VISA COMMERCIAL SOLUTIONS BEST PRACTICES SUMMARIES. Profit from the experience of best-in-class companies.

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1 VISA COMMERCIAL SOLUTIONS BEST PRACTICES SUMMARIES Profit from the experience of best-in-class companies.

2 Introduction To stay competitive, you know how important it is to find new ways to streamline and save on your company s operations. Learning how leading companies handle commercial payments can give you deeper insights into where and how you can improve. Help you understand how to run your Procure-to-Pay processes more efficiently. Enhance visibility into corporate spend. Gain better control and compliance. And ultimately, help enable you to add more profit to your bottom line. Visa commissioned Deloitte Consulting to conduct 90 in-depth interviews in 2007 with more than 60 global/multinational, mid-size and large corporations as well as federal and local government agencies across the world. See the section entitled Study Methodology for additional detail. The 2008 Visa Global Procure-to-Pay and Commercial Card Best Practices Study describes how these organizations implement and optimize their Procure-to-Pay processes and commercial card programs. This document provides high-level summaries of the best practices. The summaries give you a quick overview of each best practice and its key benefits including maximizing your purchasing and corporate card programs. Streamlining travel and entertainment management. Taking advantage of the latest innovative best practices. And automating the entire Procure-to-Pay process. To obtain the full version of the 2008 Visa Global Procure-to-Pay and Commercial Card Best Practices Study, contact your commercial banker. Table of Contents Procure-to-Pay Best Practices Articulate a Procure-to-Pay Strategy with a Short and Long-Term Vision Establish Center-Led Management of Critical Procure-to-Pay Functions Create a Procure-to-Pay Shared Services Organization Institute a Center-Led Travel Management Function Develop a Procure-to-Pay End-to-End Automation Strategy Set Performance Goals for Procure-to-Pay and Card Management Employees Communicate Enterprise-wide Procure-to-Pay Policies and Procedures Communicate Enterprise-wide Travel Policies and Procedures Institute a Supplier Management Program Develop a Contract Lifecycle Management Process Establish Supplier Key Performance Indicators Automate Order Placement with an e-procurement Solution Maximize Use of an Online Travel Booking Tool Evaluate Accounts Payable Automation Solutions Note: Survey results, research and practice recommendations are intended for informational purposes only and should not be relied upon for marketing, legal, technical, tax, financial or other advice. When implementing any new strategy or practice, you should consult with your legal counsel to determine what laws and regulations may apply to your specific circumstances. Visa is not responsible for your use of the information, including errors of any kind, or any assumptions or conclusions you might draw from its use. Much of the information contained in this document applies internationally, but a certain amount of information applies only to certain countries or regions. Although Visa tries to mark all country- and region-specific information with a country indication, it does not warrant or represent that all information without indication applies internationally. You should check the applicability of any information in this document to you or your organization.

3 Automate Invoice Receipt and Payment with Electronic Invoice Payment and Presentment (EIPP) Reduce Invoices with Evaluated Receipt Settlement (ERS) Automate the Payment Approval Process Create a Controls and Compliance Strategy for the Procure-to-Pay Process Consolidate Spend Data and Conduct Spend Analysis Benchmark the Performance of the Procure-to-Pay Process Analyze Enterprise-wide Travel Spend Data Commercial Card Best Practices: Strategy Implement a Purchasing Card Program Implement a Corporate Card Program Consider Implementing a Commercial One Card Program Consider Implementing a Fleet Card Program Consider Implementing a Multinational Commercial Card Program Integrate the Commercial Card Program with Enterprise-wide Cost Reduction Initiatives Establish Center-Led Management of the Commercial Card Program Achieve Active Senior Management Support of the Commercial Card Program Integrate the Commercial Card Program into the Green Initiative Create a Controls and Compliance Strategy for the Commercial Card Program Commercial Card Best Practices: Program Management Select the Liability and Billing Structure for the Commercial Card Program Define Issuance Criteria for Optimal Purchasing Card Distribution Define Issuance Criteria for Optimal Corporate Card Distribution Establish Parameters for Eligible Purchasing Card Transactions Establish Parameters for Eligible Corporate Card Transactions Communicate Enterprise-wide Purchasing Card Policies and Procedures Communicate Enterprise-wide Corporate Card Policies and Procedures Mandate the Use of the Purchasing Card for All Eligible Purchases Develop Procedures for Commercial Card Account Management Deliver a Comprehensive Commercial Card Training Program Investigate Expansion of Commercial Cards into New Spend Categories Integrate the Commercial Card Program with the Working Capital Management Process

4 Commercial Card Best Practices: Technology Integrate Commercial Card Data with Financial Accounting Systems Integrate the Commercial Card with e-procurement Technology Automate the Reconciliation Process by Integrating with Expense Reporting Applications Commercial Card Best Practices: Operations Establish Audit Procedures for the Commercial Card Program Integrate the Commercial Card Program into the Business Continuity Plan Designate a Commercial Card for Meetings, Incentives, Conferences and Exhibitions (MICE) Optimize Use of Ghost Cards or Virtual Accounts for Procurement Spend Optimize Use of Central Travel Accounts for T&E Spend Use Fleet Cards to Track Fleet-Related Expenditures Use the Commercial Card to Pay Invoices in Accounts Payable Incorporate Commercial Card Acceptance into Supplier Contract Terms Communicate Commercial Card to Non-Accepting Suppliers to Encourage Card Acceptance.. 46 Utilize Enhanced Data from the Purchasing Card Program Utilize Enhanced Data from the Corporate Card Program Develop a Process for Reporting and Payment of Sales and Use Taxes Develop a Process for Value Added Tax (VAT) / Goods and Services Tax (GST) Reclamation Implement Imaging Technology and Establish a Receipt Retention Policy Monitor and Evaluate Commercial Card Program Performance Share Commercial Card Performance Scorecard with Senior Management and Key Stakeholders Optimize Program Performance with the Use of Analytical Tools Study Methodology

5 Articulate a Procure-to-Pay Strategy with a Short and Long-Term Vision Best practice companies establish a Procure-to-Pay strategy that is composed of short and long-term goals. The short-term goals range from one to two years, while long-term goals range from three to five years. The goals and initiatives are best developed by incorporating feedback from key stakeholders throughout the organization. Successful strategies contain goals for: Overall spend Spend by commodity type Spend by order placement mechanism Spend by payment type Cost Savings (estimated by activity-based costing or full-time equivalent [FTE] savings) Supplier sourcing goals This strategy is the foundation of the company s Procure-to-Pay process and should be a component of the company s overall business agenda. Cost Savings and Process Efficiency A well defined and prioritized Procure-to-Pay plan enables companies to identify achievable cost savings goals and increases execution efficiency Supplier Management Increased organizational alignment improves a company s ability to manage and rationalize suppliers User Satisfaction Procure-to-Pay goals aligned with organizational needs receive increased support from key stakeholders and employees Establish Center-Led Management of Critical Procure-to-Pay Functions Determining the degree of centralization of Procure-to-Pay functions is a critical organizational design and management decision. A center-led management approach ensures consistency of key Procure-to-Pay activities across the entire company, while allowing requirements and restrictions to vary slightly based upon business unit/ regional needs. Activities that often have centralized oversight with location-specific tailoring as needed include: Strategic sourcing Contract administration 1

6 Order placement Supplier payment Expense management Travel administration Communication and training Many organizations achieve center-led management of Procure-to-Pay functions by establishing a shared services organization. Shared service organizations centralize and streamline functions across a company such as Procurement, Accounts Payable and Accounts Receivable. In doing this, companies are able to reduce costs by taking advantage of economies of scale and process standardization of key Procure-to-Pay functions. Control and Compliance Centralized oversight allows for consistent development and communication of policies and procedures, thereby providing enhanced employee compliance Cost Savings and Process Efficiency Center-led management helps eliminate redundancies and increase process efficiencies across Procure-to-Pay functions Supplier Management Center-led management of the Procure-to-Pay function enables centralized negotiations with suppliers, which enhances the negotiating strength of a company Create a Procure-to-Pay Shared Services Organization Leading organizations encourage a collaborative relationship between their Procurement, Accounts Payable and business functions to maximize the efficiency of the entire Procure-to-Pay process. In most organizations, a tighter integration of Procurement and Accounts Payable has been achieved through the adoption of a shared services model with center-led management of the Procure-to-Pay process. This approach allows organizations to standardize and streamline non-strategic activities, increasing the quality of service provided to the company. Additionally, this approach facilitates Procurement and Accounts Payables joint participation on cross-functional teams for initiatives such as a purchasing card implementation, an e-procurement upgrade or strategic sourcing. The input of key individuals such as representatives from Procurement and Accounts Payable, major internal Procure-to-Pay stakeholders and end-users helps set goals, provide training and evaluate new opportunities for the shared services organization. 2

7 Cost Savings and Process Efficiency Strategic positioning of Procurement and Accounts Payable results in cost savings and increased process efficiencies through the streamlining and standardization of Procure-to-Pay activities Supplier Management Increased collaboration between Procurement, Accounts Payable and business units encourages the development of initiatives that improve supplier sourcing, negotiations and contract management User Satisfaction Increased Procurement and Accounts Payable alignment with organizational needs increases user satisfaction Institute a Center-Led Travel Management Function Best practice companies centralize their Travel Management function to ensure consistency of key travel program elements across the entire company, while providing flexibility for the local business units to adjust policies and procedures to support unique travel needs. Organizations typically centralize the following Travel Management activities: Travel supplier negotiations and management Travel policy development and management Management of online travel booking tool Travel-related communications (e.g., newsletters, website) Corporate card administration Centralization of the Travel Management function can reduce overall travel costs by as much as 20 percent through cost and process efficiency savings, which are achieved through: Improved travel coordination efforts across the company Enhanced negotiations with suppliers through volume pricing Consistent development and communication of travel policy Streamlined communication with suppliers Increased user satisfaction from centralized service Consistent and comprehensive travel reporting Furthermore, leading companies use one travel agency to enhance the reporting of travel spend. Many companies also integrate the folio data from their corporate card programs with the travel agency data to gain a more comprehensive view of company-wide traveling costs. Control and Compliance Consolidation of the Travel Management function enhances the ability to track and analyze travel spend and compliance data 3

8 Cost Savings and Process Efficiency Centralized travel and consolidation of spend reduces costs and improves discounts User Satisfaction Streamlined and standardized processes, in addition to an enhanced ability to address employee questions and issues, improves the user experience Supplier Management Centralized Travel Management improves relationships with and management of suppliers Develop a Procure-to-Pay End-to-End Automation Strategy Best practice companies develop technology strategies that detail how technology implementations and enhancements can enable end-to-end automation of the company s Procure-to-Pay operation. Technology strategies can include the following key components: Vision for the current and future Procure-to-Pay platform, including integration with new technologies, automation and potential outsourcing opportunities Short- and long-term Procure-to-Pay technology initiatives with alignment to specific Procure-to-Pay goals Identification of benefits to be achieved through the technology initiatives Framework for selection of technology partners and suppliers Organizations prioritize their automation initiatives and ensure maximum alignment with their goals. These organizations also typically work closely with key stakeholders in senior management, IT, Procurement and Accounts Payable to ensure the initiatives have the appropriate level of support and resource commitments within the organization. Study participants indicated that the implementation of a commercial card program was a crucial component of their long-term technology automation strategy. Often, the success of these programs was used to develop business cases for further technology automation and integration within the Procure-to-Pay process as well as commercial card program expansion. Cost Savings and Process Efficiency Effective planning and development of an automation strategy increases the efficiency of technology implementations and maximizes the effective use of resources Supplier Management Short- and long-term strategies provide guidelines for the selection of technology suppliers, including capabilities and service-level expectations 4

9 User Satisfaction Short- and long-term strategies that align with a company s Procure-to-Pay strategy tend to also align with end-user needs, increasing their support of technology initiatives Set Performance Goals for Procure-to-Pay and Card Management Employees Best practice organizations establish specific performance goals for employees that are aligned with the company s Procure-to-Pay and Card Program strategy. Performance evaluation criteria may be based upon: Department and Cost Metrics Measuring employees against specific department or cost savings objectives will align the employee incentives with the company s overarching objectives. Many individuals involved in the Procure-to-Pay process are also evaluated against annual savings targets Personal Development Criteria Companies assign individual goals related to continuing education or accreditation with industry organizations. Establishing individual goals will encourage employees to remain current on industry topics and will provide them with development opportunities Once performance goals are established, employees should be informed of the evaluation criteria, measurement frequency and review process. In addition, companies will often create a scorecard to monitor and measure employee performance against the assigned goals. Cost Savings and Process Efficiency Encouraging the correct employee behavior will improve internal efficiencies. In addition, performance goals will motivate employees to achieve the company objectives and cost savings goals User Satisfaction Clearly communicating expectations and providing continuing education opportunities allows employees to achieve their goals and improves both career development and employee satisfaction Communicate Enterprise-wide Procure-to-Pay Policies and Procedures Best practice companies develop Procure-to-Pay policies and procedures to communicate the recommended Procure-to-Pay processes. Policies may cover a variety of topics, including mission statement and objective, organizational structure, requisitions process and use of commercial card. Organizations work closely with key stakeholders to ensure that consensus is established when developing or modifying Procurement policies and procedures. 5

10 Leading organizations develop comprehensive communication strategies to ensure that Procurement policies and procedures are effectively communicated to employees. Most companies report that employees are more likely to use the appropriate purchasing process if they understand purchase guidelines and how compliance supports the overall company strategy. Therefore, organizations should considering communicating purchasing guidelines and the impact compliance has on the organization (e.g., cost savings, potential efficiency gains) to employees regularly. Companies ensure that their Procurement policies and procedures are relevant and up-to-date by conducting regular reviews on a frequent basis, modifying the policies as needed. Changes to policies can then be communicated to users and incorporated into existing Procure-to-Pay training. Control and Compliance Clearly defined policies and procedures allow companies to define and monitor progress toward user compliance with policies and procedures Cost Savings and Process Efficiency Increased adherence to well-defined policies and procedures maximizes the use of practices that are identified to enable greater efficiency for the Procure-to-Pay organization User Satisfaction A clear communication of the Procure-to-Pay process allows employees to perform more efficiently and minimizes rework associated with non-compliance Communicate Enterprise-wide Travel Policies and Procedures Best practice companies develop and disseminate company-wide travel policies to travelers to increase compliance and realize the associated cost savings benefits, such as increased use of preferred vendors and maximized use of efficient travel booking systems. To ensure the development of comprehensive travel policies and procedures, companies often consult their travel agency, business travel network or third-party providers for policy development. Companies also ensure that travel and entertainment (T&E) policies align with overall Procure-to-Pay objectives and are actively endorsed by senior management. Once the company-wide travel polices have been developed, organizations often allow local or regional businesses to customize travel policies and procedures such as the number of required approvals or recommended means of travel. 6

11 Successful organizations communicate travel guidelines as well as the impact compliance has on the organization, including cost savings and process efficiencies, to employees regularly through multiple communication channels, such as intranet portals, targeted s, newsletters and meetings. Companies ensure that their travel policies and procedures are relevant and up-to-date by conducting regular reviews on a frequent basis, modifying them as needed. Control and Compliance Clear travel policies and procedures increase employees understanding of travel restrictions, mandates and policy updates, helping companies achieve a greater level of control Cost Savings and Process Efficiency Increased compliance with travel policies, including the use of preferred travel suppliers and payment by corporate card, results in cost savings and payment process efficiencies User Satisfaction Comprehensive travel policies and requirements provide employees with a clear process for travel planning and booking Institute a Supplier Management Program Leading companies have corporate-wide Supplier Management Programs to guide the selection and on-going management of suppliers. These programs are typically centrally administered, while also ensuring that the program efforts are supported by the business units and employees who interact with the suppliers. These programs typically consist of the following components: Program Objectives A formal Supplier Management Program should include strategic and financial goals such as the number of contracted suppliers or the number of preferred suppliers per spend category Contract Term Guidelines Typical contract guidelines include instructions for when to utilize volume guarantees, criteria for determining contract length, payment terms, discount percentages for early payment and service level requirements Contracted/Preferred Supplier Criteria Organizations also ensure that criteria exist to determine minimum standards for contracted and preferred suppliers Commodity/Spend Type Management Once the suppliers are selected, organizations use cross-functional teams to manage the supplier relationship Companies conduct periodic reviews of their Supplier Management Programs to track performance and ensure the goals and objectives are aligned with organizational needs. As Supplier Management Programs often take time to fully implement, companies often align Supplier Management goals with long-term organizational objectives. 7

12 Cost Savings and Process Efficiency Suppler Management Programs enable negotiation of increased supplier discounts due to consolidated spend and improved process efficiencies through increased supplier alignment with efficient order and payment methods Supplier Management Centrally administered, corporate-wide Supplier Management Programs guide the selection, optimization and on-going management of suppliers across the organization User Satisfaction Incorporation of user feedback into supplier performance evaluation and simplification of purchasing options through a rationalized supplier base enhance user satisfaction Develop a Contract Lifecycle Management Process Active management of suppliers and contracts is critical for organizations with a large number of contracted suppliers. Leading organizations develop an approach that uses automated tools to develop contracts and ensure that suppliers adhere to the contracted pricing, terms and Service Level Agreements (SLAs). A number of third-party vendors provide applications to manage the six stages of the contract lifecycle, from contract drafting, negotiation and approval to contract storing, administration and renewal. Depending on the number and complexity of the contracts, companies select and implement tools with varying levels of functionality. Software also exists to integrate the contract lifecycle with procurement, sourcing and payment applications. The integration of these applications automates the supplier selection and payment process and enables Evaluated Receipt Settlement (ERS) and the performance of three- and four-way matching. Control and Compliance A contract management tool provides companies with visibility into the details of supplier contracts, which allows companies to monitor each supplier s performance and adherence to contracted terms Supplier Management The ability to monitor supplier performance against the contracted terms provides companies with the information needed to manage the supplier and identify performance improvement opportunities 8

13 Establish Supplier Key Performance Indicators Leading companies monitor the performance of their suppliers to ensure adherence to the negotiated contract terms and Service Level Agreements (SLAs). To track performance, companies typically establish Key Performance Indicators (KPIs) based on the terms and SLAs that are established in the contracting and negotiation process. Common KPI categories include price, speed, accuracy, quality, billing and customer service. Often companies will develop a scorecard to monitor the KPIs. A scorecard provides information on current and historical performance and allows companies to proactively respond to issues and encourage the correct behavior. The scorecard can be used for performance reviews with the supplier as well as status updates with senior management. In addition to tracking supplier performance against KPIs, companies also evaluate suppliers on their ability to meet the company s objectives. In order to communicate the objectives, companies hold annual supplier meetings, during which the company describes their strategy, goals and initiatives. The annual meetings allow the suppliers to align their practices with company objectives. Control and Compliance Implementing a scorecard monitoring system allows companies to gain visibility into and control over the supplier performance. As suppliers increase compliance with the negotiated terms, companies receive improved service and product quality Cost Savings and Process Efficiency Improving supplier performance will reduce inconsistency and errors, either in the product quality, shipments or pricing. This will reduce the need for internal manual exception processing and expedited orders Supplier Management Determining supplier KPIs provides companies with metrics and criteria to monitor supplier performance. The scorecard provides objective criteria that companies can use when meeting with suppliers to address issues and/or concerns Automate Order Placement with an e-procurement Solution Best practice companies have successfully implemented e-procurement solutions to streamline and automate their order placement activities. e-procurement software applications are employee self-service solutions that support requisition, approval routing and order placement. These applications eliminate manual purchasing 9

14 activities, minimize process variance, enable process integration, reduce the need for multiple procurement systems and minimize invoice and payment errors. Studies have shown that the use of such tools can reduce the average cost of Purchase Orders between US$10 and $20. 1 Successful e-procurement implementations are based on the development of a clear business case containing measurable goals and benefits. Successful implementations require involved project sponsors, clearly defined communication and training programs, and a phased rollout strategy. Organizations develop formal processes to enroll suppliers in their e-procurement systems and maximize the automation benefits by integrating the purchasing card as the payment method. To ensure the estimated e-procurement system benefit is achieved, companies encourage compliance with the prescribed use of the system. Some companies strongly encourage usage through education and compliance reporting while other companies mandate usage. Control and Compliance The use of e-procurement solutions increases business with preferred suppliers and encourages compliance with purchasing policies and procedures Cost Savings and Process Efficiency e-procurement systems automate the requisition and Purchase Order creation process, leading to cost savings and process efficiencies. Additional process efficiency can be gained through the integration of purchasing cards as a form of payment in the system Supplier Management Mandating purchases through the e-procurement system places a greater volume of spend with preferred suppliers, improving the ability to negotiate for pricing, volume discounts and quality of service User Satisfaction e-procurement systems increase user satisfaction through standardizing and simplifying the purchasing process Maximize Use of an Online Travel Booking Tool An online booking tool provides an effective way for companies to monitor travel spend and to encourage the appropriate travel behavior. In addition, these tools can provide transaction fees that are 30 percent to 50 percent lower than the transaction fees for booking through an agency call center. 1 Forrester, The Forrester Wave : eprocurement Solutions,

15 Organizations typically select an online booking tool provided by their travel agency or select a third-party software provider. Once implemented, due to the savings potential, companies aim to achieve a high percentage of eligible trips booked online. Companies take a variety of approaches to increase compliance with the online booking tool, including communicating the benefits of the tool, training key users on the tool, offering incentives to booking with the tool and identifying non-compliance. Organizations take advantage of many features that online booking tools provide. Online booking tools support the establishment of traveler profiles, which allow organizations to set controls applicable to the employee s travel needs. In addition, the online booking tool allows for pre-trip approvals and can be used to monitor compliance with preferred suppliers. The incorporation of corporate cards into online booking tools further improves a company s ability to increase compliance with travel policies. In addition, data from corporate card travel bookings can be integrated into expense reporting tools, automatically pre-populating expense reports to streamline the reconciliation process for travel expenses. Control and Compliance Online booking tools provide the ability to recommend specific travel providers and/or lower cost itineraries. Communicating these options results in an increase in travel with the preferred suppliers and compliance with the travel policies Cost Savings and Process Efficiency There is a reduced transaction fee for trips booked using the online tool. In addition, employees often select a lower-cost fare when presented with all the options through the online tool Spend Visibility The online tool provides more comprehensive reporting on travel spend as it allows companies to identify non-compliant travel purchases or bookings made outside the online tool/preferred travel agency User Satisfaction The online tool provides an easy and user-friendly method for employees booking travel. The ability to book travel at their convenience and select from a variety of options improves the overall travel experience Evaluate Accounts Payable Automation Solutions Organizations that rely on manual systems within Accounts Payable often have to deal with duplicate, inaccurate, late or unauthorized payments as well as misappropriated cost allocations. Leading organizations are addressing these inefficiencies and risks by maximizing the level of automation within their Accounts Payable function. 11

16 A key component to an Accounts Payable automation strategy is the reduction of paper in the invoice receipt-to-pay cycle. Organizations adopt technology solutions that enable the receipt of electronic invoices, convert paper invoices into digital images, store electronic invoices in a web-based repository and extract key data from the invoices to enhance reporting and approval and payment processing. Organizations typically evaluate the following aspects of the Accounts Payable function when identifying opportunities for automation: Invoice Receipt Organizations automate the receipt of invoices through EDI or solutions supporting Electronic Invoice Payment and Presentment (EIPP) Document and Data Capture Organizations consider imaging or automating the conversion and capture of paper documents into an electronic format Content Storage and Management Companies also automate the storage, management and retrieval of electronic documents and data Workflow Management Workflow management solutions allow invoices to be automatically routed for appropriate approval Payment Organizations can automate the payment of invoices through ACH or a commercial card solution Control and Compliance By eliminating manual processes and potential sources for human error, automation within Accounts Payable increases the accuracy of payments Cost Savings and Process Efficiency Automation within Accounts Payable reduces paper invoices and manual review processes, which reduces costs. Automating the payment process enables the company to make timely payments, improving an organization s ability to take advantage of early payment discounts Supplier Management Automation within Accounts Payable increases spend visibility, which supports supplier optimization and enables improved supplier performance tracking and evaluation Spend Visibility The electronic receipt and payment of invoices allows a larger portion of purchasing and payment data to be centrally captured. The data is aggregated across different business units and purchasing methods to reveal spending patterns and aid analysis Automate Invoice Receipt and Payment with Electronic Invoice Payment and Presentment (EIPP) Best practice organizations use Electronic Invoice Payment and Presentment (EIPP) solutions to automate key Accounts Payable processes such as invoice receipt, data entry, disputes, approvals, payments and payment reconciliation. Depending on the 12

17 type of solution, EIPP may also enable invoice validation, discount management and payment status visibility. A variety of EIPP solutions exist today. Organizations should evaluate their objectives for supplier interaction and develop an EIPP strategy based on their business needs. The cost of the EIPP system should also be evaluated. Pricing will vary by solution provider, but most system costs include an implementation fee, an annual maintenance fee and a transaction fee. Once an EIPP solution is selected, organizations work with their suppliers to enroll them in the system and to have them accept the preferred electronic payment method (e.g., commercial card, ACH). Companies initially target suppliers with high transaction volume for integration with the select EIPP solution to maximize cost savings. Cost Savings and Process Efficiency EIPP eliminates the need for a paper invoice, allowing invoices to be electronically received and approved, which reduces processing costs. EIPP also enables organizations to make timely payments, which improves the organization s ability to take advantage of early payment discounts Spend Visibility The electronic receipt and payment of invoices allows a larger portion of purchasing and payment data to be centrally captured. The data is aggregated across different business units and purchasing methods to reveal spending patterns and aid analysis Supplier Management Enhanced spend visibility supports supplier optimization and enables improved supplier performance tracking and evaluation Reduce Invoices with Evaluated Receipt Settlement (ERS) Evaluated Receipt Settlement (ERS) is a business process used by best practice organizations to eliminate the need for an invoice, which results in a more efficient, streamlined payment process. ERS allows organizations to conduct a two-way match between the Purchase Order and the goods or services receipt to trigger the approval for payment. 13

18 ERS streamlines the payment process as follows: 1 Purchase Orders sent to Supplier Goods sent to Buyer 2 Buyer 3 Buyer receives goods and logs receipt acknowledgement in the procurement or ERP system Supplier 4 An internal invoice based on the quantity of goods received and the Purchase Order prices is automatically created in the system, scheduling payment to the supplier 5 Electronic payment notification sent to Supplier 6 Payment made to Supplier Companies implementing ERS often begin with a pilot program with select suppliers. The pilot program allows companies to work closely with participating suppliers and internal employees to identify potential implementation and process issues related to ERS. In order for ERS to work effectively, Procurement and Accounts Payable must clearly communicate the new payment process to employees. Buyers must enter all ERS-related Purchase Orders into the procurement system, and receiving employees need to ensure that they validate receipts and review the quality/quantity of the goods/services before logging acknowledgement of the receipt since logging the receipt triggers payment to the supplier. Control and Compliance Using ERS, payment is triggered only upon the acknowledgement of the receipt of goods, thereby minimizing payment errors. The elimination of invoices also reduces the risk of duplicate payments Cost Savings and Process Efficiency ERS eliminates the need for invoices, thus reducing the costs associated with manual invoice data entry and rework due to errors in the manual coding process. In addition, the pay-on-receipt process reduces the payment time period, allowing companies to take advantage of early payment discounts 14

19 Automate the Payment Approval Process Best practice companies automate the payment approval process by conducting three-way or four-way matching, which integrates the purchase transaction data with receipt and invoicing data. The matching occurs for the following data elements: Purchase Order Quantity of goods received Invoice Quantity of goods accepted or supplier contract terms This automated process occurs within the e-procurement or ERP system and verifies that the Purchase Order, invoice and receiving information match within accepted tolerance levels. If all documents match within a designated tolerance, the invoice is authorized for payment. This automation minimizes the time Accounts Payable spends reviewing and matching invoices and enables the department to focus on managing the exceptions. Companies analyze exception patterns to set the appropriate tolerances for low risk variances. For three-way and four-way matching to function properly, employees must comply with order and receipt procedures. Organizations communicate and enforce these policies and procedures to minimize the time Accounts Payable spends reviewing and managing invoices and receipts. Control and Compliance Conducting automated three- or four-way matching helps to ensure that invoices being paid are valid and eliminates inaccurate or duplicate payments Cost Savings and Process Efficiency Cost savings are achieved as the automated process streamlines the manual matching process and minimizes overpayments on goods that are not received or are received in poor quality Supplier Management Detailed data provided from the automated matching process enables organizations to track suppler performance metrics, which can be used to enhance negotiating strength with suppliers and improve overall supplier management User Satisfaction Automated matching eliminates the need for employees to solicit signatures prior to payment, which simplifies the overall purchasing process 15

20 Create a Controls and Compliance Strategy for the Procure-to-Pay Process The Sarbanes-Oxley Act (SOX) passed in 2002 requires organizations to design and implement an infrastructure that is controlled, is complete and can sustain a controls-compliant environment, including: Standardizing purchasing and payment processes and controls Improving access to audit and compliance data Enhancing reporting capabilities and reporting on a periodic basis Increasing the ability to detect fraud Documenting and testing controls Conducting and signing off on controls reviews Companies are continually looking for ways to develop strategies that will satisfy SOX requirements and address control issues. Best practice organizations typically achieve Procure-to-Pay control goals by implementing recommended practices within the five areas outlined in the Visa Controls Framework: Ownership An organizational structure needs to include well-defined roles and responsibilities to monitor the Procure-to-Pay process and ensure compliance with the organization s control requirements Policies Best practice policies are clearly defined and align with the Procure-to-Pay organization s overall control strategy Procedures Procedures should clearly identify the appropriate who, what, where, when and how of the Procure-to-Pay process and will assist in monitoring and control Technology Effective use of technology makes procedures more efficient and guards against human error Audit Regular audits enable organizations to monitor Procure-to-Pay policies and procedures compliance as well as identify any needed policy and procedure updates Control and Compliance Developing a controls strategy minimizes Procure-to-Pay process risks, increases compliance, enhances visibility of spend and assists in SOX compliance Cost Savings and Process Efficiency A controls strategy minimizes non-compliant behavior. Automated monitoring and tracking (via three-way matching and online travel booking tools) reduces time and effort needed to track compliance 16

21 Consolidate Spend Data and Conduct Spend Analysis Best practice companies standardize and consolidate their spend data from different sources to conduct company-wide analysis of their total spend. Spend data analysis helps companies better understand their purchases with top suppliers by spend type, enabling them to negotiate better supplier terms and pricing. Companies typically find that they do not have standard spend data elements (such as supplier IDs, supplier names and spend types) across their multiple systems. Therefore, the first step to spend data analysis is data standardization. Organizations commonly use consolidated spend data to conduct analyses by: Spend Category (e.g., travel, office supplies) Commodity Type Business Unit Payment Method (e.g., commercial card, check or ACH) Transaction Size Depending on the strategic priorities of the organization, the type and goal of spend analysis will vary. Companies often use third-party providers that offer on-demand spend management solutions, including applications for sourcing, spend analysis, contract management and e-procurement. In addition, Visa offers a series of tools to assist companies with data consolidation and analysis. For more information, please contact your local issuer. Cost Savings and Process Efficiency Analyzing consolidated spend analysis data allows the Procurement/Sourcing group to rationalize suppliers and better negotiate with existing suppliers Supplier Management Spend analysis will assist in the identification of trends or patterns in the supplier spend. This information will assist in the ongoing management of the supplier relationship Spend Visibility Standardizing and integrating the data provides companies with visibility into their overall spend. In addition, the spend analysis allows for segmentation of the data, including spend by supplier, spend category, business unit, etc., which supports supplier management and cost savings initiatives 17

22 Benchmark the Performance of the Procure-to-Pay Process Best practice companies benchmark their Procure-to-Pay performance periodically to identify key success areas and improvement opportunities. Organizations typically benchmark quantitative and qualitative items such as: Cost metrics (e.g., the cost to place an order or the cost to process a check payment) Efficiency metrics (e.g., number of Purchase Order defects or the average time to generate a Purchase Order) Supplier base metrics (e.g., the number of suppliers under contract, average supplier discount by spend type) Customer Service metrics (e.g., average time to resolve and the number of resolved custom service inquiries) Implementation of best practice processes or technology or adoption of innovative practices Companies can use the results of benchmarking studies to create a scorecard to promote the success of the Procure-to-Pay function to senior management and to gain support for key initiatives. Companies work with other similar organizations to share benchmarks and performance data. Some companies also use third-party companies to conduct blind benchmarking studies against their immediate competitors. In addition, companies with commercial card programs work with their issuers and card providers to benchmark the payment process and better understand the uses of purchasing and corporate cards. Cost Savings and Process Efficiency Benchmarking allows companies to prioritize/identify metrics and compare themselves against best-in-class organizations to identify cost savings and process efficiency goals and opportunities User Satisfaction Tracking user experience and customer service benchmarks allows organizations to identify user satisfaction goals and improvement opportunities Analyze Enterprise-wide Travel Spend Data Leading companies integrate and analyze enterprise-wide travel spend data. This information is often used by a centralized travel management function to track total spend and spend by supplier, monitor compliance to travel policies and identify 18

23 improvement opportunities for the travel program. Organizations also often use travel data to assist with strategic sourcing efforts aimed at reducing supplier rates and managing supplier performance. In order to develop comprehensive reporting, companies often need to integrate their travel spend data from multiple sources. Travel data integration can be performed in-house, by a third party or through a combination of the two. Once travel data is consolidated, companies develop a reporting dashboard to report on the important travel metrics, including: Spend and Transaction Volume Policy Compliance User Satisfaction Control and Compliance Integration of travel data allows for reporting on corporate card usage and travel agency compliance. Companies use this information to identify issues and educate travelers on the appropriate travel behavior Cost Savings and Process Efficiency Comprehensive travel data provides companies with the information needed for supplier negotiations, such as frequently flown city pairs Spend Visibility Integrating data from multiple sources provides a comprehensive view of travel spend and the ability to create customized reports for senior management and business units leaders Implement a Purchasing Card Program Evaluating and sourcing a purchasing card program can occur when implementing a purchasing card program for the first time or when selecting a new card provider. Best practice organizations create a cross-functional team to provide input during the sourcing process, including representatives from key business units, senior management and current card program administrators (if a card program already exists). Organizations define goals and objectives for their purchasing card program before initiating the evaluation process and include stakeholder input when developing a Request for Proposal (RFP) for distribution to potential issuers. Organizations analyze the costs and benefits of each available purchasing card program, taking into consideration product variations across card issuers. Some also 19

24 hold briefings with potential issuers to gain a better understanding of their offerings and receive demonstrations of technology used to support the card program. Once a provider is selected, organizations work closely with their issuer to document the company s purchasing card needs and facilitate the implementation process with a step-by-step plan. Control and Compliance Careful selection of the card program ensures that the appropriate controls, such as MCC blocks, user profiles and transaction data security, can be implemented to meet the company s needs Cost Savings and Process Efficiency The company is able to maximize cost savings and process efficiencies by selecting a card program that offers the best technology, spend analysis, consultative support and customer service Supplier Management Selection of a program that offers advanced reporting and enhanced data supports supplier management and negotiations User Satisfaction By involving cardholders in the card program selection process through user focus groups and feedback sessions, companies can increase user satisfaction with the chosen program Implement a Corporate Card Program Evaluating and sourcing a corporate card program can occur when implementing a corporate card program for the first time or when switching to a new card provider or issuer. Best practice organizations create a cross-functional team to provide input during the sourcing process, including representatives from key business units, senior management and current card program administrators (if a card program already exists). Organizations define goals and objectives for their corporate card program before initiating the evaluation process and include stakeholder input when developing a Request for Proposal (RFP) for distribution to potential issuers. Organizations analyze the costs and benefits of each available corporate card program, taking into consideration product variations across card issuers. Some also hold briefings with potential issuers to gain a better understanding of their offerings and receive demonstrations of technology used to support the card program. Once an issuer is selected, organizations work with them to document the company s corporate card needs and facilitate the implementation process with a step-by-step plan. 20