Driving Savings to Your Bottom Line

Driving Savings to Your Bottom Line Commercial Cards Best Practices November 14, 2012 1

Speakers Mark Sievert, Senior Global Treasury Advisor, Silicon Valley Bank Moderator Robert O Connor, Senior Global Treasury Advisor, Silicon Valley Bank, and former Vice President, MasterCard WorldWide Jaime Davison, Controller, Digital Room 2

Why Commercial Cards? Purchasing the New Frontier Agenda Trends in Card Use Behind the Move to Electronic Payables Client Conversation Conclusions 3

Why Commercial Cards? 4

Why Commercial Cards? Commercial cards are charge cards used by businesses to pay for goods and services Commercial cards provide automatic capture of transaction data at the point of sale Commercial cards empower employees who need goods and services to do their job to make purchases directly in a controlled environment Commercial cards are used by a majority of companies in North America 5

Purchasing the New Frontier 6

Polling Question 1 Do you currently use Credit Cards for indirect payables such as system maintenance, general repair & operations expenditures? A. Yes B. No 7

Where do Companies Find the Most Benefit? Commercial cards are ideal for indirect expenses Indirect Direct Cost of Goods Sold Raw Materials Capital Purchases Maintenance Equipment Building Property Repair Equipment Facilities Operations Office supplies Utilities Food service Courier service Training Fuel Travel 8

Traditional Purchasing Process Req to check typically involves a three-way match 9

The Re-engineered Purchasing Process Requisition, purchase order and invoice may all be eliminated 10

Savings Opportunities Efficiency: Employee time (buyer, approver, forms matching, data entry) Processing costs: Payment processing (pay suppliers vs. pay bank) Expense savings: Negotiating discounts with key suppliers Rebate potential: Gain revenue from rewards and rebates 11

Polling Question 2 What value do you perceive that Purchasing Cards can create for your company? A. Earn points or revenue share (rebate) B. Save time in AP process C. Manage cash more effectively (e.g. extend DPO) 12

Actionable Purchasing Insights A card program can provide three rich levels of spending data and insight 13

A Closer Look at Purchasing Opportunities Purchasing cards are often used for low-value / high volume purchases 14

Purchasing Trends and the New World of Procurement and Payables 15

Purchasing Card Spending In North America ($ billions) $350 $300 $250 Actual Expected $229 $247 $267 $290 $212 $200 $150 $100 $80 $89 $98 $110 $123 $137 $149 $161 $176 $196 $50 $- $57 $40 $28 $17 $1 $1 $3 $8 $11 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: 2012 RPMG Purchasing Card Benchmark Survey 16

Key Purchasing Card Usage Statistics 2011 Number of employees 6,729 Monthly p-card spending $1,462,383 Median monthly spending $272,256 Monthly spending per card $2,102 Monthly transactions per card 6.33 Spending per transaction $332 P-card-to-employee ratio 10.3% Monthly p-card spending per employee $217 Active p-cards in a typical month 80% Transactions under $2,500 placed on p-card 48% Transactions between $2,500 and $10,000 placed on p-card 28% Source: 2012 RPMG Purchasing Card Benchmark Survey 17

Why Program Optimization Purchasing Card Spend Optimization Procure to Pay Automation Efficiency Average organization has the opportunity to double the number of Purchasing Card transactions under $2500 Primary barriers preventing growth in core categories are internal organizational issues AP Automation & Working Cap Mngt 6.6% of all Purchasing Card spend is currently generated out of A/P department 34.9% of organizations use some form of A/P Card when used, these cards account for an average of 50.9% of total card spending 18

Purchasing Card Best Practices Method of payment shutdown Mix of card applications (AP, Ghost/Supplier Cards) Strong executive endorsement Cross-functional support (Purchasing, A/P, IT, Tax, etc) Integration with technology investments Granular evaluation of spending limits Expanded span of acceptable purchases Perform a process mapping / cost analysis & quantify ROI Provide comprehensive training and communications 19

Payments Landscape: B2B Electronic Payments Continue To Grow Current annual B2B Payments in the U.S. approximately $17.2 trillion 57% of B2B Payments 26% of B2B Payments 13% of B2B Payments 4% of B2B Payments 20

Payments Landscape: B2B Electronic Payments Continue To Grow Current annual B2B Payments in the U.S. approximately $17.2 trillion Wire transfers & others ACH transfers Paper Checks Purchasing Card Wire transfers & others ACH transfers Paper Checks Purchasing Card Percent of Transactions Under $2,500 by Payment Mode Percent of Transactions Under between $2,500 & $10,00 by Payment Mode 9% 15% 19% 31% 32% 37% 44% 52% 28% 31% 61% 58% 51% 41% 34% 78% 71% 65% 54% 48% 5% 7% 8% 10% 10% 3% 3% 4% 5% 4% 2003 2005 2007 2009 2011 8% 9% 10% 12% 15% 5% 5% 6% 6% 6% 2003 2005 2007 2009 2011 Source: 2012 RPMG Purchasing Card Benchmark Survey 21

The New World of Procurement & Payables 22

Expanding Program Charters Organizations are expanding program charters looking beyond process efficiency gains & financial rebates as the primary objectives Today In 3 Years 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 37% 42% Obtain better data to increase control over spending 30% 38% Increase supplier acceptance of purchasing card 24% 36% Obtain better data to enhance leverage with vendors Source: 2012 RPMG Purchasing Card Benchmark Survey 23

Polling Question 3 Are you currently accepting credit cards from your customers for B2B payments? A. Yes B. No 24

Behind the Move to Electronic Account Payables 25

First A Definition Electronic Accounts Payable (EAP) cards are non-plastic card accounts used to pay for invoiced goods and services (whether set up as a rotating pool of card accounts, ghost card accounts funded only to pay invoices from specific suppliers, or another arrangement similar in purpose). Source: RPMG Research 26

How Electronic Account Payables Differ from Direct Plastic Card Purchases Electronic Account Payables (EAP) purchases typically are: 53% 40% 35% 31% 7% For Purchases of goods of higher dollar values For Purchases from vendors with whom the organization conducts a high number of transactions For goods and services which are not allowed to be paid by plastic p-cards For transactions requiring additional approval / controls prior to payment Other Source: 2012 RPMG Purchasing Card Benchmark Survey 27

How EAP Purchases Differ from Plastic Card Purchases Percent of Organizations Using Purchasing Card to Pay for Types of Goods/Services By Organizations Using and Not Using EAP Percent of Organizations Using Purchasing Card to Buy Goods / Services Organizations Not Using EAP Accounts Organizations Using EAP Accounts Utilities 30% 50% Inventory 30% 46% Telecommunications 41% 57% Media & advertising services 48% 63% Mail and mail delivery services 48% 63% Professional services 34% 47% Transportation and freight delivery 37% 49% Government services 22% 34% Capital assets 23% 33% Temporary help services 15% 24% Print and duplication services 57% 66% General Maintenance, repair and operating (MRO) goods 74% 83% Lease and rental payments 27% 36% Catering 55% 63% Computer hardware, software, and periphera 74% 81% Travel 71% 76% Clothing / uniforms 46% 50% Office equipment and supplies 89% 93% Fuel 59% 60% Construction materials 42% 40% Source: 2012 RPMG Purchasing Card Benchmark Survey 28

Progressive Companies are Moving Toward Accounts Payable File Spend In the commercial cards business, growth in the North American region will be driven primarily by increasing procurement settlement options associated with purchase cards (pcards) TowerGroup 29

Payment Automation Continuum There are a variety of card-based solutions in market designed to address A/P-based spend categories Supplier-initiated card payments payment instruction file originated by a supplier (payee) to bank using point of sale device. For A/P payments, spend controls are often applied to single or multi-use virtual card accounts to restrict authorization amount, i.e., dynamic supplier cards. Buyer-initiated card payments payment instruction file originated by a buyer (payer) directly to bank of supplier. Requires no [manual] intervention by buyer or supplier, and may offer more attractive pricing for supplier. Allows for easiest reconciliation with A/P system. 30

Electronic Accounts Payable Solutions Fuel Program Expansion An emerging payment alternative o o 34.9% of organizations in the survey use an EAP solution (up from 16.1% in 2009) Over half of the respondents have been using EAP for two years or less Expands current program without cannibalizing existing purchasing card spend o o o Organizations using EAP solutions realized 68% higher average monthly spending compared to those programs not using EAP solutions ($1.9MM vs $1.1MM) Organizations that use EAP solutions reported higher capture of transactions between $2,500 and $10,000 versus those organizations that did not (40% versus 26%) 73% of EAP-using organizations indicate that EAP spending has little or no impact on plastic purchasing card spending Source: 2012 RPMG Purchasing Card Benchmark Survey 31

Virtual Card Solution Overview Virtual Card applications offer the largest growth potential Improve security of card information through Virtual Card Numbers (VCNs) Provide enhanced reconciliation into Accounts Payable (A/P) systems Generally there are two solutions that leverage VCNs for payments: Silicon Valley Bank Purchase Control -Online Allows you to request VCNs in real-time to pay specific vendors. You provide the vendor with the VCN number to initiate settlement or use optional email capability Web-based application customer accesses web-portal Integrated application web-based application integrated into customer s A/P via XML technology Silicon Valley Bank TransAct Gateway - Accounts Payable Real Time Provides you with the ability to send a payment file from your ERP system VCNs are generated, assigned, and delivered to approved vendors via secure email Card Runs replace Check Runs when VCNs are integrated with AP processes 32

Purchase Control Solution Overview Automated card payables helps you achieve business process efficiency, cost savings, and incremental margin improvements. Features Integrated application with automated payment initiation Hosted web-application with approval workflows Enhanced data capture Transaction level controls and limited use virtual card numbers No Per Transaction Fees Revenue Share Benefits Reduce check processing times, pay vendors faster, more efficiently Ensures approvals are completed before initiating card payments and allows you to create VCN s real time. Access to custom reports and data exports provide better visibility into supplier spend. Mitigate concerns around fraud Unlike check, ACH, or wire transfer payments, card payments carry no per-transaction fees Upon reaching spend thresholds, receive annual rebate as a percentage of spend, representing a revenue stream to you organization 33

A Conversation with Jaime Davison, Controller, Digital Room 34

Questions? 35

Biographies 36

Robert O Connor Robert O Connor is a Senior Advisor with Silicon Valley Bank s Global Cash Management team. In this role, he focuses on developing credit card and payments solutions for clients. Prior to joining SVB, Robert was Vice President of U.S. Commercial Product Sales at MasterCard Worldwide. During his seven years with MasterCard, Robert worked with many U.S. commercial card issuers on developing their commercial card strategies. Robert s previous experience includes various business development roles with U.S. Bank s Corporate Payment Solutions and Merrill Lynch. Senior Advisor - Global Treasury Management Silicon Valley Bank roconnor@svb.com 212-821-8973 37

Mark Sievert Senior Advisor - Global Treasury Management Silicon Valley Bank Mark Sievert is a Senior Product Advisor for Silicon Valley Bank s global cash management team. Mark manages the Southern California sales team and sits on key Product Committee s working sessions to create SVB s next generation of client solutions. Mark has been with SVB for two years. Prior to SVB Mark spent ten years with Wells Fargo and HSBC developing global cash management solutions for large corporate clients. He started his career in the paper and packaging industry where his last role was in developing and managing global supply chain structures in the apparel and footwear industries. msievert@svb.com 949.754.0813 38

Jaime Davison Over 13 years of progressive leadership and management experience, including: 5 years in public accounting, 4 years in the health care industry, and 6 years working for publicly held companies. Dynamic and proactive senior Finance Business Partner with strong work ethic and team building experience, including managing within a fast-paced Finance environment; highly strategic and able to tactically implement organization initiatives. International background specifically in: Mexico, UK, China, India, Italy, Canada, Philippines, and Israel. Controller Digital Room jaime.d@uprinting.com In public accounting, I served as an in-charge on a wide variety of engagements, including agreed-upon procedures, audits, reviews, compilations, bankruptcy, forecasting, consulting and fraud investigations. I have worked on engagements in the following industries: real estate, health care, retirement plans, governmental agencies, construction, manufacturing, and restaurant and hospitality services. In addition, I have experience in compliance reporting and tax return preparation for individuals, partnerships, corporations, and nonprofit entities. I have also worked for publicly held companies, including two Fortune 500 companies. I have served as a regional assistant controller with a daily national publication for approximately two years assisting with the month end close, variance analysis, budgeting and supervising accounts receivable and accounts payable staff. I have also been a manager with a leading company in the travel industry. In this role I was responsible for variance analysis, operational cost analysis, budgeting, preparing and presenting departmental financial matters to upper management, and supervising analysts and accounts payable staff. 39

Disclosures This material, including without limitation the statistical information herein, is provided for informational purposes only. The material is based in part upon information from third-party sources that we believe to be reliable, but which has not been independently verified by us and, as such, we do not represent that the information is accurate or complete. The information should not be viewed as tax, investment, legal or other advice nor is it to be relied on in making an investment or other decision. You should obtain relevant and specific professional advice before making any investment decision. Nothing relating to the material should be construed as a solicitation or offer, or recommendation, to acquire or dispose of any investment or to engage in any other transaction. 2012 SVB Financial Group. All rights reserved. Silicon Valley Bank is a member of FDIC and Federal Reserve System. SVB>, SVB>Find a way, SVB Financial Group, and Silicon Valley Bank are registered trademark. 40