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One of the unsung heroes of the Accounts Payable Automation process are payments. In my experience people don’t have has much problems as invoice probably because payments come from a central location and proactively go out of the organization, unlike invoices which aren’t so controlled.

There is a Light

Lately there has been more interest in companies paying their bill using virtual credit cards as a form of payment. Virtual credit cards (VCC) are a secure source of payment that is easy to create and easy to apply, and the great news is VCC will put you in a position to get a rebate, and everyone loves a rebate. Banks are in the forefront of managing these types of payments. Going to your bank is a natural first step, but there are a few things they don’t know… secrets

First!

Frist, what is a virtual credit card and why is it important? A virtual credit card is a limited time used card with a defined limit. Sometime these cards can be used for a month with a small limit, other time these cards can be used one time for a specific dollar amount. It’s popularity has come about because of the internet where people were looking for secure ways to make single time transactions. VCC don’t have personal information like a normal credit card so it is a very good vehicle to protect identity theft.The opportunity or trend is to take you payment file (not all) and apply that file of payments to be made through a credit card program that will leverage virtual credit cards. Also, there is the rebate factor. Meaning that each payment that gets paid by VCC will be eligible for a rebate. The vendor who is opening their credit card merchant account to receive the payment has the benefit of receiving a payment quicker where the funds are backed by the credit card company and they don’t have to exchange any bank account information with their client to make any of the transactions possible (win – win).

Thing 1 – Adoption

Adoption is the first place that banks are unaware. Typically the burden of introducing companies (Vendors) to receiving payments by way of credit card or merchant accounting is left to the company not the bank. Because of this dynamic organization that are wanting to really press a VCC program will need to hire skill they do not posses. Skill like tele-prospecting, sales, and closing transactions. Normally these skill are not part of finance departments as much as sales departments. There are synergies with the departments, meaning sales can help recruit, but because of the ongoing nature of vendor VCC adoption finance and accounting will need to look for alternatives.

Thing 2 – Options

Another thing you banks doesn’t understand is the vendor needs options. Options like paper checks and ACH are needed to help the recruitment process for VCC. They don’t seem related and they even seem like they are competitors, but they all work together to achieve the same goal. Here are a few facts:

1. Vendors don’t like paper checks either – but don’t know any other option
2. ACH are difficult to administer by both the vendor and client. In a resent survey by AMEX they found out that:
3. 20% of Vendors Addresses change each year
4. 10% of vendors change banking relationship each year

Thing 3 – Don’t Forget the Invoice

The third and final thing banks don’t know about your VCC program is that the invoice make all of the security difference. Banks are great with helping you manage your money, but they don’t do much when it comes to managing the expense. The expense, however, starts with the invoice (or PO) and ends with that expense being a payment.

Most businesses have check signers. The role of the checks signer is to make sure the expense and the payment match. It is an extremely important step that can’t be skipped, so when approached with separating the expense (contract or PO) to the payment, finance and accounting professional are forced to say “no”.

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The Argument to Automate – How Innovation Can INSPIRE Not Fire – click here to buy

The 8 Pitfalls of Accounts Payable Automation – click here to buy