Paper to Electronic: Automating Receivables

Bill Coward, VP Electronic Receivables Consultant

June11, 2014

Agenda Trends  What is causing new payment trends  Who is impacted Minimize paper – transition to electronic receivables  How to move forward efficiently and cost-effectively  Highlight best practices and payment trends Leverage technology to navigate the complexity of payment processing  Identify the pricing components of card processing  Outline best practices to insure lowest possible costs are achieved

Innovation is driving change

trend

Shopping

trend

Society

© 2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC. 2

Which industries need a payments strategy?

© 2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC. 3

Not just retailers anymore

Government

• Most widely held procurement cards are with the Federal government • Moving toward pre-paid/stored value cards

Healthcare

• Healthcare reform has decreased reimbursement: providers are being asked to do more with less • Increased upfront collection reduces DSO/Cost collection • Flexible Spending Accounts - $2,500

Insurance and Utilities

• Mass exodus from paper to electronic • Recurring payments • Fraud risk is low © 2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC. 4

Why?

1) Mail-in payments declining 2) Biller direct is preferred 3) Card payments still growing 4) The underbanked need alternatives 5) Finally embracing e-bills © 2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC. 5

Common goals…

Reduce cost, complexity and risk

© 2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

Consolidated reporting Single integration for multiple channels POS Web CC/IVR Mobile ERP MOTO

6

The AR

treasure

hunt

7

Take your AR to best-in-class

Clear

payments in

1.3

days

Reduce

manual intervention by

50%

Adopt new technology with

$0

capital expenses 8 Source: May 2012 Aberdeen study

The changing AR landscape       Increased complexity, cost, risk Dual processes for checks, electronic payments High cost to maintain, upgrade infrastructure USPS service reductions Regulatory pressures No fallback with single-site operations 9

How leaders unlock hidden value

Today Best-in-class

Aging Silo’d

$$$

Reactive Visibility and control Technology Payment channels Cost to process Time to process Customer service Advanced Integrated

$

Proactive 10

Your AR treasure map

Electronic billing Current technology Automated posting Multiple payment channels Reduced exceptions Single data file

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Where do you begin?

12

Present bills/statements electronically

How it works

 Leverage one supplier, one combined billing file for electronic and print delivery

Value

 Eliminates print/mail expense  Faster delivery improves DSO  Greater efficiency for AR staff 13

Enable multiple payment channels

How it works

 Manage all channels in one workflow  Deposit all items electronically

Benefits

 Increase customer satisfaction   Cut processing costs Improve DSO

Give your customers choices

14

Take your AR to best-in-class

Clear

payments in

1.3

days

Reduce

manual intervention by

50%

Adopt new technology with

$0

capital expenses 15 Data Source: May 2012 Aberdeen study

Best-in-class accounts receivables 9x better Time for payment to clear (days) 11,7 5x better Manual intervention (% invoices) 79,9% 4,1 1,3 Best Average Trailing Source: Aberdeen, May 2012 44,9% 16,2% Best Average Trailing 5x better Accounts Receivable past due 16,1% 8,6% 3,3% Best Average Trailing 16

Payment Landscape Number of Transactions

(billions)

Source: Nilson, Federal Reserve, NACHA, ATM&Debit News, WF Analysis

Debit card Credit card ACH Checks Stored value

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Things to think about…

Leverage technology to navigate the complexity of payment processing

19

Interchange

What is it?

A percentage fee applied, according to Visa/MasterCard regulations, to the dollar value of each transaction.

Who Pays for it?

The fee is paid by the acquirer to the issuer. This cost is then passed through to you.

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What do Merchants Pay?

Components of Merchant Pricing

Additional Fees 2% Processing 9% Assessments 4% Interchange 85%

21

What impacts interchange costs

Payment Channel Card Type Merchant Category Code System Configuration

22

Interchange optimization

Best Practice

You are in control.

Why?

•Address Verification Service •Settle batches on time •Send correct processing flags •B2B Line item details •Review statements monthly and track for anomalies •Be aware of Card Brand changes •Periodic reviews with your acquirer •Provides some risk mitigation and lower interchange rate •Lower interchange rate, easier reconciliation •Lower interchange rate, improves chargeback rights •Lower interchange, data passes to Payer •Quickly identifies process issues •Spring/Fall releases often have systemic changes that impact interchange •Confirms process optimization 23

Level III and Large Ticket Data Requirements

Level II Data

 Tax Indicator denoting presence of sales tax  Itemized Sales Tax amount (must be greater than $0)  Customer Code

Level III Data

 All Level II Data   Transaction Summary (order date, invoice number, etc.) Line Item Detail (i.e. item description, product code, quantity, unit cost)

Reality Check

– There are limited software and payment

gateway applications that are certified to capture the required data to process Level III and Large Ticket transactions

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“Do not lose sight of the importance of quality. Selecting and enabling technology is more complicated than checking a box or finding the lowest-cost provider.” Article by The Aberdeen Group 25