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Creating the Merchant Value Proposition for Electronic Payments

Creating the Merchant Value Proposition for Electronic Payments. October 17, 2012. Agenda. Market Background Electronic Payments Overview Case Studies Merchant Value Proposition Defined Enrollment Best Practices. Market Background. Today’s Payment Landscape.

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Creating the Merchant Value Proposition for Electronic Payments

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  1. Creating the Merchant Value Proposition for Electronic Payments October 17, 2012

  2. Agenda • Market Background • Electronic Payments Overview • Case Studies • Merchant Value Proposition Defined • Enrollment Best Practices

  3. Market Background Today’s Payment Landscape “Manual, paper-based accounts payable departments are eroding the bottom line of large and mid-market enterprises by an order of millions of dollars each year….and the stage is set for a major financial makeover.” Source: Aberdeen Group, E-Payables Solution Selection Guide

  4. Market Background 74% B2B payments made with paper checks $38B Total transaction cost savings Source: 2010 Purchasing Card Benchmark Survey, RPMG; Association of Financial Professionals

  5. Market Background Payment choices have continued to emerge, giving organizations more choices that deliver process efficiency improvements, revenue benefits and greater overall control Expanded Existing Check/Wire/ACH Check/Wire/ACH Single-Use Accounts Purchasing Card Purchasing Card T&E T&E Advanced Technology Drives Evolution of Payments

  6. Market Background Payment Methods – Past, Present and Future Payment Types by Volume, Recent and Planned Changes Source: Aberdeen Group, August 2011

  7. Electronic Payments Overview Payment optimization is a framework for extracting permanent benefits from corporate accounts payable and procurement functions. “Transforming the payment process has moved from a long-range goal to a short-term priority.” --Treasury executive The Goal: • Streamline business processes, • lower overall costs and contribute to • incremental margin improvement

  8. Electronic Payments Overview Source: Aberdeen Group, May 2010

  9. Electronic Payments Overview Top Challenges that Impede Payments Optimization Source: Aberdeen Group, May 2010

  10. Electronic Payments Overview

  11. Payment Optimization Framework

  12. Electronic Card Payments Overview

  13. Simplified Remittance for Supplier • Convenient, easy to accept and process • Detailed information delivered via mail or email • Settlement instructions communicated • Flexible network options • Access to Comdata Business Network

  14. Electronic Card Process Overview • 6. Matched reconciliation 1. Payables disbursement file Company AP Financial System Processing Network • 5. Transaction data • 2. Response file • 3. Payment information • 4. Authorize and settle Vendor Campaign Management

  15. Case Study: • NYSE: CAB • 2011 revenue $2.8B • 34 retail stores • Leading specialty retailer and the world’s largest direct marketer of hunting, fishing, camping and related outdoor merchandise

  16. Case Study: Process • Transition from check to electronic payments • Leverage another payment type to achieve savings • Contribute to incremental margin improvement • Utilize a variety of tools • Executive sponsorship • Employee orientation • Systems integration • Supplier strategy – direct and indirect • Overview • Virtual card payments for AP • Daily reconciliation • Suppliers enrolled • Implementation challenges • Payment improvements • $10M monthly program goal Results: $1.3M Annually

  17. Case Study: • Migrate to virtual card • Reduce manual checks • Reconcile daily • Build supplier participation • Contribute monthly revenue *Example only – rebate based upon billing and payment terms.

  18. Value Proposition Buyer’s Perspective/ Supplier’s Perspective Moving to Electronic Payments • Check to card, ACH, wire • Payment terms (30, 45, 60, 90 days) • Discounts (payment incentive) • Remittance detail (information delivered) • Systems integration (information reconciled) Considerations • Treasury management strategy • Supplier leverage • Value equation

  19. Overcoming Objections • Listen to your suppliers • Discuss payment options • Leverage payment terms • Include in contract negotiation • Provide acquiring partners

  20. Supplier Considerations • Value of accelerated cash flow • Card acceptance 1.5% to 3.0% • Discount offered 2% net 10-15 • Simplified process • AR reconciliation and internal processes • Average receivable amount, ticket size, DSO • Lower collection cost or bad debt reduction • Pricing strategy

  21. Enrollment Best Practices • Secure executive sponsorship • Communicate internally • Target 100% of vendors • Segment and profile vendor base • Be consistent with your message • Campaign continuously

  22. Organizational Commitment Moderate ~ to Full Engagement

  23. Summary • Focused efforts yield cost savings, margin improvement and streamlined processes • Transition to electronic settlements and lower overall processing costs • Maintain a balanced approach • Continuous improvement requires effective change management

  24. Questions?For more information, contact Bob Sneed at Comdata Corporationp. 615-376-6891bsneed@comdata.comwww.comdata.com

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