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How to convince suppliers to accept virtual card payments.


Setting up a virtual card payment system and enrolling suppliers are essential first steps in implementing a new payment strategy. But they are just that – first steps.

You’ll further reduce the number of checks you write – and reap other great benefits – if you offer additional payment options through later phases of implementation. These phases involve changing the minds of suppliers who may be reluctant to accept virtual cards or other alternate payment methods.

Often, getting buy-in is a matter of offering information or incentives that make card payments more attractive. Foot-dragging suppliers may be more inclined to accept virtual cards, for example, if they know they’ll be guaranteed immediate funds. Vendors may find that their deposited checks take a day or more to clear and be available. Some not as credit-worthy suppliers that receive large dollar checks may find those funds are held by the bank for a period of time. Knowing their funds will be readily available via virtual card can be a strong selling point.

Suppliers that remain reluctant may need another level of incentives, such as improved payment terms. To make this possible, you’ll need to work with your solution provider to define clear payment terms for different forms of payment. For example, you might offer to pay suppliers who accept virtual cards within 15 days, while ACH payments are made within 25 days and check payments are pushed back to 45 days. Vendors can then weigh for themselves the benefits of taking each form of payment.

Of course, you’ll also need to be able to deliver on the promise of faster payments. That may require your purchasing and accounts payable departments to work together to develop more efficient systems for invoice approval.

The idea of faster payments is attractive to suppliers – so attractive that some offer discounts to customers who pay their bills quickly. But they will likely resist offering discounts and incurring any extra expenses associated with accepting virtual card payments. In these cases, your company will want to compare the value of virtual card revenue shares to early pay supplier discounts and choose the option that makes better financial sense. Again, you’ll need to consider the likelihood you can get the invoice through the approval process fast enough to capture the discount. You’ll also want to consider the days payable outstanding (DPO) impact and the cost associated with pushing funds out of your operating account sooner.

In some cases, you may already have existing agreements for payment terms and discounts. The introduction of a new payment strategy may present an opportunity to reconsider and renegotiate these agreements.

The good news is: every supplier wants to be paid, sooner rather than later. Your new payment strategy helps make that possible by delivering benefits to both you and your suppliers.

About the author:

Clint Scott works with Commerce Bank clients to get their virtual card payment program off the ground. He oversees the CommercePayments™ account implementation and supplier enrollment teams and is based in Kansas City, Missouri.

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