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5 min read

How Virtual Cards Improve Dealership Cash Flow & Reduce Fraud Risk

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Have you heard of virtual credit card payments? With digital payments increasing rapidly across B2B transactions, it’s time for your dealership to get up to speed with virtual cards—not only as a payment method—but as a means to enhance cash flow and mitigate fraud risks. And in case you’re curious, paper check payments won’t be disappearing any time soon, but their use in accounts payable (AP) is in notable decline

This article delves into the various aspects of virtual cards, their role in the payment process, the benefits they offer, and how they can significantly streamline AP operations in auto dealerships.

The Role of Virtual Cards in the Payment Process for Dealerships

Understanding Virtual Cards as a Payment Method

Virtual cards provide businesses with a secure and efficient way to manage vendor payments. Unlike traditional credit cards—which have a higher risk of fraud and misuse—virtual cards are a modern payment method that generates a unique 16-digit number set for each transaction. This feature enhances security by ensuring that card numbers are only valid for a single use or a specified vendor, plus, you can even set spending limits and expiration dates on your virtual cards. And … because virtual cards are digital, they cannot be physically stolen or copied, offering your dealership more enhanced fraud protection than any other payment method available.

How Virtual Cards Streamline the Payment Process

A big advantage of virtual cards is their ability to streamline payment processes in your auto dealership. By integrating virtual card solutions into existing payment workflows, your dealership can automate transactions and reduce manual data entry, two benefits that reduce errors and shorten payment delays. 

Virtual cards also enhance the overall efficiency of your AP department since they can also connect directly to your dealer management system (DMS). Having this capacity, vendor payments can be processed swiftly, allowing AP staff to focus on more strategic tasks rather than manual invoice processing and payment status tracking.

Benefits of Using Virtual Cards for Vendor Payments

Using virtual cards for vendor payments provides numerous benefits for your auto dealership. First of all, they enhance cash flow management by allowing you to maintain better control over your outgoing payments. With the ability to set specific spending limits and expiration dates on virtual cards, your dealership can effectively manage cash flow while also ensuring vendor payments are made on time. Additionally, virtual cards facilitate a more transparent payment process, making it easier for your staff to track spending and manage budgets. 

How AP Automation Improves Accounts Payable in Auto Dealerships

Automating AP processes has become a top priority for many SMBs seeking to optimize their financial operations, and automation software allows your auto dealership to manage both invoice processing and payments more efficiently. By leveraging advanced invoice and payment processing solutions, you can ensure that your AP department operates smoothly, minimizing delays in vendor payments and improving overall cash flow. The transition to automated invoice and payment systems is not merely a trend; it’s become a necessity in an increasingly competitive market.

Key Features of an AP Automation Solution

An AP automation solution encompasses a variety of features designed to streamline invoice and payment processes for dealerships. These solutions typically include electronic payments, invoice management, and reconciliation tools that work together to create a cohesive workflow. 

For instance, when your dealership receives an invoice from a vendor, the automation solution can automatically match the invoice with the corresponding purchase order, ensuring payment accuracy. This level of integration not only speeds up the payment process but also enhances the accuracy of your financial reporting, providing you with a clearer picture of your cash flow and the status of your operations.

Impact of Payment Automation on Cash Flow Management

Once payment processes are automated, your dealership can achieve significant reductions in processing costs and time spent on manual entry. This efficiency translates to improved cash flow, as your staff is then able to make payments more consistently and even extend Days Payable Outstanding. Furthermore, the ability to track and manage payments in real-time allows your dealership to make informed financial decisions while also investing in growth opportunities. 

The Advantages of Implementing Advanced Payment Processing Solutions

Comparing Payment Options: Virtual Cards vs. Paper Checks

As you evaluate payment options, it’s likely you will find the difference between virtual cards and traditional paper checks to be quite striking. Paper checks—while once a standard practice in all B2B transactions—come with numerous drawbacks, including longer processing times and increased fraud risk. In fact, check fraud was up 90% from 2021 to 2023 and has become a $24 billion dollar business in 2024.

In contrast, virtual cards offer a streamlined solution that reduces the need for physical checks and eliminates associated processing delays. Automated payments using virtual cards also enhance tracking capabilities and allow your staff to monitor payment types and statuses with ease.

Reducing Processing Costs with Automated Payments

Advanced payment processing solutions, particularly those that incorporate automation, significantly reduce processing costs for SMBs. By minimizing the reliance on manual processes, automated payments can help your dealership lower the labor costs associated with invoice handling and payment processing. Additionally, automated payments reduce the risk of late fees and penalties by ensuring your dealership’s payments are made on time. 

Enhancing Security and Reducing Fraud Risk

Fraud is a pervasive concern in business today, particularly in the realm of payments, however the adoption of virtual cards and other advanced payment solutions have the potential to significantly reduce this problem. With features like unique card numbers, expiration dates, and transaction limits, your dealership can mitigate the risk of fraud more effectively than with traditional payment methods like checks and corporate credit cards.

Besides their unique features, virtual cards are more easily monitored and tracked compared to paper checks, allowing your dealership to quickly identify any discrepancies or unauthorized transactions. And by prioritizing secure payment methods, you will protect assets and maintain trust with your vendors and customers.

Strategies to Automate Dealership B2B Payment Workflows

To effectively automate B2B payment workflows, your auto dealerships should focus on implementing robust payment solutions that integrate seamlessly with your DMS. Key strategies include investing in AP automation software, developing clear protocols for managing vendor relationships, and establishing solid payment timelines. By fostering automation within the AP department, your dealership can significantly enhance operational efficiency, improve cash flow, and reduce the risk of errors associated with manual payment processes.

Steps to Implementing a Virtual Card Payment Solution in the Dealership

1). Evaluate Your Dealership's Payment Needs

Before implementing virtual cards, it’s essential that your dealership evaluates its specific payment needs. Your assessment should consider factors such as volume of transactions, types of vendors, and existing payment processes. 

Then, by understanding your dealership’s unique requirements, you can select a payment solution that aligns with operational objectives and enhances your overall payment strategy. Having this tailored approach ensures that your dealership maximizes the benefits of virtual cards while addressing any potential challenges that may arise as you transition to new payment methods.

2). Choose Right-Fit Payment Automation Tools

Your dealership should look for a payment automation solution that offers comprehensive features, including real-time tracking, expense management, and seamless integration with your DMS. It's also important to consider the level of customer support provided by the automation provider—as ongoing assistance can be vital during the transition phase (and beyond). 

Best Practices for Transitioning Your Dealership to Virtual Card Payments

Like other aspects of dealership accounting, transitioning to virtual card payments requires careful planning and execution. Best practices include training your AP staff on the new payment processes and providing them with the necessary resources to manage the transition effectively. Additionally, have discussions with your vendors about the changes you want to make; some will be willing to shift payment methods, and some may still want to continue with paper checks.

If you're noticing resistance with vendors, you may want to implement a phased approach and gradually integrate virtual card payments, making adjustments as needed. By following these best practices, your dealership will be able to successfully navigate the transition and reap the benefits of improved cash flow and reduced fraud risk.

Ready to Introduce Virtual Cards to Your Dealership?

Incorporating virtual cards into your dealership’s payment processes is a secure, efficient, and cost-effective alternative to traditional paper checks. With the added benefits of automation and real-time tracking, this payment method helps lead to more transparent and efficient AP operations.

If it’s time to optimize your payment processes and protect your dealership from fraud, CloudX offers comprehensive solutions tailored to your needs. Reach out to us today for more information.

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