Ron Sager, Senior Vice President UMB Bank Kansas City

Transcription

1 Ron Sager, Senior Vice President UMB Bank Kansas City

2 Agenda for this session: Introductions Mississippi Education Enhancement Fund Card Accounts Lessons Learned Program Year 2012/2013 and Program Year 2013/ /2015 Program year preview MS EEF Program Management Moving Transactions from Paper Payments to Electronic Definitions and Examples of B2B Payment Trends Best Practice Solution to Consider

3 State of Mississippi Department of Education Education Enhancement Funds Card Account Program: Mississippi Education Enhancement Fund Card Accounts Senate Bill 2761, as passed during the 2012 Regular Legislative Session, authorizes the Department of Finance and Administration to issue procurement cards for use by classroom teachers to purchase classroom supplies, instructional materials and equipment. Funding for the procurement cards is secured by EEF funds as specified in Mississippi Code section (3)(a)(iii) Mississippi Code, 1972 Annotated. Places funds directly in the hands of teachers for use in outfitting their classrooms and greatly reduces the paperwork burden on local school district business offices by alleviating the requirement to fill out numerous requisitions and purchase orders.

4 Mississippi Education Enhancement Funds Total yearly program purchases by calendar year $2,548,000 40,444 transactions 2013 $7,513, ,035 transactions 2014 (2 months) $2,952,000 47,164 transactions 2014 estimated $11,000, ,000 transactions Processing cost $92 per transaction for traditional purchasing process compared to less that $21 for MS EEF

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6 2012/2013 Program Year Determine allocation amounts by District Determine cards required by District Build card accounts Deploy by mid September Balance accounts monthly Suspend at the end of the program year 3-31

7 2013/2014 Program Year Determine allocation amounts by District Determine cards required by District Reconcile and replace as needed Build card accounts Deploy by mid September Balance accounts monthly Suspend at the end of the program year 3-31

8 2013/2014 Program Year What we learned. Determine allocation amounts by District New amount approved by Legislature, allocated by DOE, funds total created Determine cards required by District Districts were asked to build plan last week of July contracts very difficult to determine Reconcile and replace as needed-this is a heavy task - very time and labor intensive It is difficult at best to anticipate staff changes, lost cards, re-assignments, and accounts that need to be retired. Lists did not always synch up. Build card accounts Over 5,000 new accounts of the 35,000 original required replacement for 2013/2014 Deploy by mid September It is difficult to bring all Districts on together-busiest time of the year and to manage the changes and reconciliations - program was out of spec-delivered in October Balance accounts monthly No changes necessary Suspend at the end of the program year 3-31 Not all accounts were canceled at the end of the first program year - there were logical exceptions made for a few extra days (back orders)

9 Proposed 2014/2015 Program Year Changes Determine allocation amounts by District This process is still under review for 2014/2015 Determine cards required by District Districts should plan for last week of August-final date TBD soon Reconcile and replace as needed-this is a heavy task-very time and labor intensive It is difficult at best to anticipate staff changes, lost cards, re-assignments, and accounts that need to be retired. This inventory process UMB can will pre-build be discontinued. based on historical estimates Build 100% new card accounts of requirements All previously issued accounts are terminated This has at not the been end of finalized, the school but year the and earlier new the cards and numbers are issued each program better year Better experience for District and teachers less last minute changes Not all accounts were canceled at the end of the Deploy by mid September program year-no exceptions Changing the card issuance process will make it possible to deliver in spec-to be delivered by September 15 to 22. Balance accounts monthly No changes necessary Suspend at the end of the program year 3-31 All accounts will be canceled at the end of the program year-there will be no exceptions

10 Take Aways Declining Balance Purchasing Card Purchases controlled at the point of sale Call Center assistance 6 days a week 7am to 7pm to COMMCLIENT@umb.com Refer to account as MS EEF account Online inquiry service for Cardholders Online Inquire service for District Admins When teachers separate the card must be retired Lost cards must be replaced with new numbers Common decline reasons MOTO-No AVS, limit exceeded, nonapproved MCC FDR Falcon/Payment Defender-Fraud Management Need Visa number whenever possible Secure at UMB Bank If in doubt, ask: Ron Sager, Senior Vice President UMB Commercial Payments Solutions 1010 Grand Boulevard MS Kansas City, Missouri / Ron.Sager@umb.com

11 Unique teacher funding method-only one in the US Very successful program for Mississippi- greatly reduced the paperwork burden on local school district business offices by alleviating the requirement to fill out numerous requisitions and purchase orders Cronin Award for Procurement Excellence National Association of State Procurement Officials (NASPO) has recognized State of Mississippi for Excellence in State Government Procurement for this program National recognition by peers

12 Discussion of and Examples of B2B Payment Trends:

13 B2B Payment Trends: As the volume of B2B payments has grown, the corresponding opportunity to derive efficiency-driven cost savings from the traditional accounts payable process has also grown ACH Automated Clearing House - A nationwide electronic batch processing network system operated by the Federal Reserve Bank. In order to access this network, an organization must send transfer instructions in a standard format to its originating bank, which then passes them to the network that will effect electronic funds settlement on a future date. ACH can be used to disburse funds such as direct deposit of payroll, expense reimbursement, invoice payments or any other recurring disbursements. Reduced Processing Time The processing time for purchase, payment and reconciliation may be reduced significantly as the overall AP process becomes more efficient. Automated Reconciliation Process - A much improved reconciliation process can occur as payment data passed with electronic transactions is automatically matched with purchase data, eliminating the need for manual inputs.

14 Current trends: Commercial Card Spending in North America (in $ billions) Sustained electronic B2B payments growth is being driven by organizations seeking the achieve great cost savings with traditionally inefficient functions $234 $213 $194 $176 $ Source: RPMG 2010 Purchasing Card Benchmark Survey Results. (This data does not reflect any forecast, prediction or expectation regarding Visa s performance or revenues.)

15 Current trends in Mississippi9:

16 B2B Payment Trends Research indicates there is a growing awareness among financial executives that the traditional AP function is highly inefficient * 82% of organizations surveyed are preparing to make use of electronic B2B payment methods, up from 69% just two years earlier * Taking steps to automate the function has become a top enterprise technology investment priority among surveyed companies * ERP s are becoming more affordable making the investment more attractive Companies expand use of ERP features over time Check payments trending lower The average company in makes an estimated 49% of its payments to major suppliers by check compared to 65% in 2007* Automated payments using card based solutions for electronic B2B payments sustained continued growth and is being driven by organizations seeking the achieve great cost savings with traditionally inefficient functions.

17 Why & When to Automate Payments Streamline Payments Increase Control of Purchases Expand Purchasing Card Spend Better Manage Cash Flow The Value Proposition for Buying Organizations Electronic payments help streamline the payment and reconciliation process by reducing the cycle time, cost and financial risk associated with traditional check payment activity. Buying organizations increase control of purchases and help align spending with procurement policies by leveraging a payables automation solution. In addition, automating payments can help the buying organization to increase its purchasing card spending by enabling card payment for purchases that heretofore have not been paid by plastic cards. Implementing a payables automation solution can give an organization greater flexibility to increase DPOs, improve cash conversion cycles, and enhance the predictability of cash flow forecasts. Enhanced Data Financial Incentives The enhanced data that accompanies a payables automation solution facilitates capture of line-item invoice details from suppliers that pass Level III data and helps buyers to have a consolidated view of supplier spend to enable better spend category and supplier management. Financial incentives from issuers may be available through the use of commercial cards. Buying organizations that automate payments through any electronic or card form payment with a payables automation solution can realize a streamlined process that may yield cost savings

18 Why & When to Automate Payments? Suppliers see a number of benefits from accepting electronic and card-based solutions The Value Proposition for Suppliers Expand Customer Base Improve Working Capital Reduce Processing Times Enhanced Data Adoption of virtual card-based solutions may strengthen, retain, and potentially expand buyer / client relationships. Electronic payments enable faster receipt of funds from the time of payment initiation, which can decrease supplier DSOs and potentially improve cash flow, and enhance working capital. Electronic settlement can simplify payment processing by making funds available to the supplier soon the transaction is processed and could eliminate manual processes such as invoice presentment and inquiries to buying organizations on payment status. Enhanced remittance data that accompanies a virtual card solution can help improve the payment reconciliation process thereby reducing exceptions, errors, and disputes. Strong collaboration between buyers and suppliers is a core component of any buyer s electronic payment strategy since supplier adoption is a key to success. 18

19 Payment Automation Benefits Automating payments results in multiple benefits Streamlined Payments Processes EDI - Enhanced Data Interchange Support of Electronic Imaging Increased Control of Purchases Better Management of Cash Flow

20 Top Benefits For Sending Or Receiving Electronic Payments * Association of Financial Professionals (AFP): Electronic Payments Survey

21 Barriers To Increasing Use Of Electronic Payments AFP Electronic Payments Survey

22 Visa Payables Automation Overview-How it Works AUTOMATE Unique account for each supplier Send payable files to Issuer VPA sends remittance notices to suppliers CONTROL VPA processes only approved invoices and amounts Schedule payable files to meet payment needs VPA adjusts card limits as needed RECONCILE Online tools to track payment status Schedule consolidated reconciliation reports GROW Send non-card payables through VPA process Visa automatically identifies opportunities to convert checks to commercial card payments Expand Visa card acceptance

23 Standard Visa Payables Automation Process Flow: Pull Payment Steps 8 to 10 = VPA provides payment status and reconciliation information 8 Suppliers Created 9 Buyer Receives in VPA (provided account # and Settles Statement info) Buyer Monitoring (online access to payment status) VPA Generates Recon Report Supplier Receives payment (settlement process) 7 Steps 6 & 7= Supplier receives notice & processes the transaction Supplier Presents Transaction (charging the account #) VPA Sends Remittances details to Suppliers 5 Steps 1 to 3 = Before payment processes through VPA; activities taking place today 2 Buyer Approves Invoices (company ERP) VPA Adjusts Limits on account # Payment File Created (sent to VPA) 4 3 Steps 4 & 5 = VPA processes payment

24 Visa Accounts Payable Benefits Buyer Precise payment timing Increased controls Security Improved reconciliation No loss of float Better visibility into transaction and spend history Supplier Guaranteed payment and faster settlement Chargeback reduction Clear remittance information Eliminate check handling and related clerical tasks Operational efficiency Utilize existing infrastructure and processes. Minimized business disruption.

25 Card Program Overview One best practice solution that can help automate the payments process is a commercial card program Adoption and use of commercial payment cards continue to grow 67% of Global respondents use commercial payment cards 18% since % of U.S. respondents use commercial payment cards 25% since 2008 Commercial Card integration and automation are on the upswing 81% of companies are familiar with card-based automation solutions 90% who are familiar with card-based automation solutions, have or will likely implement Source: Visa Global Cash Management Survey Sample: Mid and large companies and organizations

26 Card Program: Options There are a number of different commercial card solutions, including the traditional card, virtual card / ghost account, and the Accounts Payable card Potential Benefits Program Type Description Improved Efficiency/ Reduced Costs Traditional Card Card used to make a purchase at the point of sale Extended Float Virtual Card/Ghost Account Virtual purchasing accounts associated with a single department, supplier, or spend type Accounts Payable Card Commercial card used by the AP department to pay a supplier after receipt of an invoice Visa Accounts Payable Automation Overview 2012

27 100 Card Program: Tangible Results By implementing a commercial card solution, your organization could reduce transaction processing costs $92.49 Cost per Transaction $70.58 (76%) With Traditional Purchase Order Method Paper PO Through to Check Payment $21.91 With Purchasing Card Source: RPMG Research 2010 Purchasing Card Benchmarking Report

28 Card Program: Tangible Results By implementing a commercial card solution, many organizations are able to reduce costs and enhance supplier relationships Increased Cost Savings Improved Supplier Relationships An organization was able to achieve cost savings of over $4 million and nearly 97% in savings over traditional purchase order costs by implementing a global purchasing card program Another organization was able to reduce its supplier base by 70%; the top 100 suppliers represented over 80% of the company s total spend Source: Visa Global Procure-to-Pay and Commercial Card Best Practices Study Source: Visa 2010 Intuit Case Study Visa Accounts Payable Automation Overview

29 School District Transactions to Consider for Card Program Based Payments: Textbooks Cell phones Overnight shipping Postage Office supply portal Bus parts Food for cafeterias Construction projects Replace in store accounts Technology Copier maintenance Contract services Accounts payable invoices Some utilities

30 Another Financial Consideration for Card Program Based Payments:

31 Process Considerations 1099 not required

32 Next Steps Explore Financial Institution Solutions Districts should work with their partner financial institution (Depository or Card) to identify payment automation opportunities such as using additional services or starting a new card program or optimizing an existing one Meet with your relationship manager to discuss new card programs or supporting tools offered by the financial institution and card provider Work with your relationship manager to evaluate areas of the card program that require support and identify the analytical tools that can address those needs Work with your relationship manager to implement and utilize the tools Continue ongoing communication with your relationship manager to track program improvement

33 Questions & Answers