How virtual card programs are rescuing school budgets
The education sector has long been a victim of budget cuts. Fortunately, there are ways for budget-constrained schools to earn new revenue — an investment in technology.
While students are accustomed to using technology in their daily education, the operations of school districts may feel like they are still stuck in the 90’s. Students use iPads while district employees still print, sign and mail checks. It’s time for the behind-the-scenes school operations to get with the times. Schools can start by investing in technology that will actually provide a new source of revenue: a virtual card program.
New revenue through existing work
Also called “AP card” or “Vendor card program,” a virtual card program allows a school or district to pay their vendors digitally, effectively replacing checks and streamlining manual processes. There are many benefits associated with card programs, the most popular being revenue share. Essentially, the school can get cash back on the transactions they process through the virtual card program — kind of like cash back rewards on a credit card.
This is an easy source of revenue because it’s based on transactions that are already occurring. The trick is to get as many vendor payments included in the virtual card program as possible. This is where some programs really outperform others.
In order to get vendor payments included in the program, the school must work with each individual vendor to establish the new payment method. Depending on the bank or card provider, this process can be handled a few different ways.
- Some card program providers leave it up to the school staff to enroll vendors themselves.
- Some card program providers include a one-time enrollment service as part of the program’s implementation.
- Some card programs providers have “opt out” programs, where vendors must say they do not want to be included.
- Some card program providers offer enrollment services throughout the life of the program.
Obviously, asking already overwhelmed staff to reach out to each provider to establish a new payment method isn’t the most efficient (or successful) way to go. And while “opt out” programs seem like the easiest option, there is a large chance of spoiling business relationships or complicating work by making payment changes without consulting vendors first. That’s why we recommend finding a program that offers enrollment services throughout the life of the program. Then, as vendors and payment preferences change throughout the years, schools will continue to get enrollment assistance.
Aside from the new revenue stream, virtual card programs present many other benefits that can help cash-strapped schools. There are a few long-lasting efficiencies that are inherent in virtual card programs.
First, all the payments processed through the program can be administered in one file, significantly eliminating a number of checks and postage costs. Once approvals are obtained, the approved payments can be quickly uploaded to the cloud-based program for immediate processing. No more hours spent printing, signing and mailing checks.
Second, all reconciliation tasks for these payments are done automatically through the program. Any payments that aren’t processed can be quickly reviewed, reminders can be sent instantaneously and a reconciliation file can be quickly downloaded to your accounting system. This saves hours of work on manually matching and filing completed payments.
Third, payment questions and troubleshooting for virtual card payments are directed to the program provider — not school or district staff. Dedicated customer service specialists can help confused vendors process payments so school staff can stay off the phone and focused on their work.
Finally, virtual card programs lead to simpler audits. Paper storage can be decreased, since records exist in the cloud-based program. All payments are quickly searchable and auditable for years to come.
The real impact for schools
The revenue share and cost savings found in virtual card programs turn into real, tangible results for schools. Especially after so many districts saw budget cuts from the COVID-19 health pandemic, savings and revenue are critical for schools and districts to survive.
Virtual card programs open up budgets and can help school systems:
- Avoid cuts to teaching positions or other staff
- Purchase new and improved equipment for teaching
- Conduct needed maintenance in schools
- Get funds for unlimited uses
How to find the right program
As mentioned, we recommend finding a program that offers enrollment services throughout the life of the program, so that new vendors can be enrolled for years to come. We also recommend asking about the vendor service model so you can ensure that your school staff will not be responsible for troubleshooting payment issues in an unfamiliar system.
Programs that offer these features will seem more expensive upfront, but they will have bigger impact and better results in the future. By having dedicated professionals responsible for vendor enrollment and ongoing service, school staff can stay focused on the other parts of their jobs while the provider ensures the program’s success. Ongoing enrollment services can help certify that your program (and in turn, your revenue share) will be maintained or even grow over time. Without ongoing enrollment, you’ll see your payment volume decrease as vendors and payment preferences change until one day the program’s results are miniscule.
In short, virtual card programs are a necessity for schools everywhere because of their extensive benefits. Schools see streamlined processes that save money and put more funding back into the budget. Adopting a virtual card program now will make it easier in the future to adjust and maximize on-the-job savings and revenue. Commerce Bank is here to help schools, districts and other educational organizations learn about the merits of virtual card programs and other back-office efficiencies.