Save Money, Save Trees: How Payment Automation Can Sustain Your Agency While Sustaining the Planet

Transcription

1 Save Money, Save Trees: How Payment Automation Can Sustain Your Agency While Sustaining the Planet 2010 Presented by: Elavon Financial Services Yves Delisle Assistant Vice President Public Sector Sales 1

2 Discussion Topics Public Sector Landscape Canadian and North American Payment Trends Why paperless? epayables Overview Options that support savings and sustainability 2

3 Public Sector Landscape Budget issues across Canada Federal Government Budget reductions Provinces and Municipalities Funding cuts Universities and schools Funding cuts Reduced private funding Record deficits Probable tax increases 3

4 Pressure on Public Sector Organizations Public sector organizations are expected to: Reduce operating costs as budgets decrease Increase control over spending Expand oversight and visibility Improve transparency and accountability Go green and decrease paper based processes The Canadian Federal Government s goal to stop issuing cheques altogether by

5 Money and Paper Saving Trends 5

6 Increasing Focus on Accounts Payable Cost Containment and Cash Management Are At The Top Of Many Agendas AP More Strategic Due To Focus On Cash Management In Response To Tight Credit Markets and Business Uncertainty AP Is Uniquely Positioned To Support Cash Management Objectives Source: Aberdeen Group, February 2009 Strategic Importance of Accounts Payable 6

7 Payables Automation Drivers Top factors driving organizations to focus on epayables Stakeholder demand for improved operational efficiency Corporate mandate to reduce overall payment costs Lack of predictability of cash flow Growing risk of payments fraud Compliance with SOX and other regulations High invoice payment error rate 19% 15% 11% 10% 62% 61% Source: Aberdeen Group, August 2011 Source: Aberdeen Group, August

8 Canadian Trends What s the hold up? Payment Preference 86% of buyers and suppliers would choose electronic over paperbased transactions Only 27% of the same group indicated that electronic transactions make up the majority 12% 2% 86% Electronic Transactions Paper Cheques No Preference Source: 2011 Canadian Financial Executive Research Foundation 8

9 Primary Canadian Payment Methods Payment Method Cheques 85% AFT Direct Deposits 55% Cards 52% Electronic Bill Payment Remittances 52% Interac Debit, Pre Paid Debit and PayPal Source: 2011 Canadian Financial Executive Research Foundation 6% 0% 50% 100% 9

10 Reducing Operating Expenses The Gartner Group Estimates that a 5% Reduction in Operating Costs has the Same Impact as a 30% Increase in Sales. 10

11 The Tide is Rapidly Shifting Source: IAPP, Accounts Payable Automation Survey, Sept

12 Payment and Reconciliation Electronic payments are a significant opportunity for cost savings Greatest cost savings benefits are achievable by moving from paper based payments to e payments Payment Costs: Wire $9.86 Cheque $7.15 EFT/AFT $4.72 Card $3.96 EIPP $2.35 Reconciliation Costs: Manual EIPP $12.00 $5.00 Aberdeen Group May 2010 study: "Global Payments: Maximizing Cash Flow with Electronic Payments and Process Automation" Accenture 2007 study: "The Role of Procurement Cards in the Source to Settle Process" Illustrative Example Only Automated, electronic reconciliation saves FTE s precious time and allows them to focus on more valuable activities 12

13 Public Sector Accounts Payable Focus Maintain/increase controls Enhance visibility Improve regulatory compliance Increase expense accuracy and timeliness Lower invoice processing costs Reduce exception rates Reduce cycle times and late payments Mitigate risk 13

14 What is the Savings Potential Cost reduction between $4 $30 per invoice cycle time reduction between 5 20 days Maturity Class Cost to Process a Single Invoice Cycle Time to Process a Single Invoice Best in Class $ days Average $ days Laggard $ days $ $ $ Cost Days Laggard Average Best-in-Class Source: Aberdeen Group, E Payables 2011 Efficiency, Visibility, and Collaboration in the Financial Supply Chain Copyright U.S. Bank: Confidential and Proprietary.

15 Sustainable Public Sector Payments 15

16 Lots of Tools in the epayables Tool Kit epayments EDI Commercial Cards Wire Electronic Accounts Payable Ghost Accounts Virtual Accounts Single Use Accounts Dynamic Adjustment Accounts Electronic Invoice Presentment and Payment (EIPP) End to End Automation 16

17 Virtual Card Accounts COMMON USES Management of strategic CARDS supplier relationships Ghost Accounts Virtual Accounts Single Use Accounts Straight Through Processing BENEFITS Enhanced visibility and control Reduced operating costs from process improvements Reduced fraud Improved on time payment Increased early payment discounts Improved revenue sharing opportunities Enhanced cash flow forecasting abilities 17

18 Virtual Account Considerations Ideal if you have a substantial number of regular suppliers who offer discounts for early payment Significant technology investments are not necessarily required by either buying and selling organizations For best results, need to sell epayments as the standard for conducting business to all internal/external partners 18

19 Virtual Account Growth Over 25% of organizations have adopted virtual purchasing card accounts For organizations with $1 billion+ revenue, the adoption rate is nearly double. Over the next three years, EAP use will grow by over 40%. 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 16.2% <$250M Virtual/Cardless Purchasing Accounts Usage 21.9% $250M to $1B 45.3% 37.9% 26.4% $1B to $5B >$5B All Revenues Source: 2010 RPMG Purchasing Card Benchmark Survey Report 19

20 Electronic Invoice Presentment and Payment (EIPP) COMMON USES When the buyer s goal is invoiceto payment CARDS automation When the goal is to reduce your payment costs, reduce your paper use and maximize your efficiency Bank can pay the suppliers how they want to be paid Buyers can pay the bank the way they want to pay Bank acts as the converter BENEFITS Easily converts paper to electronic Everything from invoice to final payment is electronic Buyer and supplier to have equal access to data promotes collaboration, mitigates disputes Payment method neutrality Fewer lost or missing invoices Minimize fraud and duplicate invoices Finance options for buyers and suppliers Maintain a complete audit trail 20

21 EIPP Considerations Significant technology investments are not necessarily required by either buying and selling organizations Implementation may take a little more time Rebates are not part of it, but the cost savings might exceed any possible rebate 21

22 Results: Savings and Sustainability 22

23 Public Sector Virtual Account Usage Government agencies, universities and schools using virtual accounts have: Reduced overall operational costs Integrated with eprocurement tools (e.g., SciQuest and Skyward) Eliminated cheques for many contract payments Increased average transaction sizes University has average transaction size of $19,000 Enhanced rebates to bring additional funding to critical programs Increased spend visibility and process control 23

24 Public Sector Usage of EIPP Reduced processing costs & support green initiatives We re into the 21 st century and out of the paper business. Contract management Construction Legal bills Housing Authorities utilities Health Services pharmaceuticals School Boards school supplies, equipment and text books 24

25 Next Steps 25

26 How Do I Get Started? Map out current payable and receivable processes Review IT resources; determine desired automation level Consult with banking partners Consult with trading partners to determine interest and effort required Obtain senior manager buy in Drive adoption 26

27 The Low Hanging Fruit B2B PAYMENT NETWORKS COMMERCIAL CARDS INVOICE PROCESSING AND PAYMENT SOLUTIONS EFT/AFT FOR RECURRING LOW VALUE PAYMENTS WIRES FOR IMMEDIATE FUNDS, HIGH VALUE PAYMENTS 27

28 Is Now the Right Time? Should I wait for the mobile revolution instead? You have tools now to fit your needs You need to get started yesterday Cards, EIPP, EFT and Wires will form the backbone for the foreseeable future Mobile and other innovation will build on these options 28

29 Questions? Yves Delisle Assistant Vice President Vice-président adjoint