What is a virtual account?

What is a virtual account?

A virtual account for business is a dummy account that can be set up to receive and to make payments for the original account. Businesses may set up accounts that are virtual so that they can track their expenditures by the supplier more easily. These types of accounts also do not allow people to use the numbers to gain access to the funds in the original account.

Charges made to the virtual account number are routed through to the original account for payment. Using these types of accounts can help businesses to easily see the spending that is occurring with each supplier or vendor or identifying and track spending for multiple business locations.

Who uses a virtual account?

Businesses of all sizes use Virtual bank accounts. However, larger businesses that have multiple locations or departments use them the most. Setting up the accounts by the department or by the location means expenses get tracked and traced back to the location or department when processed through the original account.

To get a virtual account number and account, you can request them from your bank or card issuer. These numbers can be generated for you so that you can assign them as you see fit. Virtual account numbers are highly scalable, and you can generate as many as you need as your business grows.

What makes for the best virtual account?

What makes for the best virtual account?

The best virtual bank account should offer your business the ability to set tight controls to limit the spending that can occur. You should be able to set individual restrictions for each account that you generate so that specific types of purchases can be authorized while others will not be allowed.

Virtual cards should also link to the account. Linking virtual cards can allow you to make secure purchases remotely that can be charged to the dummy account and then sent through to the original account underlying it. You should also be able to restrict the times when the accounts will work, how much is available on each of the virtual cards, and where the purchases are accepted.

Why should you use a virtual account?

Virtual account numbers are ideal if your business processes a large number of small transactions regularly. Rather than having your employees submit requisition forms for every single purchase processed before issuing a purchase order, the low-value item charges to the virtual account number assigned to the supplier.

Assigning virtual account numbers to high-volume, low-value suppliers can greatly reduce your transaction costs. According to the National Association of Purchasing Card Professionals, the per-transaction costs that are involved with the traditional purchasing process are estimated to range from $50 to $200 in terms of the labor, paper, and time costs involved. When you instead assign a virtual number to a low-value, high-volume supplier, you can reap savings of an average of $63 per transaction.

Virtual account numbers for business have more uses than just accounts payable

Virtual account numbers have more uses than just accounts payable

Using a virtual card API to generate virtual numbers can allow you to have many dummy accounts that link to one main account. You can establish different spending limits and rules for each virtual number so that you can control spending tightly.

The visibility of what is occurring with the funds in your account increases with the use of virtual numbers and dummy accounts. You can see exactly how much money is being spent by an individual department, a location, or a supplier at any time from your online dashboard. Tracking spending across your entire organization is made simple.

Example of virtual account numbers in action

To understand how virtual account numbers and accounts might work, imagine that you are the owner of a burger franchise with multiple locations. You can assign a different virtual number and account to each location.

The managers at the individual restaurants can charge orders for supplies to the numbers that you have assigned to them. You can then use the information to track food and supply costs so that you can identify underperforming restaurants or those that are spending too much money.

If you have locations for your burger franchise in several states, you can have the virtual numbers and accounts that you have assigned to each of the restaurants in a single state linked to another virtual number and account assigned to the state. Being able to set up a system of dummy accounts can provide you with greater control and visibility. Since the process is automated, it will make things much easier.

Types of accounts that are virtual

Types of virtual accounts

There are several different types of accounts that are virtual, including the following:

  • Virtual reconciliation account
  • Virtual multiple organizational entities account
  • Virtual multiple legal entities account
  • Virtual multi-currency account

Each of these different types of accounts that are virtual serves different purposes. A virtual reconciliation account helps to facilitate the reconciliation of accounts receivable or accounts payable by assigning unique numbers to each supplier or vendor.

A multiple organizational entities account allows companies to segment governance of their in-house banking processes and to allow ebanking functionality. Multiple legal entities account offers similar functionality but between different types of legal entities instead of just between departments. Finally, a multi-currency account offers all of the previously listed functionality as well as the ability to handle multiple types of currencies.

An in-depth look at virtual reconciliation accounts

A key benefit of generating virtual cards and accounts is the ability to benefit from virtual account reconciliation. The virtual numbers are generated and assigned to each division or subsidiary or individual suppliers or customers. A customer can make payments to a virtual account number, but the payment routes through to the original account.

A supplier can charge items to the virtual number, and the payments will come from the original account. Individual employees can make charges with the virtual debit card or virtual credit card numbers assigned to their departments. The purchases can all be traced directly back to the departments or suppliers. By using this type of system, the reconciliation process becomes more automated.

An in-depth look at multiple organizational entities virtual accounts

An in-depth look at multiple organizational entities virtual accounts

Many companies initially turn to debit cards with virtual account numbers or credit cards with virtual account numbers for automated reconciliation and reporting. However, as a company grows, it might need options to streamline liquidity and cash management across divisions.

Using virtual multiple organizational entities accounts can provide this additional functionality. Instead of having to rely on multiple bank accounts for liquidity and cash management across the entire company, it can instead have one central account and many dummy accounts. These types of account structures can allow businesses to enjoy in-house banking capabilities that simplify liquidity and cash management by internal company treasuries of varying levels of sophistication and sizes.

An in-depth look at virtual multiple legal entities accounts

Virtual multiple legal entities accounts provide similar functionality as virtual multiple organizational entities accounts. However, instead of providing these capabilities to different divisions within a company, these types of accounts work for organizations that contain multiple legal entities within their structures.

Even with the added functionality and sophistication, multiple legal entities accounts still retain the ability to support automated reconciliation of accounts receivable and accounts payable as well as reporting. The additional e-banking capabilities are additive and do not detract from the other capabilities.

An in-depth look at virtual multi-currency accounts

An in-depth look at virtual multi-currency accounts

Virtual multi-currency accounts are ideal for companies that have a global footprint, and that routinely deal with multiple currencies. These dummy accounts can be set up within the organization’s in-house banking structure to handle influxes of different types of currencies while automating the calculation of different currency exchange rates in real time.

Like multiple legal entities accounts and multiple organizational entities accounts, virtual multi-currency accounts work for companies that have treasuries with a high level of sophistication. These types of accounts can allow simplified management of multiple virtual account balances regardless of the currency, entity, or division.

How you can automate the process

A virtual account can offer businesses numerous benefits. The creation of a virtual account can be automated to make the entire process easier for your business to implement. The Visa developer allows the buyer in a business-to-business payment to send a payment instruction to you. You can then use API for payments processing.

The system will then send straight-through transactions to the buyer along with a confirmation of payments processing through the API. Finally, the supplier sends a notification of remittance. All of this can happen automatically without you having to do anything else.

You can place account controls on purchases

Place controls on virtual accounts

Using virtual debit cards, virtual credit cards, and a virtual account can allow you to control the spending that occurs at your company tightly. The controls allow you to set restrictions by the location, time, amount, and purchase category. Having access to this level of control can help you to reduce the risk of fraud.

Internal fraud is a serious problem for U.S. businesses. Each year, businesses suffer an estimated $50 billion in losses because of employee thefts. Using a virtual account together with debit cards with virtual account numbers or credit cards with virtual account numbers can help to prevent fraud by limiting access to your accounts and money and making the spending at your company more transparent.

You can make reconciliation more straightforward and accessible

Using a virtual wallet account at your business can make reconciliation more straightforward and accessible. You can log into your online dashboard at any time to view your virtual account balances. From your dashboard, you can view all of the transactions that have occurred within an individual account that is virtual in real time 24 hours per day and seven days per week.

As the transaction data flows automatically to your original account, the reconciliation process can be automated. The dashboard can help you to understand where your company is at and how the spending occurs across your entire organization.

You can make virtual payment requisition simpler

Virtual accounts make payment requisition simpler

Virtual payment requisition is much simpler with a virtual wallet account. Your employees will not have to submit requisition forms for each purchase that your company needs to continue to operate smoothly. Instead, day-to-day purchases can be charged to the virtual number so that purchases are complete at the time that they are needed.

Virtual payment requisition can save on processing costs and help you to eliminate antiquated paper-based systems for purchasing approvals. You can also get rid of other systems within your company that are laborious and that have heightened fraud risks such as reimbursements and petty cash.

Benefits of virtual accounts and virtual cards

​The Bento for Business virtual card and account solutions offer companies the ability to instantly generate as many virtual numbers as they need through the card API. Businesses can restrict the numbers to specific merchants, locations, times, and amounts available to spend. You can restrict purchases by the category to help to prevent unauthorized spending and fraud.

The virtual solutions give you greater transparency while helping to automate the reconciliation processes. Bento has earned hundreds of positive reviews and has the support of thousands of loyal business customers. There is a free 60-day trial so that you can try out the solutions within your company to see how they work. To learn more, call 866.220.8455 to speak to a customer service representative.