Why virtual cards are taking over the business world
Did you know that 25% of Fortune 100 companies used virtual cards in 2014, and spent an average of $330,698? This number has only increased in the last five years.
What is a virtual card?
A virtual card isn’t actually a physical card that you can swipe. Think of it as a virtual card number that you can generate in seconds and use like a credit card for online purchases.
Virtual cards have numerous benefits over physical corporate cards, checks, invoices, and PO processes, particularly in cases where ease-of-use, control, and reporting are important.
In this post, we’re going to take a closer look at five of these benefits, including:
- Virtual cards enable approvals
- See all spend owners and enable accounting automation
- Take power away from vendors
- Minimize damage from fraud
- Make purchasing easy for employees
Virtual cards enable approvals
One of the biggest advantages for your finance team is that virtual cards allow them to take back control over how money is being spent.
Instead of giving employees high-limit cards and fighting fires as the transactions roll in, finance teams can use a cloud-based platform like Airbase to have employees create spend requests and generate vendor-specific virtual cards once the requests are approved.
The approval system allows finance teams to approve purchases and set spend limits upfront instead of reacting to the monthly credit card bill and Expensify reports where there’s no way to recover the money that’s been spent.
See all spend owners and enable accounting automation
Using an approval system in conjunction with virtual cards allows the finance team to automate more of the reconciliation and reporting work. Giving each virtual card a spend owner makes it easy to track ownership of each transaction in the system.
Accounting can also set rules to automatically code recurring transactions to the correct expense account and add the appropriate tags before posting it to the GL.
Take power away from vendors
Giving a vendor your credit card information is giving them the power to charge you whenever they want. This means you often don’t find out about a price increase or subscription auto-renewal until you see the charge on the statement at the end of the month.
Smart businesses use virtual cards to protect themselves by generating a unique card for each vendor. Companies using Airbase, for example, can create virtual cards with custom spend limits, transaction limits, and adjustable lock dates to ensure that vendors are not able to charge over the agreed amount or make multiple unapproved charges.
Minimize damage from fraud
While convenient in the early days of a startup, having dozens - if not hundreds - of employees, vendors, and subscriptions all sharing high-limit corporate cards is trainwreck waiting to happen.
Besides being inefficient, the more services and people who have access to the same card, the higher your fraud risk. And suspending a card due to fraud kicks off a whole new set of tasks related to hunting down account owners and updating card details for all of the affected services.
Virtual cards protect businesses with spend limits, and canceling a card is simple because you only need to update the payment information for a single vendor rather than all of the services using a shared card.
Make purchasing easy for employees
If you work in a fast-paced environment like a startup or any industry that requires fast payments, virtual cards can be a lifesaver. While they look and act just like traditional credit cards, virtual cards offer added simplicity, security, and protection for the company.
So if you run a food delivery startup, you can set it up so that your 1099 delivery drivers can get one-time virtual cards for the amount of each food pick-up order. This is a more secure way to pay while also making it easier for your accounting team to keep track of the funds.
This same process also works with your full-time employees when they hire freelancers or contractors to help them with projects. Instead of handing over the company card or Paypal account, you can create a virtual card in their name with a pre-set spend amount.
For fast-growing companies, virtual cards are a clear upgrade over traditional credit cards. Companies can leverage virtual cards to help preserve budget, minimize fraud risks, and increase control, all without sacrificing speed.
Interested in learning how you can set up virtual cards with an approval system in Airbase? Schedule a demo today.