Virtual cards are on the agenda for more finance professionals. And for good reason.
Paying suppliers with a virtual card enables buyers to reduce costs, mitigate risks and generate lucrative monthly rebates or rewards on payments made by card. Suppliers benefit from secure payments, self-service reporting, and streamlined reconciliation of payments and open invoices.
But none of these benefits are possible without a strategy for implementing virtual cards. Here is a proven six-step implementation strategy that delivers the greatest ROI on virtual cards:
- Step #1: Analyze your latest supplier spend file
Review your organization’s current relationship with each supplier, whether the supplier accepts cards, how the supplier is currently paid, the average amount the supplier is paid, and the number of payments made to the supplier. These insights will help you identify eligible suppliers. And don’t be surprised if most of your payments are going to suppliers who do not represent the latest share of spend. Taking a holistic approach to spend-file evaluation results in greater efficiency for your department, while maximizing potential rebates or rewards.
- Step #2: Enroll your suppliers
Enrolling suppliers in a virtual card program starts with tracking down contact information for each supplier, identifying the right contact for each supplier, and appending the information to your vendor master file. The next step is to create a launch plan incorporating messaging tailored to specific groups of suppliers. Be sure to include contact information for your CFO, controller, or a person in your accounts payable department on all supplier communications. And customize communications to suppliers to reflect a primary motivation for migrating to virtual cards (e.g. going green). The initial enrollment campaign should include multiple e-mails to suppliers, as well as telephone calls, to explain the process of being paid via virtual card. Suppliers should be given the opportunity to immediately opt into your virtual card program or to get back to you in a few days after they have had internal discussions or received senior management approval.
- Step #3: Execute the payment
Automated payment engines make it a snap to pay suppliers with cards. Buyers simply upload an invoice payment file into the payment engine. The payment engine then determines whether to pay each supplier via virtual card, Automated Clearing House (ACH) or paper check. Most accounts payable departments expect to make most of their payments to suppliers electronically within the next three years, per the Institute of Finance and Management (IOFM).
- Step #4: Ensure dedicated support
Buyers have too much at stake to let their virtual card program be undermined by a lack of support: virtual card programs can deliver four times the financial benefits of an invoice automation project. Look for virtual card programs that offer ongoing and dedicated change management, a point of contact for bank and network support, dedicated supplier support to ensure program participation, and the ability to maintain a secure and reliable payments platform.
- Step #5: Plan for ongoing enrollment
Things change fast these days. Suppliers come and go. Supplier resistance to virtual cards softens. Buyers gain leverage with suppliers who demanded paper checks in the past. That’s why it’s important to enroll suppliers on an ongoing basis. Drive enrollment by regularly analyzing your supplier spend file, contacting new suppliers about virtual cards early in the buying process, and working with procurement to negotiate card acceptance for new contracts.
- Step #6: Grab incremental revenue
Virtual cards help transform the accounts payable department into a profit center. For starters, eliminating paper checks decreases operating costs. What’s more, the time and resources your accounts payable department saves by paying suppliers electronically can be used for value-added tasks. And the monthly rebates or rewards earned from virtual card spending can offset department overhead and fund automation projects. Tip: Virtual card solutions providers should only make money when they successfully enroll your suppliers (think: revenue sharing).
The benefits of virtual cards to buyers and suppliers are undeniable. Putting this six-step strategy to work will ensure that your organization achieves the full potential of its virtual card program.
The best part: many of these tasks can be performed by your virtual card solutions provider.