Automating the Settlement Process

Automating the Settlement Process

Agenda Discussion Outline Why automate payments Options to achieve automation Selecting a service provider Transforming your payment process Future of electronic payments

Why Automate Payments?

The Case for Change There is opportunity Accounts Payable remains a paper-based process* 83% of all invoices are still on paper 68% of payments are still remitted with paper checks Universal need to do more with fewer resources There is desire 69% of Finance professionals are seeking to increase use of ACH and Purchasing Card payments for accounts payable in the next 18 months** There is available technology Affordable SaaS technologies are coaxing previously reluctant payers and even vendors off the sidelines SOURCE: *PayStream Advisors August 2010, ** PayStream Advisors December 2011

Why Automate? Pressures Driving A Focus on E-Payables Stakeholder demand for improved operational efficiency Corporate Mandate to reduce overall payment transaction cost Lacked predictability of cash flow Growing risk of payment fraud Compliance with Sarbanes-Oxley and other regulatory requirements SOURCE: Aberdeen Group, August 2011 0% 10% 20% 30% 40% 50% 60% 70%

Automation A Win, Win Automating your payments can result in: Cost savings Resource allocation Process efficiencies Paper production of forms and filing Bank fees (associated with outsourced checks or complex remittance support with epayments) Increased negotiating leverage with suppliers Early payment discounts Dynamic discounting

Cost Savings Opportunities Companies that installed an electronic invoicing solution reported a 61% reduction in invoice processing costs financial returns from automated discount management are 5 to 10 times as large. Paperless Accounts Payable, IOMA

Options to Automate

81% US B2B Payment Mix B2B payment trends are heavily influenced by corporate mandates to realize automation efficiencies 57% Checks ACH 25% 10% 7% 13% 2% 4% 2004 2007 2010 Wire Cards Source: AFP; First Annapolis analysis

A Case for ACH While most organizations already offer ACH payments to employees, vendor ACH is less widespread Buyer goals: Drive down the cost of payments Free up AP resources to focus on value-added activities Meet vendor requests for electronic payments and remittance

A Case for Wires Same day settlement is a critical requirement for certain B2B transactions Buyer goals: Streamline processes Simplify ongoing maintenance Eliminate bank stickiness Reduce training costs

Wire types Domestic AKA Fedwires Provide same day settlement for transactions Often used for high dollar transactions International AKA Funds Transfer or Real Time Gross Settlement transactions Same day settlement of funds on a global basis Often used for all overseas transactions despite settlement requirements SWIFT A consortium of banks and businesses Standard messages that move money globally Barriers to entry for corporates have been eliminated

Commercial Cards Credit cards used by businesses to pay for goods and services, such as business travel, MRO and vehicle expenses Improves upon consumer cards with additional purchasing controls and reporting Buyer goals: Utilize credit line to pay for expenses Decentralize purchasing to in a controlled environment Enable point of sale purchase and payments

A Case for Checks Checks will always be around! Paying by check makes sense when: The payee is not a repeat vendor You need to make an inexpensive, immediate payment

Employing A Comprehensive Payables Strategy is Best Practice ACH Checks Repetitive payments High dollar payments International payments One off payments Unbanked Emergency low dollar payments Wires Card ACH Card Small, one off payments Travel and expense Bypass approval process Wires Any payment requiring same day settlement International payments where an ACH cannot be used Optimal Payments Mix

Selecting a Service Provider

Bank Solutions Banks now offer a full suite of payment capabilities including: Outsourced Check Printing ACH Wires Card The Bank s goal is to increase customer stickiness One stop shopping Maximize amount of customer s assets with a single institution

Bank Solutions Bank services can be convenient but limiting ACH remittance delivery is costly or non existent Difficult to switch banks for better interest rates, etc if all payments are tied to single institution Banks can end business relationships due to unfavorable finances, credit or publicity Recommendations: Leverage the bank services that get you benefits that drive your business Do not tie all payment processes to a single financial institution

Finding a Provider: Non-Bank Solutions Look for trusted, long standing providers that: Take a consultative approach Have industry experts on staff Are willing to plug into existing processes A mature solution will: Provide a more immediate ROI Reduce the time to the first automated payment Promote growth Ease vendor adoption

The Right Solution Maximizes Your Resources Do more with less Your AP Automation solution should provide savings and efficiencies not complicate your business ERPS & Accounting Systems Simple integration with any back office accounting system Few requirements for ERP updates Leverage current payment processes IT Resources Limited implementation involvement Little to no ongoing system maintenance Automatic technology refreshes and new feature roll-outs

Transforming Your Payment Process

Best Practices When automating your payments process, best in class companies follow these steps for a successful transformation Create a project team Include cross functional representation to ensure alignment Evaluate existing payment processes Determine what steps change, what steps remain the same with the introduction of payment automation Create a cost savings estimation for the automated process Evaluate your payment file Create your optimal payment mix (ACH, wire, commercial card, check) Communicate new payment method(s) to your vendors

Best Practices When automating your payments process, best in class companies follow these steps for a successful transformation (continued) Set goals for payment transformation What percent of vendors or spend will be targeted for each automated payment method Implement solution service provider Set up vendors with preferred electronic method Communicate payment automation process and goals internally Explain solution provider, change in payment methods, cost savings expectations Begin payment transformation Track successes

Future of Electronic Payments

Industry Trends The Order to Pay Market demands that solutions in the future Be global, mobile, and relevant Integrate with existing invoice and PO workflow as needed Grow their supplier networks and address supplier pain points Consolidated reconciliation and ease of integrating remittance data Don t want buyers to have their bank account information Navigate the regulatory environment effectively Converge Treasury with Trade Create a secure environment for their buyers and suppliers Consult with customers on payment mix and optimal payment method by type and supplier Unlock working capital for companies to help them succeed