Turning AP into a Revenue Generator Benefits of automated, card-based payments June 20, 2013
Speakers Robert O Conner, Senior Global Treasury Advisor, Silicon Valley Bank Carmela Montes de Oca, Senior Product Advisor, Silicon Valley Bank (Moderator) Mary Rountree, Vice President, Finance, Implantable Provider Group 2
Agenda Review current payment trends Evolution of payment cards Targeting new spend via virtual accounts Client conversation with IPG Q&A 3
Executive Summary More organizations focusing on electronic payments Payment costs are now key considerations Organizations are looking to reduce cost and seek increased control Commercial cards help in cutting operating costs, providing expanded control and more 4
Polling Question 1 Do you currently use credit cards for indirect payables such as system maintenance, general repair, marketing & operations expenditures? A. Yes B. No
Factors Driving Electronic Payment Focus Reduce Procure-to-Pay Transaction Costs 65% Maximize Rebates and Incentives 49% Improve Employee Convenience 44% Improve Employee Productivity 38% Reduce Procure-to-Pay Cycle Time 25% 0% 10% 20% 30% 40% 50% 60% 70% Source: PayStream Advisors, Electronic Payments and P-Cards Adoption Survey, Q3 2009 6
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 7
Payment Choices Have Evolved Existing Spend Capture Check/Wire/ACH Expanded Spend Capture Check/Wire/ACH Virtual Account Numbers Pcard Pcard T&E T&E Technology drives automation of payments 8
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)
First A Definition Electronic Accounts Payable (EAP) Cards 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 EAP Terms: Virtual cards Single-use accounts Straight through processing Buyer-initiated payments 10
Silicon Valley Bank Virtual Card - Overview Virtual Card Numbers (VCNs) Unique, non-plastic account numbers used for secure purchasing Increased transaction-level control Defined Authorization Controls for Each VCN Number of transactions (single-or multi-use) Transaction amount limit (exact, maximum, or min-max range) Validity period Suppliers and merchant category codes Enhanced Client-Supplied Data Capture up to 30 client-specified data elements with each VCN for enriched data analysis, reconciliation, and allocation Two Interface Options Request website with customizable approval workflows (Purchase Control) Batch file interface (transact Gateway aka: tag) Secure VCN delivery to Suppliers Sent via encrypted email to suppliers 11
A Closer Look at Virtual Cards / EAP
Using Card in Accounts Payable Processing SVB transact Gateway enables clients to seamlessly use card payments for Accounts Payable spend, helping to remove process inefficiencies and generate key financial benefits Benefits Controlled Payments, Reduced Fraud Streamlined Processing Commercial Card Rebate Eligibility Working Capital Improvements VCN Enablers Exact Amount Control: Pay invoices to the penny, avoiding short payments and reducing exception processing Set Validity Period: Defined start and end dates to track and manage outstanding, unprocessed card payments Single-Use: Reduced fraud and supplier misuse, improved transaction risk management Batch File Interface: Automated method to generate card numbers from an ERP or AP system Secure Delivery of Card Numbers: Encrypted email delivery from SVB to suppliers Enhanced Reconciliation: Capture invoice numbers, payment reference numbers, etc. to streamline reconciliation and reduce reliance on merchant-provided data Standard 16-digit account numbers: No additional enablement or training is required for card-accepting suppliers 13
Virtual Card Numbers: Payable Process Flow The virtual card numbers payment process flow mirrors your existing Accounts Payable setup Initiate Authorize Route Payment Reconcile You receive invoice from supplier You authorize payment AP department uploads payment file to card system Card system generates single-use account number for each transaction Card system emails supplier: payment is ready Supplier securely retrieves, processes payment Your system imports settlement file and reconciles 14
Supplier Benefits Hypothetical Example Remittance Information: Virtual Card Number: 5563382407077635 Expiry Date (MM/YY): 07/13 CVC: 297 Cardholder Name: WestdaleWireless AP Cardholder Address: 516 Edgewater Drive Wakefield, MA 01880 Purchase Type: Office Supplier Transaction Amount: $5350.00 Supplier: ABC Supplier Supplier Email Address: AR1@abcsuppliers.com Email Sent: Yes Valid From: 6/20/13 Valid To: 7/31/13 Invoice ID: 9999000101 Invoice Description: Office supplies 15
Virtual Card Number: Reporting VCN offers additional reporting data to the standard suite of Commercial Cards transaction data, enriching and simplifying your analysis, allocation, and reconciliation processes Reporting Data Analysis Allocation Reconciliation GL 1 IIII GL 2 III III GL 3 III II II For Each Transaction: Rich Commercial Card Transaction Data Virtual Card Number Client Custom Data Fields Capture additional info to enrich data analysis Use this data to automatically allocate to the proper GL Easily track matched expired, and active Virtual cardsmatch transactions to payment instructions by invoice or ref # Combine standard Commercial Card transaction data with virtual card number and custom data fields Capture up to 30 custom data fields at time of card creation for later reporting Create custom reports tailored to your program View trends, monitor spending patterns, and track goals of your card program Track requestor, reason for purchase, meeting ID, project ID, etc. to enrich data analysis Example Use: Track actual meeting spend vs. budget Allocate transactions to the correct accounting codes and cost centers With VCN, record accounting codes or requestor information at time of payment Automate or simplify expense allocation Sample custom data: GL code, cost center Leverage invoice, payment reference, or order numbers to identify transactions Match transactions automatically with purchase/invoice documents to track payment status Sample custom data: invoice number, PO number 16
Virtual Card Number: Controlled Spending Purchase Control as a workflow purchase tool When an employee needs to make a business purchase but does not have authorized access to a purchasing card, Purchase Control is an ideal solution. Step 5: With the transaction completed, Purchase Control can facilitate a quick and easy reconciliation process, matching the virtual card number, which is unique to each transaction, in three important places: on the approved purchase request, online payment receipt, and the company s monthly statement. Step #5 Step #1 Step 1: Company s system administrator sets up spending limits for each employee - such as a $3,000 limit for a marketing manager, with purchases above that requiring approval by his or her supervisor. Step 4: Once approved, Purchase Control will generate a virtual card number. Key transaction data that was entered when the purchase request was made such as cost center and general ledger codes is now attached to the virtual card number. The virtual card number can only be used within the parameters of its approval (transaction amount, date, and vendor) providing built-in transaction security. Step #4 Step #3 Step #2 Step 3: Logging in to the Purchase Control application, the supervisor can review and approve or decline the purchase request Step 2: The marketing manager starts the process by going to the Purchase Control application and filling out a purchase request. A request that exceeded his or her limit for example, a purchase of $4,000 would trigger an automatic e-mail notifying the supervisor for that approval. 17
Polling Question #3 Is your organization leveraging single use accounts to extend the use of your purchasing card program and/or automating your Accounts Payable department? A. Yes B. No
A Conversation with IPG
Implantable Provider Group (IPG) Fast Facts Founded in 2004 Implantable Device Benefit Management Industry Leader Grown at a 218% compounded annual rate for the past three years Privately owned by its management team and Sequoia Capital, a Silicon Valley based financial partner Annual sales = approximately $50M Mission: To provide implantable Device Benefit Management (DBM) solutions that deliver tangible value to health plans, providers, physicians, manufacturers and patients, which improve quality, affordability and patient access to life saving and life enhancing implantable devices Annual purchasing spend = $20M and approximately $3M of that is indirect spend 5500 - B2B transactions 800+ - vendors 20
Implantable Provider Group: The Challenge In order to ensure timely payments to its suppliers under the current setup, IPG needs to make a large number of payments to a variety of different vendors. The company s existing vendor set-up process for each payee is cumbersome and inefficient. IPG would prefer a payment tool that is both secure and more efficient as well as electronic. The company would like to increase payments on cards, leading to fewer check payments, reduced paper processing, improved working capital and increased visibility into expenditures. IPG has two major concerns about increasing its current purchasing card program: 1. Compliance/Fraud IPG requires several approvals before releasing payments. 2. Lack of necessary data Credit card data is missing certain key fields including PO numbers and General Ledger information. 21
Implantable Provider Group: A Focused Approach Reduce cost through streamlined business processes Gain greater control over discretionary expenses Automate supplier payments Leverage appropriate technology Improve the company s working capital position 22
Implantable Provider Group: Execution Strategy Reduce cost through streamlined business processes Expense management automation Gain greater control over discretionary expenses with the SVB Multi Card payment solution Purchasing Payables Ensure compliance to corporate policy Automate supplier payments and reconciliation process Reduce check disbursements Generate cost savings through e-payables 23
Implantable Provider Group: Execution Strategy Automate supplier payments and reconciliation process (continued) Executive support for the program Implementation team Define the execution strategy Policy and procedures Integrate, enroll supplier, test, pay and reconcile Supplier enrollment campaign Benchmark 24
Implantable Provider Group: The Value In the first three months, we have successfully enrolled over 48 suppliers and have another 20 actively engaged, representing a total of more than $6M in annual payments SVB provides proactive supplier enrollment support Solid methodology and execution based on best practices An alternative payment type to check, completely automated with reconciliation features Average cash flow improvement of 15+ days Cost savings from reduced checks, bank fees, research, etc. Triple-digit growth month-over-month 25
Implantable Provider Group Lessons Learned Ensure you have all the necessary controls and data in place to reconcile your transactions Start small enroll one vendor to ensure your processes and controls work prior to open enrollment Consistently improve communication often people do not fully read or understand letters and emails. 26
Questions?
Next Steps: 1. Gain top management support for payment process transformation and partner with key players in the organization to ensure buy-in. 2. Implement strategies to reduce reliance on checks. 3. Demonstrate the benefits that preferred suppliers will receive from commercial card acceptance. (They can expect faster pay and efficiency savings while you will gain control and revenue.) 4. Incorporate commercial card acceptance language into preferred supplier contracts. 5. Institute a set of upfront spend controls (e.g., customized limits based on cardholder, supplier or transaction size) and backend audits. 28
Robert O Conner Senior Global Treasury Advisor, Silicon Valley Bank 972.455.0959 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 Silicon Valley Bank, 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. 29
Carmela Montes de Oca Senior Product Advisor, Silicon Valley Bank (404)264-8323 Carmela Montes de Oca is a Senior Global Treasury Advisor with Silicon Valley Bank serving corporate clients in the Southeast and is a sales manager for the East Coast. In this role, she is responsible for not only building relationships but providing domestic and international treasury management advice, products and services that contribute to clients' continued growth and success. Carmela joined Silicon Valley Bank in 2006, and is focused on delivering treasury solutions for payments & collections and information reporting. Before joining SVB, Carmela was responsible for treasury services at other large banking institutions. Carmela has over 25 years of banking experience serving clients in the commercial and technology industries. She earned a Bachelor of Science Degree in accounting and is a Certified Treasury Professional, a certification granted by the Association of Financial Professionals. 30
Mary Rountree Mary Rountree is the Vice President, Finance, for Implantable Provider Group. Mary has been with the company for two years. Prior to that, she was Director of Accounting for Foodbuy, LLC, a division of Compass Group in the food service industry. Mary resides in the Atlanta metro area with her family. She loves spending time with her family on their boat and her personal hobby is running. Vice President, Finance, Implantable Provider Group 31
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