The Major Advantages of Virtual Cards versus P-cards

Businesses around the country are beginning to realize the exorbitant cost of relying on traditional paper checks for invoice payments.

A 2018 study from PYMNTS and Mastercard reported that checks cost businesses $31 per transaction. That can result in indirect costs of $31,000 per month for companies that send 1,000 checks per month. P-Cards typically carry heavy annual membership fees and monthly spend minimums PER CARD that a corporation may distribute to its employees.

Epayables vs p-cards

Companies are slowly but surely starting to adopt alternative invoice payment methods. That same study reported that 33 percent of respondents said they expected to expand their usage of cards and ePayables by 2021.

While some companies are making the transition to physical cards known as P-cards, others are realizing the huge benefits of jumping straight to an all-digital format known as ePayables.

What are P-cards?

P-cards go by a number of names:

  • Purchase cards
  • Procurement cards

In simple terms, P-cards are basically credit card products issued to corporations that employees use to pay pre-approved purchases on behalf of the business. Payments from P-cards can be made using physical credit cards or digital means using the account number.

P-cards have many major advantages over paper checks:

  • They streamline the expense approval process: Employees don’t have to use personal payment methods to fund expenses and submit invoices for reimbursement.
  • P-cards typically carry heavy annual membership fees and/or minimum monthly spend per card requirements.
  • They speed up payments to vendors: Most companies request a formal invoice for purchases, instead of allowing their employees to go the reimbursement route. Paper check payments take much longer to process and clear. Payments from P-cards, on the other hand, are virtually instant. 
  • They allow businesses to cash in on rewards: Many financial institutions that issue P-cards give rewards to businesses in the form of points, elite status and/or cashback.

Advantages ePayables Have over P-cards

While P-cards have many advantages over paper checks, there are still some drawbacks:

  • A separate P-card must be created and distributed to each employee or for each vendor. 
  • There is room for fraud or employees to purchase items the business didn’t approve of. 
  • P-cards have an established credit limit based on the corporation’s creditworthiness and financial stability. The total dollar amount of purchases a month are limited to the established credit limit.
  • Therefore, purchases may not go through if the business is carrying a balance and there isn’t enough of a credit line available, the entire purchase will be denied.

These are some of the areas where ePayables hold distinct advantages over P-cards. First and foremost, ePayables come from one account, not multiple accounts that must be funded separately. They also put control of spending entirely in the business’ hands. Invoices are only paid after the purchases are approved, even if that process is automated somehow.

The main difference between ePayables and P-cards are that they place the control overspending with the business and not employees. Instead of submitting purchase requests beforehand and then giving employees the leeway to make purchases, ePayables allow the business to control the actual purchase and payment. 

By requiring an invoice, ePayables allow businesses to manage cashflow directly. While one of the distinct advantages of ePayables is that they reduce the time of invoice processing, a company could decide to hold off on processing an invoice if it needed to preserve cash on hand.

But perhaps the biggest advantage that ePayables provide over P-cards is the ability to eliminate paper and integrate automation completely. With ePayables, there is never a need to print a physical product — paper or plastic.

They also give organizations the ability to reduce administrative processes significantly. ePayables can help automate approval processes that cause significant bottlenecks and result in costly human errors.

Vendors Prefer ePayables

You might think that vendors would prefer P-cards over ePayables, by reading the description of how the payment process works. ePayables force an invoice process, after all, while P-cards allow vendors to charge a card at the time of purchase.

And while that is true, more and more vendors see the distinct advantages of ePayables over P-cards. While P-card acceptance increased from 2013 to 2017 in most major industries, it dropped from 2017 to 2019 — sometimes dramatically.

This decrease in P-card acceptance was accompanied by an increase in the acceptance of ePayables. In fact, more than 50 percent of vendors accept ePayables as a form of invoice payment, as of 2019.

ePayables allow vendors to work more directly with their customers. It allows them to establish a better relationship, as there is next to no chance of a payment getting rejected, and a much lower chance of a dispute being made against a purchase that wasn’t approved.

The streamlined nature of the process is a huge benefit to vendors as well. Instead of being forced to charge a new P-card each month, the vendor can simply electronically invoice their customers to the same account.

These benefits dramatically outweigh the drawback of having to wait for funds to be transferred to their account. That’s why the acceptance of ePayables is skyrocketing while that of P-cards is dropping.

Start Your Company’s Transition to ePayables

There are countless benefits to using a system of ePayables for invoice processing. From a simple bottom-line perspective, ePayables can significantly reduce the cost of processing invoices, when compared to both traditional paper checks and P-cards.

Going completely digital also eliminates the need to use unnecessary paper or plastic just to make purchases and transfer money to vendors. But the biggest benefit of utilizing ePayables is the elimination of manual processes that take valuable time away from employees — and can result in honest human errors.

If you haven’t already made the switch to ePayables for your invoice processing, now is the time. Blue Penguin can help you create and implement your ePayables system.

It doesn’t have to be complicated, and it doesn’t have to be frustrating to make the change. Contact Blue Penguin today to find out how.