Once a buyer has paid an invoice with a virtual card, the AR team on the supplier side receives an email notifying them that a virtual card has been used to make a payment and that they must now process that payment. In most cases, the card details are sitting in the body of the email. Due to the strict parameters and rules applied to the card, this isn’t an issue from a security perspective. The issue is that the vendor has to manually plug those details into their POS system or virtual terminal. They must input the card details, wait for the success or failed message, deal with that message appropriately, and then ensure the remittance data is entered into the ERP. Entering remittance data, in most cases, involves manual data entry (from email to ERP) and in the best case involves copy/paste actions. The level of effort is high and if the dollar value of each transaction is low, it means that the ROI diminishes quickly for the supplier. For a supplier receiving only a handful of virtual card payments, the process is somewhat manageable. However, with the growing popularity of virtual cards, especially from the buying side, suppliers are either forced to hire more staff in AR or refuse to take virtual cards.
In one case we know of, a supplier had to build a team of 20 full-time resources to deal with the volume of virtual card emails. It became a mess to manage. Suppliers en masse are revolting and despite double-digit growth in virtual card payments each year, the churn on suppliers accepting virtual card payments is more than 15%.
What we are left with is a payment method that has a positive impact for the buyer but negative impact for the supplier. So how can we make virtual cards a positive experience for everyone? There are two issues that need to be solved for: easily processing the card and, once processed, getting the remittance data into the supplier’s ERP without manual data entry.
By implementing Straight-Through-Processing (STP) and working directly with acquirers like First Data, card issuers can get the card processed and get the funds into the right bank account. But then there is still a remittance problem. How does that data get into the supplier’s ERP?
You need a supplier-centric solution that facilitates a more robust way of taking payment details, transports them into an ERP and closes out the open receivables. This solution now exists and it’s finally making it easy for suppliers to accept virtual cards.
This new solution aggregates all virtual card payments received by a supplier across all issuers and compiles it into one comprehensive file-based or API-based data transmission, for delivery directly into the supplier’s accounting system. This creates a digital data source that suppliers can more easily integrate into ERP systems or use for cash flow forecasting.
As more and more suppliers begin to use this new solution, we’ll start to see virtual cards compete with ACH as a commonly accepted payment method. By streamlining the approach to existing reconciliation processes, this new solution helps to improve the overall payment experience between buyers and suppliers of all sizes.
Aug 12th, 2020
The Buyer’s Guide to Selecting Accounts Receivable Automation Software
Feb 25th, 2021
With multiple stakeholders involved and a host of business objectives to consider, finding the right AR automation software for your team can feel daunting. But don’t stress, because we’ve compiled all the key considerations that should guide your research.
5 B2B Payment Trends That Will Define 2021
Feb 18th, 2021
Find out which B2B payment trends will have the greatest impact on businesses in 2021 and how to stay ahead of the curve when it comes to payment processes.
Why Your AR Processes Might Be Stuck in the 80s—and What It’s Doing to Your Cash Flow
Jan 28th, 2021
Much has changed since the 1980’s thanks to rapid advancement in technology. So why haven’t most accounts receivable departments caught up? Learn how outdated AR processes could be hurting your cash flow.