Your marketing department wants to buy a video jingle on the internet, the IT department has to pay online for software licenses, and the strategy team needs a study for their work. No problem – except that most online providers of software, image materials, studies, training sessions, and many other products demand immediate online payment. Purchases like these are generally impossible to handle within a company’s existing procurement system. Employees often turn instead to their company card - or even private ones - which has many disadvantages for their companies. There is no big-picture view of this kind of spending,

The COVID-19 pandemic has forced many companies to seek out innovative approaches to the purchasing and payment processes that previously required a physical presence. Many companies still process invoices and payments manually – especially for ad hoc and online purchases. But when employees are working from home, there is no one on site to process invoices and order payments. The uncertainty surrounding how long the situation will last has also led companies to look for alternative sources of working capital.

Cleaning services, tools, catering, IT hardware, and office supplies | Most companies with a purchasing department are well positioned when it comes to these kinds of recurring indirect purchases. Requests for proposals are organized, framework agreements are signed, and the volume typically goes to just a few suppliers. This has brought significant savings in some cases compared to individual order placement. So everything is under control, right? Yes and no. It would be, if not for the large number of ad hoc and one-time purchases,

At first glance, these kinds of purchases might seem insignificant compared to those of recurring, highpriced products. Although they account for only about 20 % of the total volume, they are responsible for a significant 80% of the administrative costs associated with indirect purchases (Les Echos 28/2/2017). The various products ordered on an ad hoc basis here and there come from many different suppliers, each one of which has to be set up and managed in the system, and these transactions generate hundreds of invoices to approve, process, and pay.

Virtual cards, which are digital credit cards in the Mastercard® network, are accepted virtually anywhere around the world.

Ad hoc purchases offer tremendous potential for cost reduction across a wide range of areas of the company. But is there a solution that actually meets the needs of all stakeholders (employees, the purchasing department, accounting and finance, treasury) and solves the challenges discussed above?

• The B2B virtual cards segment dominated the market in 2022, accounting for over 70.0 % of global revenue.

• The global virtual cards market was valued at USD 13.31 billion in 2022 and is expected to grow at a compound annual growth rate (CAGR ) of from 2023 to 2030.

• The global value of virtual card transactions is projected to increase from $1.9 trillion in 2021 to $6.8 trillion in 2026, highlighting the growing importance of this method for B2B transactions.

A virtual credit card is a 16-digit card number with a three-digit CVC code, generated at need. They can be used anywhere their providers are accepted and have particular benefits for online and ad hoc corporate payment.

Companies can use virtual credit cards to pay wherever credit cards (Mastercard, for example) are generally accepted.

Every card is limited to non- travel B2B payments

All transactions is made using virtual credit cards within a specific period are acombined into a single easilyunderstood statement and billed to the company together, at the end of an agreed statement period.Suppliers, however, receive immediate payment from the provider.So the company only receives a single statement, instead of many individual invoices, and has only one supplier: the provider of the virtual card.

Single-use virtual cards are the standard type. In this version, a card number is generated for one-time use. Once used, the card is blocked for further payments. This is what makes virtual cards so secure.

Virtual cards come in several types, such as those for one-time payments and those used for recurring payments. Some providers also offer ways to integrate them into frequently used purchasing platforms, where card numbers are generated completely automatically and used to pay every time a purchase is made.

Sacmi is an international corporate group and worldwide leader in providing advanced technologies in industrial plant and equipment engineering. The company specialises in machines and full systems for the ceramics, metal, packaging, food and beverage industries and in manufacturingcontainers made of plastic and new materials. Sacmi is represented in 30 countries and has over 4,500 employees.

In this type of arrangement, which is actually a form of single-use, an interface to a purchasing platform is created. This is theoretically possible for any platform that connects buyers and sellers, whether external or internal. As soon as the employee places an order and clicks to pay, a virtual credit card is automatically generated in the background as the means of payment. The payment is then handled as usual via the provider of the virtual credit card. When the order is placed, additional information such as the project or cost centre can be required; this information then appears on the collective statement to make it easier to associate individual items with people, projects, or cost centers.

Using virtual cards to make payments is advantageous for more than just the buyer. Merchants also benefit from this payment method – despite merchant fees, which apply the same as other credit cards.

With virtual credit cards, companies not only increase their days payable outstanding (DPO), but also reduce their days sales outstanding (DSO) for their suppliers at the same time.

So what about the merchant fee a supplier has to pay when accepting credit cards? Can it still be worthwhile for the supplier to accept virtual cards? Yes, for many reasons. The acceptance fee, which is about 2%, is easily outweighed by the speed of the payment process and the payment security that is gained.

Card payments eliminate the risk of default, since that risk is shifted to the provider of the virtual card. That means the merchant saves an average of 2 % – the average amount of income lost to non-payment.

Merchants receive payment significantly faster when virtual cards are used, namely within two to three days as compared to funds transfers, which have an average DSO of about 47 days in Europe. To receive immediate payment by funds transfer, the merchant would have to offer a discount, which in Europe typically averages anywhere from 5 to 8%.

Sagemcom develops innovative products in the smart city, broadband, and audio and video segments. To craft models and prototypes, the R&D teams often have to make ad hoc purchases in very small amounts, typically from suppliers in France, but also in other countries. These suppliers are not generally part of the company’s existing supplier pool. To make sure the delivery goes quickly, the R&D teams place their orders online or visit a store in the local area.

The detailed collective statement gives the company 100 % visibility for all of the expenses incurred by the R&D teams.

There have been no cases of fraud or attempted fraud, internally or externally, since the company started using virtual cards. The monthly tatement lists all transactions in detail. It allows the purchasing and accounting teams to track expenses incurred on a specific basis

Virtual cards have also simplified ad hoc purchasing processes for Sagemcom’s R&D employees. All purchases of this kind are now handled by the purchasing department. Employees no longer have to pay up front, and they don‘t have to deal with expense statements. “We have control over ad hoc purchases while also offering our internal customers an additional service,” Touzet adds. For their part, employees are happy to have more time for their core tasks.

Fewer manual entries, less time and effort spent on reconciliation | There is a lot less manual work to do in accounting. All line items listed in the collective statement are automatically imported into Sagemcom’s SAP ERP system in CSV format, with information such as cost center and project number allocated accordingly. “Our card provider AirPlus acts as a single supplier, combining all supplier invoices into a single statement. Virtual cards have made it possible for us to boost efficiency across the entire indirect purchasing and procurement chain,” Touzet notes.