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Buyers, Suppliers Converge Around Virtual Cards

For the many businesses that have managed to endure the COVID-19 crisis, embracing changes that improve their cash flow and financial flexibility has been critical.

Dean M. Leavitt, founder and CEO of Boost Payment Systems, told PYMNTS in a recent Masterclass that businesses large and small that have traditionally relied on the manual processes associated with writing checks or wiring funds to pay their suppliers are increasingly using commercial credit cards for payment instead.

“What we’ve seen over the last nine months since the pandemic started is that it has become that much more important to tighten up the timeframe of when buyers are making payments and suppliers are receiving them,” Leavitt said. “A massive bright light has begun to shine on [the timing of payments] process.”

Leavitt told PYMNTS a big reason behind the resistance of commercial card use and acceptance has been a lack of understanding or knowledge about the true value of commercial cards as an alternative payment method.

“Let’s say you have a supplier that has offered 60-day payment terms,” he said. “We may have a conversation with that supplier and say that if you’re willing to accept cards as a form of payment, perhaps you’ll get paid in 10 or 15 days, thereby reducing their days sales outstanding by a cycle and a half. That extra working capital is incredibly important to that supplier.”

The importance of working capital and controlling the timing of payments is equally important to buyers, too.

“We’ve seen many examples where having those funds earlier than they would normally get them because they took a card product has had a material impact on that business and their ability to stay open,” Leavitt said.

The Sum Of The PARTS  

Beyond the growing interest in the benefits that faster and more flexible payments can bring to businesses, Leavitt said there are many other factors pushing firms to consider migrating their payments to commercial cards.

Leavitt said he’s had “phenomenal success” demonstrating the benefits of commercial card use and acceptance by citing the acronym “PARTS,” which stands for “pricing, automation, reporting, timing of payments and security.”

“When we talk about flexible pricing and a completely automated process for [businesses] to receive the proceeds of a credit card transaction, to receive the reporting in a way that works for them, that’s a completely different conversation,” Leavitt said.

Using PARTS has enabled Boost to bring on large strategic suppliers that have historically rejected card acceptance.

Consider the hypothetical example of a $15 million monthly B2B payment that contains 5,000 invoices.

“The only way that a supplier would be willing to take cards under that scenario is if, first and foremost, the process is automated,” Leavitt said. “You completely eliminate the human element to it — and with it, eliminate human error possibilities.”

He added that of equal importance to these massive but passive automated payments is data exchange. While checks, wires and most ACH transactions are limited as to what kind of data you can have, commercial credit cards aren’t.

For instance, he said Boost recently processed a $31 million B2B payment that had “quite a bit of data that needed to accompany that transaction. [We] reported both to the supplier in their format and to the buyer in their format.”

“You’re virtually unlimited as to the amount of data that can accompany [a commercial card] transaction,” Leavitt said.  And with Boost’s “virtual card lockbox” STP platform, there is no need for buyers or suppliers to share bank account information. All payments are “pushed” by the buyer into the supplier’s depository account without the need to share card data.

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