How Straight-Through Processing and Virtual Cards Optimize Business Payments

As a small business owner, paying vendors can be a pain point—particularly because the accounts payable process can be so slow and prone to errors. This is one place where the shift to digital payment options has opened a new world of optimization. Many business owners are now looking to replace manual and paper-based processes with faster digital solutions like virtual cards and straight-through processing, or STP, for online payments.

According to the Association for Financial Professionals' AFP Payments Survey (PDF), almost 60% of organizations reported that they're somewhat likely or very likely to shift a majority of their B2B payments from checks to digital or electronic payments, while another 32% said they already use digital solutions as their primary form of supplier payments. Just 5% of those surveyed had no plans to switch from paper checks to electronic payments.

Understanding how this technology impacts business payments—and what a switch to STP or a virtual card will do for your organization—can help you make the best decisions to optimize your B2B payments.

What is a digital payment?

Prior to the payment technology revolution, small businesses were restricted to either paper checks or personal or corporate purchasing cards to pay vendor invoices. Both checks and credit cards had their downsides. Check writing was an onerous and almost entirely manual payment method, and it extended the amount of time suppliers had to wait to receive their payments.

Accepting credit cards extended the days payable outstanding, or DPO, while still ensuring vendors were paid on time—which helped small businesses manage their cash flow. However, corporate credit cards still required manual payment and oversight, which meant potential inefficiencies and opportunities for error.

Automating the entire accounts payable process using STP and virtual cards can remove this friction, streamline B2B payment processes and help ensure vendors are satisfied.

What is STP?

STP is an automatic payment process that allows money to be transferred electronically, with no need for manual intervention. To take advantage of STP, organizations must connect with a payment processing network.

Businesses using STP for B2B payments can reduce payment cycle times, collection costs and accounts receivable errors.

What are virtual cards?

Virtual cards let businesses safely provide instant payment to suppliers upon receiving an invoice. Unlike paper checks, they don't require payers or suppliers to visit a physical location in order to issue or receive payments. Virtual cards also require much less manual oversight than traditional corporate credit cards because they can be set up to automatically provide payment once certain conditions are met.

Virtual cards are becoming a more popular payment method, and small businesses have more options available to them with this technology—like virtual cards that combine STP with machine learning to offer safe and instant payment to suppliers upon invoice submission.

Improving working capital

Using STP or virtual cards can help improve your working capital as a small business owner without negatively impacting relationships with vendors and suppliers. This type of automated technology can ensure timely payments while still helping you optimize your cash flow. For instance, using a virtual card can allow you to leverage your statement grace period to improve your DPO while providing payment to your suppliers as soon as an invoice is approved.

Rather than manually trying to time payments to maximize working capital while maintaining business relationships, automated digital payment options do the heavy lifting for you so you can feel confident that your accounts payable are optimized for your needs.

The future of your business

Digital solutions like STP and virtual cards for online payment represent the future of small business B2B payments. Transitioning your accounts payable processes to these automated options can help you improve working capital, strengthen business relationships—and focus more on growing your business.