create new revenue for a business.

Adding to your company’s bottom line can be achieved with a virtual payment system that not only eliminates fees, but also generates revenue as a result of the savings created by eliminating manual processes.

Overcome the fear of integrating a digital payment system

Even with all the benefits, converting to a virtual payment system can be daunting. Systems need to be in place in order to adopt virtual card payments to suppliers. First and foremost, suppliers need to be on board with converting and receiving a digital payment compared to traditional paper checks. Convincing vendors to transition to a new and different payment method can present hurdles.

WEX has simplified the supplier onboarding process to adopt virtual card payment

To face the supplier onboarding hurdle, WEX took a unique approach by breaking down the spend coming through their own AP department to identify the root of the problem. This approach provided a benchmark related to how many suppliers were most likely to convert to virtual card payments. From there, the team made a goal based on that estimated conversion number. By understanding the total AP spend at WEX, the first layer to be removed was one-off spends that would either never happen again, or wouldn’t happen again for several years. From that, WEX removed any entities that did not accept virtual cards as well as entities that would not accept virtual cards in the foreseeable future: municipalities, government organizations, banks, tax agencies, employees, and so on. The number that resulted from removing such entities created the “targeted spend.” Such a process helps identify business needs and prioritize the key suppliers. This is a crucial step to move forward in adopting virtual cards for your AP department.

The second step to using virtual card payments is supplier onboarding. To convince vendors who are not already accepting virtual cards to start doing so, your business needs to take every inroad available to contact those suppliers and educate them on the benefits of this technology. WEX suggests expecting a conversion that falls between 17% and 35% of your targeted spend. However, with persistence, engagement, and dedication to converting suppliers to onboard virtual payments, WEX was able to achieve 42% of their targeted group of suppliers. By encouraging engagement, your virtual card campaign can see a significant increase in vendor onboarding.

From this internal study, WEX recognizes that the key factor to drive conversion is engagement. It is pivotal that your business takes the time to educate your internal and external stakeholders to create a better understanding of virtual cards. At WEX, managing this onboarding process with sensitivity toward suppliers while demonstrating key benefits to them is important. The biggest payoff for suppliers is the savings not only in terms of their resources, but also in the speed of payment and cash flow in their businesses. Relaying this information in an effective way has proven successful at WEX.

Get started with a WEX digital card for AP payments

Using a virtual card payment solution is very similar to the payment process of a credit card. Although most suppliers are likely to have experience using a credit card, your business still needs to dedicate time to educate them on the differences and benefits of using a virtual card. WEX has designed a two-in-one solution for AP departments that provides a virtual card product set and a state-of-the-art reconciliation into one interface.

Learn more about how to get started with a digital card payments program.

Build value and trust with every transaction

Every business – whether it be travel companies, financial institutions, technology companies, or corporations – can benefit from cutting costs, increasing visibility, and finding new sources of revenue. The WEX digital payments platform delivers and helps you build value – and build trust by reducing fraudulent payments.

In closing, we invite you to watch this short video that gives a great overview of what virtual payments are and why you’d want to use them:

Learn more about how WEX payment solutions can be tailored to your business, so you can accelerate and streamline operations while creating lasting growth and success for your organization.

References:
Bank of America
WEX case study
Core Integrator
Plate IQ
Mineral Tree
Business Wire