Presentation Transcript

1. Advances in Payment Strategies An Industry Perspective May 8, 2012 R. Keith Henry, Vice President Nancy Mirfin, Senior Vice President
2. Making the Business of Payments Pay Payables management helps you: Enter vendor invoices Match volumes received Store vendor records Establish Accounting Distribution & Approvals Manage Cash Outflows Generate Payments
3. Payables Characteristics Most organizations have centralized A/P functions. Accounts Payable Departments report that 81%-100% of invoices are received via paper. Estimated cost of processing paper invoices average $3.25 to $7.80 per invoice. Payables Depts. report their most significant challenges revolve around managing paperwork, getting approvals and operating in a timely manner. Companies tend to use purchase orders for more than 25% of their invoices. Many organizations report that average invoice processing time is five days or less. About half (48%) spend more than 10 hours per month resolving invoice exceptions. About two-thirds of organizations frequently or always capture early payment discounts.
4. Key Trends Affecting Payments Market
5. Payables Metrics AP Productivity Index Metrics (2010)
6. From Costly Paper Processing to e-Invoicing
7. 58.3% Paper checks 71.2% 32.1% Purchasing cards 14.6% ACH transfers 8.8% 6.4% 5.4% Wire transfers & others 3.2% below $2,500 between $2,500 and $10,000 Business-to-Business Segment Payments A vast majority of commercial payments are still being made with checks Purchasing Cards have captured 32.1 percent of transactions below $2,500 There is still a much lower penetration rate (14.6 percent) of Purchasing Card use on transactions between $2,500 and $10,000 Source: Purchasing Card Benchmark Survey Results, R. Palmer and M. Gupta
8. Payment Migration: Next 12-18 Months % Shift from Checks and Other Payment Methods to Commercial Payment Cards What percentage of your commercial payments do you anticipate shifting from checks/other payment methods to commercial payment cards in the next 12 – 18 months? % of total payments Source: 2011 Visa Inc. Global Cash Management Survey commissioned by Visa Inc. and conducted by Survey.com, a firm specializing in internet market research
9. Making Cards Part of Your Payment Strategy Employee Purchasing cards For smaller dollar decentralized purchasing Reduces time for receipt and payment of goods A lot of value for both buyer and vendors Employee Travel cards For travel & entertainment expenses Preferred method of payment for these vendors Improves financial controls (SOX compliance) For preferred (contract) vendor ordering Facilitates online ordering and payment A lot of value for both buyer and vendors Limited ability to set transaction controls Vendor Ghost cards Card-Based Settlement
10. Payables Optimization 1. Consider existing PAYMENT MECHANISMS; checks, ACH, Wire and Card. Consider existing TYPES OF PAYMENTS; Vendor, MRO*, Petty cash, Travel, Fleet and Entertainment. Consider the PROCESSES related to each type of payment as it is completed through your organization. 4. Consider the RISK related to each payment mechanism. 5. Consider the COST of processing these various types of payments; Material differences in the economics of the various payment alternatives create the opportunity to pursue an optimum payment mix and a winning proposition for the payor.
11. Best Practices in Payment Optimization Review all areas of disbursement for opportunities: Travel, MRO – Fleet, Petty Cash and Vendor Payments. Agree internally where a card will be used to replace the current payment type; Card first, Electronic second. Establish goals for penetration by payment categories; What is my mix today? Include Card as a viable payment option on all existing (as permitted) and future contract(s) negotiations. RFPs released for capital expenditures should specify that card will be the payment vehicle. Select a Partner that has the ability and resources to assist with perpetual vendor enrollment, not just one time. Offer ACH as a second option, if card is not viable. Consider making your payment sooner… a point of negotiation available when using card. Select a partner that can provide consolidated reporting in order to track overall program spend and traction. Strategize annually on how to move additional payments to card. Select a partner that can consolidate your spend from all program payments into one for a heightened annual rebate.
12. Various Models- A Comparative View Benefits Faster to market - “plug & play” Leverage technology Introduce “self-servicing” using the Web Electronic settlement Dynamic Negotiation Issues Data Security - PCI, NACHA, PHI Funds held as a portion of compensation Reconciliation Integration Alternative Payment Electronic Solutions
13. Check Use of Positive Pay & Payee Reconsider “reverse” positive pay versus segregation of duties Controls over check stock & secure ink Signature control ACH Use ACH debit blocks or filters (half of the organizations with ACH fraud loss in 2009 did not) Reconcile accounts Return fraudulent ACH debits on a timely basis (22% did not). Card Prompt charge back Reconcile card payments Expand use of ghost cards to improve visibility Other Vendor Master File controls Address Verifications Best Fraud Protection Practices AFP Fraud Risk Survey, March, 2011
14. Payment initiation platform to centralize disbursement function through a single payment file Value-added capabilities enable settlement of card-based transactions through traditional client A/P processes – allows clients to leverage a new payment method for disbursements! Satisfies all payment requirements for card payments, check issuance, ACH or wire transfers Flexible platform architecture offers easy data integration and process control Optimizes payment mix by migrating from costly paper disbursements to more financially rewarding methods such as cards Consolidated Payables – Overview
15. Complete Solution Paper Invoices E-Invoices Exception Items Managed by Designated AP Contact Routed to Designated Process Owner Front-End Centralized invoice capture, routing and approval Payment Execution File Transmitted to Bank Approved Items Posted into Client ERP for Payment Invoice Imaging Settlement Execution: Check Printing ACH Wire Transfer Card Settlement Client ERP Recognition Custom Matching Workflow Reconciliation File PO, Receiving, Payment and other business rule data
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