Virtual credit cards are auto-generated credit card numbers that are created for a specific purchase and can only be used once. Because they’re so different from ordinary plastic, switching to virtual cards may seem like a hassle — but they’re actually easier to use than traditional credit cards once you’ve set up your system.
Their convenience for expenses and general purchasing can’t be overstated because their protective features make them usable for purchases where traditional credit cards would be too risky. As a result, virtual cards have become increasingly popular with A/P departments. In fact, the Wall Street Journal reports that they’re the fastest-growing category in the payment industry, and Billtrust claims that virtual card spending will overtake traditional purchasing cards by 2021.
If your company isn’t already using virtual cards, now’s a great time to get started.
Why use virtual cards?
Virtual credit cards have a number of advantages over the traditional plastic. Just consider how virtual cards can help you solve the following issues:
- Employee overspending – Users can set maximum spending limits and can set the card number to expire after a certain deadline. Any leftover amount on a virtual card will be credited back to the original account.
- Poor expense visibility – You can have separate virtual card numbers for different expense categories, or even for specific vendors, which makes tracking expenses much easier.
- Employees making purchases without authorization – If your employees use their own cards — or even company-issued plastic — for expenses, they can make purchases and then inform you after the fact. Virtual credit cards can only be issued by the primary account holder, so employees have to get approval before making a purchase. That makes virtual cards a good way to keep control of employees with poor spending habits.
- Delayed employee reimbursements – By issuing a virtual card instead of having the employee use their own credit card, you can make reimbursements a thing of the past.
- Card theft – It’s basically impossible to clone virtual cards since they have no physical form. What’s more, virtual cards can’t be lost, stolen or skimmed. Even if a hacker gets ahold of a virtual card number, there’s not much damage they can do – these numbers are generally issued with a built-in purchase limit equal to the amount of the initial expense.
- Lack of expense tracking and reporting – With virtual cards, tracking expenses over time and generating reports by employee, vendor, and so on is typically trivial. You’ll be able to quickly spot issues such as ballooning expenses early on, while they’re still relatively easy to fix.
- Excessively high credit card fees – Credit cards are often prohibitively expensive for small businesses, but virtual card numbers tied to a checking account or debit card can be considerably cheaper. This set-up makes it easy to give employees purchasing power without actually releasing your checking account or debit card number to them.
- Inefficient purchasing processes – Virtual cards are much easier to integrate into a largely automated purchasing or expense process, as you’ll see in the next two sections.
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The virtual card purchasing process
One of the safest and most effective ways to use virtual cards for employee expenses is to have your provider issue single-use accounts (SUAs). These are ordinary-looking 16-digit account numbers that can only be used once and are issued at the time the employee makes the expense request. Once the purchasing department approves a particular expense, your virtual card platform automatically produces a credit card number that’s authorized for the exact amount of the expense.
SUAs are also a great choice for accounts payable purchases. You can set up your virtual card platform to automatically email a fresh virtual card number to a vendor as soon as you’ve approved the invoice. Because the vendor can only charge the card once, it’s a secure way to pay expenses that might otherwise be too risky to put on a credit card, such as very large purchases or purchases from brand-new vendors.
Virtual cards and automation
One of the most groundbreaking features of virtual cards is how well they lend themselves to an automated purchasing process. Virtual cards’ built-in security features, particularly their SUA option, make them much safer to use in an automated purchasing or expense process than your typical plastic credit card. In fact, since virtual card platforms can issue SUAs automatically upon request, they’re already partially automated.
For example, consider how Teampay’s automated expense process works. An employee can put an expense request through using Teampay’s Slack chatbot, giving the bot whatever information you require for that type of purchase. Teampay then submits the completed request to a designated approver.
If the expense gets approved, Teampay then issues a virtual card number to the employee that’s good only for the particular expense’s vendor and amount. The employee can also use Teampay to submit a receipt if required by your purchasing process. In short, the only part of the employee expense process that’s not automated is the expense approval – a step that takes no more than a quick click for your typical expense request.
Switching to virtual cards protects you from fraud, gives you more visibility into employee expenses and allows you to automate much of the A/P process, reducing the risk of data entry errors. These cards can make your entire company more efficient by disposing of reimbursements and making it easier to control spending.