Commercial Cards: It’s All About The Data

Once reserved for only the largest and most sophisticated firms, automated enterprise resource planning (ERP) and accounting platforms are now accessible for even the smallest of businesses, and data from those systems is the new currency of operational efficiency.

That’s particularly true in accounts receivable (AR), with B2B suppliers not only needing money to flow in from their buyers, but high-quality transaction data for reconciliation, reporting and analytics. As B2B payments migrate away from the paper check in their own digitization journey, a supplier’s opportunity to access valuable transaction insight grows.

According to Dean M. Leavitt, founder and CEO of Boost Payment Solutions, this is among the largest priorities for today’s accounts receivable departments, and commercial cards are stepping up to meet that demand.

“The big question for suppliers is, ‘When I receive my payment, how can I be sure that I also receive my data in a way I can actually use to run my enterprise?’” Leavitt said in a recent interview with Karen Webster. “One of the biggest advantages of the card rails is that you are virtually unlimited as to how much data you can pass with that transaction.”

While the benefits of commercial card acceptance are becoming more clear, he warned that if it’s not handled properly, commercial card acceptance can be just as burdensome as taking checks.

A Reconciliation Headache

The drive for payment information is a key factor behind suppliers’ gradual path toward commercial card acceptance.

“There is an expectation that when there is some form of transaction between trading partners, usable data will also flow between them,” said Leavitt. “Even the least sophisticated accounting systems have an ability to organize remittance data into usable information. The thirst for data among businesses is reaching levels we’ve just never seen before.”

Too often, card transactions involve virtual card information and transaction requests sent via email, placing a significant burden on a supplier’s staff to manually input data into systems and manage the posting process. Complicating matters further is the fact that every card issuer has a unique way of packaging card and transaction data, and sending it to a supplier, adding to the workload as suppliers are forced to categorize that information without a clear understanding of which invoices are being settled.

“Issuers will create bells and whistles around their virtual card platforms, designed to add more security or easier functionality for buyers,” Leavitt said. “But very little, if any, thought is given to the downstream implications for the supplier. And a lot of suppliers throw up their hands and say, ‘I’m willing to take cards, but the amount of effort it requires from my teams in AR and billing to manually process these transactions is too much, so we’re not going to expand our card acceptance.’”

Ironically, this is one way in which cards — despite their support for transmitting electronic data along with payment — have fallen short, even compared to paper checks. Historically, businesses would submit paper checks stapled to a stack of invoices, or wield check lockbox services that, while inefficient, could at least clarify which transactions were to be applied to which invoices.

Data’s Favorite Payment Rails

Commercial card transaction data can quickly become lost in a deluge of unstandardized information. However, when technology sits between B2B transactions, Leavitt noted, solutions like Boost Intercept are able to capture the card transaction from a buyer, and automatically present it in a supplier’s preferred format.

He likened this tool to “essentially creating a lockbox” for virtual card payments — a strategy that addresses what has become one of the largest obstacles to commercial card acceptance and adoption: automated reconciliation. In this way, the data supported by card transactions can offer a competitive edge over other rails, said Leavitt.

“As cards become more mainstream in terms of how companies pay each other, there’s more of a focus on the best payment method to exchange data,” he said. “If you’re using a wire or even most ACH platforms, and certainly a check, you cannot send along with that transaction much, if any, digital data.”

ACH transactions are increasingly adopting the Corporate Trade Exchange (CTX) transfer system to enable ACH payments, and to transfer the high level of reconciliation data that vendors demand, noted Leavitt. However, the added costs of the service can quickly cancel out the traditional advantage of ACH’s lower cost of acceptance — particularly as service providers like Boost introduce technologies to enable lower cost of acceptance, including proprietary interchange rates.

When push comes to shove, most buyers need a way to extend their DPO, while suppliers need a way to reduce their DSO. These businesses don’t necessarily care about which payment rail achieves this, Leavitt admitted. Yet, the card rails are increasingly the clear “win-win” for buyers and suppliers when all factors are considered.