Virtual cards for businesses: Company-wide practices you can adopt today
Virtual cards are a great tool for finance leaders to manage cash flow. Adopting them in your business can bring many cost benefits and remove unnecessary financial stress. We looked at the best ways you can implement virtual cards in your business.
Alex Millar, CPA
August 12, 2021
Virtual cards are generating more and more buzz. Recently, Hudled sent out a poll asking how companies are paying for their subscriptions, with a third of them using virtual cards. While they’re certainly growing in popularity, it’s not always clear how to implement them in your company. In this guide, we cover everything you need to know about using virtual cards in your business.
What is a virtual card?
Virtual payment cards are card-free payment solutions that put you in control. They work similarly to traditional debit or credit cards. Only, they're created online. You can select your desired currency, set spending limits and streamline payment processing. When you create a virtual card, it generates a unique 16-digit card number, expiry date, and CVV.
How to use virtual cards in your business
Dedicate one card per subscription
When setting up virtual cards, individually assign them to a subscription or expense category. The benefit of doing this is that you can easily cancel at any time. Rather than letting vendors automatically charge you, you have more control. If you ever need to stop a subscription, simply cancel the card. Having one card per subscription means there aren't any impacts on your other subscriptions.
"There is nothing more frustrating than having a subscription that automatically renews - especially if you no longer use it. With virtual business cards, this problem can be easily solved with a press of a button. Virtual cards can be disabled electronically, therefore simply cancel your virtual card to prevent it from being charged."
One card per subscription also allows you to easily trace transactions: how much you spent, where it's going, who purchased it. Virtual card payments will automatically record purchasing information in your card management system. This removes manual work for you, allowing you to focus on more important work.
Set card limits based on the subscription cost
Setting limits on virtual cards can help keep you on top of expenses. No subscriptions should go above a pre-set amount, so you don't have to worry about hidden costs.
Before setting a limit, ask your employees what they expect the tool to cost each month. In this calculation, ask them to factor in what the tool could grow to. Set the card limits based on this information. Then, let your employees know what the limit is. This will ensure you're both on the same page while making it easier for you to track expenses.
Set the expiry date
Creating virtual cards that have a set expiration date can ensure you don't end up paying extra. This is particularly helpful for one-off purchases or unwanted automatic renewals. It can also prevent overcharges on monthly subscriptions, when you don't want to accept new upcoming costs.
Have a backup payment source
Make sure you always have a plan B. In case there are insufficient funds in your account, come up with a backup payment. This is particularly important for vital subscriptions in your company.
Understand the product's business model
Depending on your company of choice, virtual card products have different business models. Understanding the business model can make sure you choose a product that's right for you.
For example, some products make money through foreign exchange fees and conversions. When you include these in your purchases, it’s easy to see how fees can add up. Avoid accidental fees by checking your virtual card's default currency. You can end up spending a lot more money through these extra fees.
Set clear procedures for your employees
Set out clear guidelines on company policies and procedures around virtual cards. When done right, it'll help avoid misunderstandings down the line.
Ask your employees to provide you with a copy of the receipt to verify purchases. As a general rule of thumb, ask for them to upload the receipt within 24 hours.
Avoid personal cards
Where appropriate, it may be worth limiting the use of personal funds for company purchases. When employees use personal funds, they forgo an approval process. This can add extra company expenses, limiting real-time visibility and spending control.