Transcript Advances in Treasury Management

Advances in Payment Strategies
An Industry Perspective
May 8, 2012
R. Keith Henry, Vice President
Nancy Mirfin, Senior Vice President
Making the Business of Payments Pay
Payables management helps you:
•
Enter vendor invoices
•
Match volumes received
•
Store vendor records
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Establish Accounting Distribution & Approvals
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Manage Cash Outflows
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Generate Payments
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Payables Characteristics
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Most organizations have centralized A/P functions.
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Accounts Payable Departments report that 81%-100% of invoices are
received via paper.
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Estimated cost of processing paper invoices average $3.25 to $7.80 per
invoice.
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Payables Depts. report their most significant challenges revolve around
managing paperwork, getting approvals and operating in a timely manner.
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Companies tend to use purchase orders for more than 25% of their
invoices.
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Many organizations report that average invoice processing time is five
days or less.
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About half (48%) spend more than 10 hours per month resolving invoice
exceptions.
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About two-thirds of organizations frequently or always capture early
payment discounts.
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Key Trends Affecting Payments Market
Category
Descriptions/Examples
Economy
In the current environment, organizations are looking
internally at their own processes to identify immediate
improvements
Technology
While consumer adoption of electronic payments
matures, business electronification has significantly more
room for growth. Technology and emerging payment
types will continue to be drivers of change (EIPP, EBPP, ecommerce, Image Capture/Remote Deposit)
Risk Management
Increasing emphasis on risk management across all
payment types, (privacy, security, theft)
Regulatory Issues
Increased legislation and regulatory guidelines are being
imposed on payments industry, (Card Act, interchange,
surcharge)
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Payables Metrics
AP Productivity Index Metrics (2010)
Efficiency (Total of 51%)
Top
Performers
Median
Total cost of the process “process accounts
payable” per invoice
$5.06
$9.59
Total cost of the process “process accounts
payable” per $1,000 of revenue
$.039
$0.51
Number of invoices processed per “process
accounts payable” FTE
15,831
9,552
6,025
3,839
Number of disbursements per “process
accounts payable” FTE
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From Costly Paper Processing to e-Invoicing
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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
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There is still a much lower
penetration rate (14.6 percent) of
Purchasing Card use on
transactions between $2,500 and
$10,000
58.3%
71.2%
32.1%
6.4%
3.2%
below $2,500
Source: Purchasing Card Benchmark Survey
Results, R. Palmer and M. Gupta
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14.6%
8.8%
5.4%
Paper checks
Purchasing
cards
ACH transfers
Wire transfers
& others
between $2,500
and $10,000
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?
39%
26%
20%
12%
% of total
payments
4%
0% - 20%
21% - 40%
41% - 60%
61% - 80%
81% - 100%
Source: 2011 Visa Inc. Global Cash Management Survey commissioned by Visa Inc. and conducted by Survey.com, a firm specializing in internet market research
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Making Cards Part of Your Payment Strategy
Employee Purchasing cards
Employee Travel cards
•For smaller dollar decentralized purchasing
•Reduces time for receipt and payment of goods
•A lot of value for both buyer and vendors
•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
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Payables Optimization
1. Consider existing PAYMENT MECHANISMS; checks, ACH, Wire and Card.
2. Consider existing TYPES OF PAYMENTS; Vendor, MRO*, Petty cash,
Travel, Fleet and Entertainment.
3. 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.
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Best Practices in Payment Optimization
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Review all areas of disbursement for opportunities: Travel, MRO – Fleet, Petty
Cash and Vendor Payments.
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Agree internally where a card will be used to replace the current payment type;
Card first, Electronic second.
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Establish goals for penetration by payment categories; What is my mix today?
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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.
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Select a Partner that has the ability and resources to assist with perpetual vendor
enrollment, not just one time.
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Offer ACH as a second option, if card is not viable.
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Consider making your payment sooner… a point of negotiation available when
using card.
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Select a partner that can provide consolidated reporting in order to track overall
program spend and traction.
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Strategize annually on how to move additional payments to card.
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Select a partner that can consolidate your spend from all program payments into
one for a heightened annual rebate.
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Alternative Payment Electronic Solutions
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Various Models- A Comparative View
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Benefits
— Faster to market - “plug & play”
— Leverage technology
— Introduce “self-servicing” using the Web
— Electronic settlement
— Dynamic Negotiation
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Issues
—
—
—
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Data Security - PCI, NACHA, PHI
Funds held as a portion of compensation
Reconciliation
Integration
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Best Fraud Protection Practices
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Check
– Use of Positive Pay & Payee
– Reconsider “reverse” positive pay versus segregation of duties
– Controls over check stock & secure ink
– Signature control
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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).
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Card
– Prompt charge back
– Reconcile card payments
– Expand use of ghost cards to improve visibility
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Other
– Vendor Master File controls
– Address Verifications
AFP Fraud Risk Survey, March, 2011
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Consolidated Payables – Overview
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Payment initiation platform to centralize disbursement function through
a single payment file
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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!
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Satisfies all payment requirements for card payments, check issuance,
ACH or wire transfers
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Flexible platform architecture offers easy data integration and process
control
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Optimizes payment mix by migrating from costly paper disbursements
to more financially rewarding methods such as cards
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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
Recognition
Client
ERP
Custom
Matching
Workflow
•
•
•
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Settlement Execution:
Check Printing
ACH
Wire Transfer
Card Settlement
Reconciliation File
PO, Receiving, Payment
and other business rule
data
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?
Questions
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