Transcript JPMC Slides
Best Practices to Deepen Your Purchasing Card Program Value 1 This presentation was prepared exclusively for the benefit and internal use of the J.P. Morgan Chase client to whom it is delivered (including such client’s subsidiaries, the “Company”) in order to assist the Company in evaluating, on a preliminary basis, certain products or services that may be provided by J.P. Morgan Chase. This presentation contains information which is confidential and proprietary to J.P. Morgan Chase, which may only be used in order to evaluate the products and services described herein and may not be disclosed to any other person. In preparing this presentation, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was provided to us or which was otherwise reviewed by us. This presentation is for discussion purposes only and is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by J.P. Morgan Chase. Neither this presentation nor any of its contents may be used for any other purpose without the prior written consent of J.P. Morgan Chase. J.P. Morgan Chase makes no representations as to the legal, regulatory, tax or accounting implications of the matters referred to in this presentation. Notwithstanding anything in this presentation to the contrary, the statements in this presentation are not intended to be legally binding. Any products, services, terms or other matters described in this presentation (other than in respect of confidentiality) are subject to the terms of separate legally binding documentation and/or are subject to change without notice. Neither J.P. Morgan Chase, nor any of its directors, officers, employees or agents shall incur any responsibility or liability whatsoever to the Company or any other party in respect of the contents of this presentation or any matters referred to in, or discussed as a result of, this document. J.P. Morgan Chase is a marketing name for certain businesses of JPMorgan Chase Bank & Co. and its subsidiaries worldwide. © 2013 JPMorgan Chase & Co. All rights reserved 2 Discussion Agenda Review purchasing expense management process Discuss best practices for each step of the process Identify opportunities for new or established programs 3 Purchasing Card Best Practices 4 Purchasing Management Process Purchasing Process Source Policy Payment Reconcile Report Multiple Stakeholders & Processes – Purchasing, AP, Finance, HR, IT Program Drivers Organization Culture – targeted/generic, controlled or flexible Organizational Complexity – industry, organizational footprint 5 Source Policy Payment 6 Reconcile Report Poll When did you last conduct an accounts payables analysis to evaluate current purchasing card coverage of your organizations spend? Within the last year Within the last two years Within the last three years We have never done an accounts payable analysis Do not know 7 Sourcing Conduct an annual accounts payable analysis to identify the potential purchasing card (P-Card) Vendors Understand current P-Card penetration of Vendor base Understand Vendor payment terms for prospective P-Card Vendors Review Vendor payment strategy to validate alignment with organizational goals and controls Update specific categories of spend for purchasing card payment Ensure alignment with financial policies and procurement procedures Develop Vendor contract language that requires card payment for future negotiations Clarify or revalidate Vendor value for accepting P-Card Leverage purchasing card spend reporting for Vendor consolidation opportunities 8 Source Policy Payment 9 Reconcile Report Poll How often do you review and update your procurement policy to align to your purchasing card program? As needed Every year Every two years We have never updated our purchasing card policy Current policy does not include purchasing card 10 Policy Review current policies and procedures for purchasing card use Specify Vendors or categories of spend where card can be used Ensure appropriate level of controls for card types that enable use Communicate and ensure the policy is accessible Develop creative ways to raise awareness of the policy Post policy on company intranet site and incorporate into training for targeted users Drive continuous improvement in your policy Conduct formal policy review every one or two years Ensure the ability to incorporate “just in time” changes to policy as needs evolve 11 Source Policy Payment 12 Reconcile Report Poll How are your purchasing cards most often used? Issued to an individual employee Issued to a department for shared use Issued for targeted Vendors Issued within accounts payable for invoice processing and payment Embedded within e-procurement or e-commerce tools 13 Payment Review and update purchasing card user profiles Monitor card usage and distribution to ensure use for individual and department spend Review AP use cases for general invoice payments or targeted Vendors Set appropriate spend limits and controls per user profile Ensure limits and controls align with scope of authority Review and adjust limits on a regular basis Establish processes with Vendors to capture appropriate level of data Determine where enhanced level of detail is required Ensure enhanced detail is being captured 14 Source Policy Payment 15 Reconcile Report Poll What percentage of your transactions are reconciled by your cardholders and program administrators prior to cycle close and payment to J.P. Morgan? 20% or less 20% - 50% 50% - 80% 80% - 99% 100% 16 Reconciling Ensure that all transactions are reconciled Utilize tools to assign accounting codes to transactions Develop a disciplined process to ensure review and approval of transactions prior to payment Determine and review ongoing audit strategy Review and modify risk tolerance based on organizational policy. Review and modify audit process that ensures accountability without loss of efficiency Integrate purchasing card data into your accounting system Review integration process for potential improvements or efficiencies Review and update processes to manage data integration 17 Source Policy Payment 18 Reconcile Report Poll How often do you conduct a review of your program and review the results with key stakeholders? Every month Every quarter Every year Review program but do not communicate with stakeholders Do not review program 19 Reporting Review key performance indicators to track program performance Measure program performance against established success metrics Review reporting usage to assess value and impact Establish an annual process to review performance and update goals Modify controls or payment strategy based on performance Update program controls and categories of spend based on identified opportunity Review current reporting strategy and key stakeholders Understand opportunities to leverage PCard program data within the organization Sourcing, Finance, HR Provide quarterly or monthly data and conduct review 20 Higher Ed Benchmarking Analysis 21 Higher Education Commercial Card Overview Commercial Card MCC Spending1 DENTAL/LAB/MED EQUIPMENT 7% 7% OTHER DIRECT MARKETERS 22% BUSINESS SERVICES 7% COMPUTERS/SOFTWARE 7% 12% 8% CATALOG MERCHANT BOOK STORES SCHOOLS 11% 8% 11% INDUSTRIAL SUPPLIES STATIONERY/OFFICE SUPPLIES STATIONERY STORES Commercial Card Metrics Higher Ed Metric All Industries % Transactions Under $2,500 on a Purchasing Card2 Large Institutions: 55% % Transactions $2,500 – $10,000 on a Purchasing Card2 Large Institutions: 31% Small: 20% 28% Average Purchasing Card Transaction Amount2 $267 $348 Average Corporate Card Transaction Amount3 $298 $227 Travel Spending by Payment Mechanism3 68% 85% Corporate Card 44% Small: 47% Global Commercial Card Best Practices Opportunities & Benefits Benefits Best Practice Achieve Active Senior Management Support of Card Program Integrate Commercial Card Program into the Green Initiative Align with corporate goals, demonstrate value Increase visibility of program across the company Reduce paper and fuel usage Align with corporate goals, demonstrate value Highlight commitment to customers Investigate Expansion of Increase spending under management in nontraditional spend categories Commercial Card into New Spend Categories Enhance automation with elimination of POs Best Practice Benefits Integrate Commercial Card with eProcurement Technology Increase liquidity, reduce use of cash reserves Streamline and automate the procurement process from purchase order to payment Develop Comprehensive Commercial Card Training Program Communicate updates, reduce misperceptions Enhance program visibility Increase spending compliance Optimize Use of Ghost Cards or Virtual Accounts for Procurement Spend Streamline ordering process, increase efficiency Allow staff to focus on value-added activities Increase spending under management Visa PerformSource Source: (1) Commercial Card Spending MCC metrics for this report were derived from aggregated Visa commercial card spend from a subset of Visa purchasing card transactions by US organizations between January 1, 2010 and December 31, 2010 and represent the top 10 MCCs by spend and the % of spend out of the total aggregated spend within the top 10 MCCs. (2) RPMG Research 2010 Purchasing Card Benchmarking Survey; (2) RPMG Research 2011 Corporate Card Benchmark Survey. Higher Education Procure-to-Pay Overview Procurement Tools within Higher Education1 Procure-to-Pay Maturity Model Establish an End to End Automation Strategy Consolidate Spend Data, Conduct Spend Analysis Optimize Program Performance Foundational Advanced Institute a Supplier Management Program Benchmark Procure-to-Pay Process Establish Supplier KPIs Global Higher Education Sector Global Procure-to-Pay Best Practices Opportunities & Benefits Benefits Best Practice Develop a Procure-toPay End-to-End Automation Strategy Evaluate Accounts Payable Automation Solutions Consolidate Spend Data and Conduct Spend Analysis Improve working capital management Reduce time and expense Free staff time for more strategic activities Reduce paper in the payment cycle Implement a solution appropriate to specific company needs Gain visibility into indirect spending Eliminate redundant spending Track and prevent non-compliant spending Best Practice Automate Order Placement with an eProcurement Solution Institute a Supplier Management Program Automate the Payment Approval Process Benefits Increase spending under management Reduce time, expense and errors Decrease redundant spending Align suppliers with procurement strategy and policies Establish preferred supplier relationships and improve pricing negotiations Ensure supplier compliance with negotiated contract terms Allow staff to focus on value-added activities Visa PerformSource Source: (1) Public College & University Procurement,” American Association of State Colleges and Universities (AASCU) National Association of Education Procurement (NAEP) 2010. Chip and Pin 24 Chip and Pin • JPM is actively developing a U.S. chip card solution • JPM’s chip solution will fully integrate into our existing U.S. programs without compromise. Environment Today J.P. Morgan Chip Strategy front Magnetic stripe cards continue to be the primary card-type back Project is in active status and moving forward as planned. accepted within the U.S.; however, chip card acceptance is rapidly growing internationally. J.P. Morgan is working to provide U.S. Clients with access to chip based commercial cards. While magnetic stripe cards still work at a majority of international merchants, chip-only acceptance is growing at: The comprehensive approach includes: - Ability to issue chip cards into an existing or new program. - Unmanned ticket kiosks - Efficiently integrates into existing program structure. - Gas stations - Commercial cards that will include both a chip and a magnetic stripe. As a result, U.S. Cardholders, traveling internationally may need to: - Be persistent in asking a merchant to swipe their card - Plan ahead to purchase train tickets - Use cash for select transactions - Enabling existing cards to be converted to chip cards and retain existing account numbers - Availability on both MasterCard and/or Visa. Cardholders will be able to efficiently set / re-set their 4-digit PIN within our Customer Service automated line. ■ U.S. banks and card issuers remain in the early stages of introducing chip cards for their customers. At this time we are in Pilot and expect to roll out chip cards to select clients in late 2014 and early 2015. 25 Questions for Panelists or JPM? 26