Smarter Payments
Debunking Common Electronic Payments Myths
Contrary to misconceptions surrounding electronic payables solutions, companies that adopt virtual card programs often boost their efficiency while increasing their savings and protecting against fraud.
Economic growth in the US has been somewhat tepid in the long recovery from the global financial crisis, but there have been bright spots along the way. The middle market has helped create new jobs and grow the US economy. The National Center for the Middle Market reports an 8.5 percent year-over-year revenue growth rate for the middle market over the last 12 months and the employment growth rate remains strong at 6.4 percent.1 As these businesses continue to expand, leaders are looking for opportunities to effectively manage growth, gain competitive advantages and improve the bottom line.
To best capitalize on growth opportunities, companies shouldn’t overlook their payment strategy as an area to increase efficiencies, reduce costs and optimize working capital. Incorporating a modern virtual card solution for B2B payments can better position the organization to remain competitive in a dynamic marketplace.
Boost Efficiency and Savings with Your Payments Strategy
Businesses of all sizes are trending away from checks and toward electronic payments. The 2019 Association for Financial Professionals’ (AFP) Electronic Payment Survey Report2 found that 42 percent of organizations’ B2B payments continue to be made by check. This is a significant decline from the 51 percent reported three years prior.
B2B Check Payments in the US
Percentage of Organization's B2B Payments Made by Checks2
| 42% | All | 2004 | 81% |
| 46% | Annual Revenue Less Than $1 Billion | 2007 | 74% |
| 39% | Annual Revenue At Least $1 Billion | 2010 | 67% |
| 48% | Up to 1,000 B2B Payments Made/Month | 2013 | 50% |
| 41% | 1,001 to 5,000 B2B Payments Made/Month | 2016 | 51% |
| 38% | Greater Than 5,000 B2B Payments Made/Month | 2019 | 42% |
Reliance on checks often overlooks common direct and indirect cost areas, including:
- Lost employee time
- Materials, supplies and postage
- Losses due to human error in a manual process
- Losses due to fraud
- Inefficient working capital management
Commercial card programs address many of these issues by reducing overhead, providing robust reporting, tracking functionality and solidifying control functions. Global acceptance of credit cards and rebate options are additional reasons why nearly half of AFP survey respondents stated that they’re likely to convert a majority of their payments to electronic methods for their major suppliers in the next three years.2
In particular, single-use accountSM solutions are increasing in popularity because they provide an added level of efficiency and control, in addition to organization savings in the form of a rebate. Each supplier payment carries a unique 16-digit virtual account number. That means the credit limit on each single-use account number is set to the specific amount of each payment. And because it’s electronic, buyers are able to automate the payment process with a solution that combines the benefits of a purchasing card, the functionality of a check and the efficiencies of ACH.
Common Myths About Upgrading to a Virtual Payments Solution
While legacy processes may seem sufficient, today’s fast-paced environment challenges middle market businesses to better manage payables and cash. A lack of transaction visibility and control, and fragmented or incomplete reporting can directly impact the bottom line. Further, the growing risk of fraud requires innovative processes and solutions. Virtual cards offer enhanced security features to mitigate the risks of fraud and misuse.
While larger corporations have complex integration requirements, many virtual card programs for mid-sized businesses offer a turnkey interface that requires limited IT expertise. Administrators can easily set critical transaction parameters and “go live” to quickly get the program up and running. The right virtual card provider will offer an implementation solution best suited to meet the company’s specific needs.
Virtual card programs are designed to make staff more efficient. Solutions can automate administrative functions, simplify tasks and streamline account reconciliation, reducing the time employees spend on manual data entry and check management. Reducing the strain on staff resources gives employees more opportunities to focus on value-added areas of the business that sustain growth and provide a competitive advantage.
Virtual payment programs reduce processing costs, enhance disbursement capabilities and capture more spend. In fact, a 2018 RPMG Electronic Accounts Payable Benchmark Survey3 indicated that organizations that use virtual payments estimate the cost of the average invoice payment to be $9, yielding $26 per transaction in cost savings over traditional check payment. For organizations whose suppliers offered early payment discounts, more than half also report that they continue to receive that discount when the invoice is paid with a virtual payment.
