By Mike Railey, Vice President of Payments, MineralTree
While virtual cards aren’t new to the finance scene, a lot of healthcare businesses still haven’t integrated them into their accounts payable (AP) process. Many still use paper checks to pay supplier invoices, and as a result, take on all the extra costs and manual inefficiencies that come with them.
As part of an AP process, virtual cards can optimize payment workflows and support cash flow for healthcare organizations and their suppliers, something that has become increasingly important in the past 18 months.
What are virtual cards?
Virtual cards are an online payment method that acts like a credit card, but with fewer security risks. Each time a virtual card payment is initiated, a new, randomly generated 16-digit number, or “token” is created. This number works just like a regular credit card number except that it can only be used once and for a specified amount.
Virtual card payments can be delivered to vendors via email or a supplier portal and processed in the same way as a credit card transaction. The nature of the one-time use number means that an account can’t be accessed or charged fraudulently in the way a standard credit card account could if its number made it into the wrong hands.
Incorporating virtual cards into the AP process
Because virtual cards act just like credit card payments from the point of view of the vendor, they are very easy to incorporate into the AP process. Organizations that use an AP automation platform may find the option for virtual card payments already built in.
This means that any healthcare organization that wants to implement this payment method can do so without any additional effort or workflow changes. All they’ll need to do is work with their AP automation provider, who should have a dedicated supplier enablement team to contact and enroll vendors to accept virtual card payments. In the end, incorporating virtual card payments in the AP process should result in faster, smoother payments and less time and energy wasted with manual check payments – for both the healthcare organization and the supplier.
It’s worth noting that some organizations like the control that paper checks or traditional credit cards provide over the timing of a payment. These payment methods provide a sort of built-in “float.” This same control is also built into virtual cards. In fact, virtual card payments give the payer even more control. When processing invoices in the AP automation system, users have the ability to select which vendors they want to pay as well as the specific timing of payment, giving them the option to hold onto their cash for as long as possible without violating their supplier payment terms.
The benefits of virtual cards for healthcare organizations
When it comes to B2B payments in the healthcare industry, virtual cards can significantly reduce manual labor and streamline payments while reducing errors and maintaining security. The benefits are significant:
- Reduced paper processing for AP departments: Because virtual card payments are handled electronically, there is no printing, signing, packing, postmarking, or mailing required like there are for checks, saving both time and manual effort.
- Increased flexibility for irregularly occurring disbursements: In healthcare, irregularly-timed disbursements are more common, making automatic payment less available. For some, this was a reason to prefer paper checks, which could be made out in a specific amount to a specific individual or entity. But virtual cards offer this convenience as well since a new virtual card number is automatically generated for each payment.
- Improved payment security. Virtual cards are significantly safer than paper checks (which contain account and routing numbers) or credit card payments (which rely on using the same number for all disbursements). If check or credit card information falls into the wrong hands, the entire payment account could become compromised. With virtual cards, however, each payment is made with a unique, one-time use number, masking vital account information.
- Improved efficiency: Because healthcare organizations make multiple payments to multiple different entities each month, any improvement in efficiency of the AP process goes a long way. With virtual cards, new card codes are created automatically, and each transaction is digitally authorized with no need for cumbersome manual intervention.
- New revenue streams: Just as credit cards often come with reward or cash back programs, so too do virtual cards. Receiving cash back for every virtual card payment made translates to money in your healthcare organization’s pocket for payments that need to occur anyway. This money can be spent on value-added business activities – like improving patient care.
- Easier AP reconciliation: As part of the AP automation process, virtual cards eliminate the need to reconcile payments against multiple statements. Organizations will know exactly when the payment has been received and credited to the supplier’s account.
The benefits of virtual cards for suppliers and vendors
Not only are there multiple benefits to using virtual card payments for healthcare organizations, but their suppliers benefit too. These benefits include:
- Remote access to payments: Electronic payment methods are increasingly preferred by suppliers, particularly those that have remote Accounts Receivable (AR) teams. Paper check payments require that team members be physically present to handle and process the checks, whereas remote teams can handle electronic payments from anywhere.
- Quick and efficient payment: Once the supplier receives the virtual card number, they can process it immediately and receive funds in their account much faster than they would if they had to wait for a paper check to clear.
- Assurance of funds: Once a virtual card number is swiped, the supplier has assurance that the funds are available. For vendors, this means they don’t have to worry about bounced checks or delinquent accounts.
- Easier reconciliation: Because virtual card payments come with rich remittance information (more than is typically found on a paper check or via a standard card payment) suppliers have a much easier time with their own account receivable reconciliation.
- Time savings and convenience: Just as for the healthcare organization itself, the vendors and suppliers will save time and effort by avoiding the manual workflows associated with check processing.
Streamlining payments in the healthcare industry
Virtual cards offer a number of significant advantages for both healthcare organizations and their suppliers by streamlining the entire payment process securely and in a way that easily integrates with existing AP processes. Understanding these benefits can help healthcare organizations determine whether virtual cards should be part of their AP process.
About the Author
Mike Railey is Vice President of Payments for MineralTree, a company specializing in AP and payment automation for mid-market and enterprise organizations. In his role, he oversees MineralTree’s payment solutions and operations including supplier enablement and payment support. He also develops and manages strategic partnerships in the payments ecosystem.