What is a virtual card?
When you use your credit or debit card online, nobody makes you take a picture of your card. You simply enter details such as your 16 digit card number, expiration date, name, and CVV code. A virtual card is essentially this information that is linked to a card issuer, such as a bank.
It's almost the same exact thing as a normal card without the plastic, but because they're completely virtual you can issue a new card in seconds for specific one-time purchases. You can even use one virtual card with its own custom limits for each recurring expense so you never overpay on pesky subscriptions.
Due to their convenience, they're the fastest growing category in the payments industry and it's important for any business owner, A/P department, and even employee to know how they work.
So what's so great about virtual cards?
Virtual cards may sound simple, but in practice they have several advantages for business spending:
- Prevent overspending: You can set spending limits on a virtual card per month, per year, or even per transaction. If you want the card to self-destruct after a certain date, you can set that date before you issue the card.
- Category blocking: Limits on virtual cards are highly flexible, meaning you can theoretically create any sort of restriction you want. Companies often take advantage of this to prevent certain employees and departments from spending more than their limit on specific categories. For example, you can block anyone from the sales department from spending more than $100 on food and drinks.
- Proactive budgeting: Rather having awkward conversations about why a purchase was made, you can switch to issuing virtual cards and prevent employees from charging the corporate card. The employee would then have to request a card for a purchase and be approved before spending company funds.
- No reimbursements: You have complete visibility into every detail about the transaction, including the category of the purchase. That makes it less risky to issue employees their own virtual cards for spending, meaning employees won't have to spend on their personal cards and request reimbursements after.
- Reduced fraud: Physical cards can easily be stolen, unlike virtual cards. Even if a virtual card's details are taken, your spending controls are still in place. Best of all, if you issue a card for each vendor then you simply have to replace that one card instead of updating payment information for every single vendor.
- Quick integrations: Virtual cards make it easy to send information back and forth between software. That means all your financial software, communications tools, and really anything with an API can all talk to each other and stay updated.
- Hygiene: Nobody is touching a physical card and sharing it with others.
How do they work?
Creating a virtual card takes a few clicks, but it is important to note that not all banks and credit cards will offer this feature. If they do offer it, usually it requires you to simply enter a few details and confirm that you want to create a virtual card. Make sure to check if this will require a fee.
Once created, you will receive a 16-digit card number and other details you usually see on a physical card. You may have to press a button or create a test transaction to activate the card.
If the card is activated, then you're all set to spend.
How does Trimwire use virtual cards?
In Trimwire, every card requested uses funds from a budget and every budget has a budget owner. Therefore when an employee requests a card for a purchase, the budget owner will usually be the one to check the request and approve or decline it. There are cases when the administrators such as the business owner or the finance team may take charge, but the budget owners will usually have a better understanding of how funds should be used.
Once the card is approved, the employee makes the purchase and the budget owner is notified of the transaction confirmation. If the employee has not provided a receipt for the purchase within a set timeframe, then the budget owner can send a request for the receipt over Slack, email, or any other channel.
After the receipt has been collected and the transaction has been completely settled, Trimwire syncs the expense to the correct account in Quickbooks.
Virtual cards form a crucial aspect of Trimwire's foundation as they offer vast improvements in security, control, and connectivity over their physical counterparts. Switching your team to a virtual card solution can save you money, time, and a lot of headaches especially in a world where spending is becoming more distributed. To find out more on how you can optimize your company's finances, check out our website or just email us at email@example.com.