One of the newest and most flexible forms of electronic payment is the virtual credit card. A virtual card is a 16-digit credit card number that’s created solely to pay for a single transaction at a predetermined dollar amount - but without the physical card. Virtual cards are designed to be an alternative to check or ACH payments, and can be accepted by any vendor that accepts payment by credit card.
The process to pay your vendors using a virtual credit card is similar to the process you use to cut a check. Here’s an overview of how it works.
Nonprofits are well-positioned to benefit from virtual credit cards. Not only do they add an enhanced level of security and fraud protection to the accounts payable process, they also simplify processes and provide a mechanism for generating new forms of revenue to support the nonprofit mission! Here are 4 Big Benefits nonprofits can get by using virtual credit cards.
1. Significant Cash Rebates
One of the more tangible benefits of virtual cards are cash rebates, the level of which is tied to your payment volume. The more payments you process using virtual credit cards, the higher the rebates you can earn.
2. Stronger Internal Controls
According to the Association for Financial Professionals, paper checks are still the number one target for payment fraud. Virtual payments allow you to set specific dollar amounts and expiration dates on each payment, giving you another layer of protection on your payments that improve controls and reduce the risk of payment fraud.
3. Simpler A/P Processes
Virtual cards automate the payment and reconciliation process by integrating with your financial system. Payment files are sent electronically from your A/P system to your virtual card payment processor. This eliminates the need to cut checks and automates the reconciliation process.
4. Better Cash Management
Converting to virtual card payments also means improved control over your cash. You’ll know exactly when payments need to be initiated and when they clear. This translates into better cash flow forecasting, allowing you to hold funds longer and make better cash management decisions.
A virtual card program provides a variety of benefits to both you and your vendors. It helps you reduce costs, streamline processes, improve cash flow and add another layer of controls and security over one of your most important financial assets – your cash.
Learn more about one of the fastest growing forms of electronic payment in our free publication, The Nonprofit CFO’s Guide to Virtual Credit Cards. Download now.
Tom is Founder & CEO of Vendor Centric, a consulting firm that helps organizations adopt a risk-based approach to vendor management. Connect with Tom on LinkedIn or drop him a note at firstname.lastname@example.org.