Finance is at the core of every business. Whether you want to start a new business, expand your current one, or buy new equipment or inventory, you will need money—lots of it.
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Moreover, effectively managing your account payables, spending, and overall finances can give your business various advantages over the competition. For example, having effectively managed your finances, you would be able to explore more business opportunities, increase marketing spending for better reach, implement market penetration strategies, and more.
But managing finances gets complicated as you add more customers, team members, and vendors to your business. The more customers and vendors you have, the more transactions are carried out daily to and from your business.
So how do you streamline your finance operations and effectively optimise your payment mix? And as we move towards a completely digital world, how do you automate your invoice-to-pay process? The answer to all the questions is virtual credit or debit cards for business.
In this article, we will explore all the basics of virtual cards for businesses starting from exploring their definition.
Virtual cards, also known as Vcards, are online payment devices that function like standard debit or credit cards minus the plastic. You can make online payments or make purchases over the phone using virtual cards. Just like a traditional credit or debit card, a virtual card contains the following details related to your account:
- Account number
- Cardholder name
- Expiration date
Cards are among the most trusted payment devices and are accepted worldwide, both physical and virtual. From business to consumers and everyone in between are comfortable using cards in their day-to-day life, all thanks to trusted, secure, and well-known payment networks like Mastercard and Visa.
Since cards were widely accepted by businesses and consumers alike, adopting and most likely replacing physical cards with technologically advanced virtual cards should be pretty seamless. Moreover, virtual cards are superior to physical ones in terms of utility, safety, and control. For example, virtual cards like Winden come with various benefits like unlimited cashback, free transfer, and more security with unlimited virtual cards. With the likes of Winden, you can easily open your account within minutes without any credit check and minimum deposit.
But there are many more benefits to shifting your financial operations from physical to virtual cards. Let’s explore.
Unlike physical cards, virtual cards can be single-use. Meaning a new card number, a new expiration date, a new CVV number can be generated after every transaction, which adds a layer of security to all your transactions. This feature of virtual cards limits fraud risk even if your data gets stolen.
What makes virtual cards even more secure is the fact that they are spun up. This means every virtual card is created/issued for a particular transaction of a specific amount to be carried with a particular party during a specified date range. The attempts of transacting using such a virtual card outside of these parameters won’t be authorised, protecting the owners from possible fraudulent transactions.
Keeping track of all the transactions to and from different vendors, suppliers, and distributors is vital to maintain the efficiency of your financial operations. And as your business grows, the number of transactions would also grow and might make things messier and more complicated.
This is where virtual cards come in handy. With virtual cards, it’s easier to keep track of all your cash flow. You can easily get an overview of the available funds as the system updates data after every transaction.
For more streamlined financial operations, virtual cards come with additional functionalities like assigning cards to particular vendors and suppliers helping you keep detailed track of receipts of all the transactions.
With virtual cards, you have the flexibility to manage your spending limit with each transaction whereas, with physical cards, the spending limit is set by the issuing bank/financial institute. And as mentioned above, you also get more control over your financial transactions as you can assign virtual cards to specific vendors and suppliers.
Overall there’s more control with virtual cards as compared to physical cards which makes it easier to manage your finance operations.
Working capital is the bloodline of any business. It’s the money used to cover your short-term expenses, day-to-day expenses, payments on short-term debts, inventory, and other operating expenses.
Virtual cards can help optimise your working capital by providing flexibility in payment terms as well as the ability to pay earlier while holding on to the cash. You also earn cashback on your virtual cards’ spending. Moreover, virtual cards come with integrated analytics and reporting allowing you to get a proper understanding of the rebates earned against your payments.
Overall, you get a better understanding of all your operating expenses and account payables, thereby elevating your business’ strategic value.
As mentioned above, with every spending and account payables, you actually get cashback with virtual cards. Moreover, the fees levied by virtual banks are usually lower than a normal bank.
Virtual cards are virtual meaning they don’t come with the operating costs associated with physical cards. This means virtual cards would cost you literally nothing.
In addition to being secure and efficient, virtual cards save your business a lot of money in the short-term as well as long-term making it a way better option for your financial operations.
Since the boom of FinTech in the past few years, there are endless choices for virtual cards which is why we are going to wrap this article with a quick guide to choosing the right virtual card.
Before starting the process of vetting virtual cards, make a list of your requirements and the card-specific functionalities you absolutely need.
Once you are clear with your requirement, add these points to your list:
- Your virtual card issuer bank should have the ability to issue unlimited virtual cards to keep up with your scaling business. For example, Winden, a virtual bank made for entrepreneurs, issues unlimited virtual cards to keep up with the growth of your business.
- Make sure your virtual card comes with a robust control system so you can set card behaviors like one-time or two-time use, expiration date, delete or freeze cards, and more.
- Seamless integration of your other payment and accounting tools.
- Real-time spending visibility for a better understanding of your day-to-day expenses and financial operations.
- Lastly, look for a seal of trust from Visa or Mastercard to check the credibility of your virtual card.
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Last Updated on January 7, 2022.