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March 17, 2022

Virtual Cards 101: How one company benefits from this win-win solution.

Written by
Laura Slauson
Laura Slauson
Virtual Cards 101: How one company benefits from this win-win solution. Virtual Cards 101: How one company benefits from this win-win solution.

Virtual cards have been a win-win for ecommerce company Recharge, says the company’s Controller, Eoin Hession. “We’ve gained significant returns from our use of virtual cards,” he notes, not just in the form of cash back, but also in terms of time saved, compliance, employee ownership of spend, and visibility into company spending. 

What is a virtual card?

In simple terms, a virtual card is an automatically generated card number, with associated card details, that can be used online wherever credit cards are accepted. But, when a virtual card is backed by powerful software and automated accounting, the advantages extend far beyond the ease of online purchasing. With the right software, virtual cards can:

  • Book all card transactions automatically to the GL. 
  • Capture a complete audit trail for every transaction.
  • Apply spend controls, such as time and amount limits.
  • Provide the option to auto-lock a card after a subscription expires.
  • Enforce receipt and other documentation compliance.
  • Alert users to duplicate spending. 
  • Ensure all spend is approved up front through automated approval workflows. 
  • Help ensure all categorizations are correct before GL booking.
  • Shorten the monthly close. 

From a user’s perspective, all of this happens with a few clicks — many first-time virtual card users say the process feels a bit magical. The simplicity leads to an obvious question: What took the fintech world so long to arrive at virtual cards?

In fact, only in the past few years have card issuers given fintech companies access to their card payment rails via APIs. Companies like Airbase then created workflows on top of the payment rails for a seamless card experience. It’s also now possible to integrate spend management software capabilities with traditional card providers, as AMEX has done with Airbase.

It’s all about the workflows.

Recharge’s use of virtual cards is easy and intuitive for employees. Eoin describes a virtual card request as a “mini purchase order.” Once an employee requests a card for a specific purpose, automated workflows route it to the correct approvers, who then review the request and the coding. Then the employee can use the card for the approved amount. “It’s one and done for the employee,” he says. 

The result is a lot of time saved for employees — and they’re grateful. “Employees are happy to facilitate the reduced volume of emails and Slack messages.”

Because approval happens before spending takes place, employees no longer have to ask for forgiveness after they spend money. Approvals can be routed based on a variety of factors, according to Eoin.

“We have the functionality of adding a plethora of approval flows depending on the spend. So that’s been fantastic from an overarching control perspective. We have really strong controls in place on spend before the transaction actually takes place.”

The option to require a receipt for all card transactions is another control Eoin appreciates. “We have a strong approach to compliance from a documentation perspective,” he explains. With virtual cards, the system can act as the enforcer and can even be configured to lock the card if receipts are not provided. A receipt inbox makes it easy, however, since users just have to send receipts to an email address, where they are automatically matched to the transaction record. 

How virtual cards shorten the monthly close.

The finance team also appreciates the time savings. Eoin says that any controller will appreciate the “power of a strong upfront coding environment, since all transactions are categorized in advance.” 

Virtual cards have now eliminated the need for a lengthy monthly close at Recharge. “On a weekly basis, our accounting team has a ‘mini GL close’ in which one accountant reviews all of the transactions in Airbase for consistency, ensuring that all of the transactions are coded to the correct GL and cost center.”

“It’s all automated from the backbone of Airbase, so it’s a really quick review.”

But what about physical cards?

A platform with both physical and virtual cards gives the option for both, but the visibility enabled by virtual cards typically makes them the better choice. Eoin says that the adoption of virtual cards has really reduced the volume of physical card transactions, and he notes that many vendors used by companies in the SaaS space welcome virtual cards. 

“As the controller, I work closely with the FP&A team, and we’ve put quite strict controls on physical cards including maximum spend limits a month. We want to encourage them to only use them for discretionary purchases that aren’t online, like paying for taxis.” 

How virtual cards can monetize AP. 

When a virtual card program shares a platform with bill pay functionality, it’s possible to earn cash back by paying bills with virtual cards. “This is something that as a controller I’ve taken great pride in: optimizing accounts payable for cash back,” Eoin says. The Airbase platform makes this even easier for him by providing prompts when a vendor accepts card payments. 

A seamless transition. 

When Eoin joined Recharge, he’d heard some buzz around virtual cards, but hadn’t any first-hand experience. He knew one of his top priorities was to address the disorganization of Recharge’s card spending: “We had numerous items on various cards throughout the company. Employees were also looking to take on more ownership themselves over spending.”

Initially, Eoin planned on acquiring different systems: one for purchase orders, one for cards, one for reimbursements, etc., until he discovered Airbase’s consolidated spend management platform. 

He also envisioned that employees would require a lengthy training period to get up to speed with how to use virtual cards and their spend management platform. “Ultimately, there wasn’t any learning requirement, and it was all really straightforward for employees to use. What we found is we scheduled 30–40 minute training sessions, but five minutes was all that was needed.”

What made the transition even easier was the work done by Airbase to move legacy bill payments on to virtual cards. “The fact that Airbase did a lot of that heavy lifting on the product side was really beneficial.”

The future of card spending.

Traditional credit cards are unlikely to go away, but Eoin agrees that the future will see increased adoption of virtual cards. “We are absolutely moving towards virtual cards to cover a significant volume of payments. And I think that’s the key win for finance and accounting teams to reduce the workload, and the compliance efforts on AP transactions to allow the teams to focus on the high-value add projects.”

Want to learn more about Airbase’s virtual cards? Let’s talk!

Laura Slauson
Laura Slauson
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About Airbase

Airbase offers a one platform solution to manage all non-payroll spend. It provides oversight and control over spending with real-time reporting and automatic syncing directly to your general ledger. Control all paymentsphysical cards, virtual cards, ACH, and checks – from one place. Close faster. Empower employees. Control spend.

To learn more about Airbase, contact us for a product demo.
Laura Slauson
Laura Slauson
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*Cashback rate offered on Airbase charge cards may vary based upon the Secured Overnight Financing Rates published by the Federal Reserve Bank of New York, or any such similar benchmark rates. Additional terms apply.