Procure-to-Pay and Commercial Card
Program Optimization
Presented by: Randy Qualle - TransAlta Shaun East - Scotiabank
September 2007
Conducting an AP Analysis
Agenda
TransAlta Corporate ProfileCommercial Card Program ScopeInfrastructure & KPIsAP Tool Process DefinitionTransAlta’s use of the AP ToolOverview of Results / OpportunityNext StepsHow to participateQuestions
TransAlta- Corporate Profile
Almost 100 years in the Power Business50 Power Plants / 9000 Megawatts-sufficient for nearly 4 million homesCore business is generation and energy marketingInternational player in power generation marketplaceSeveral industry awards
Generation
8468 MW of capacity54561 GWh - avg plant avail of 90%50 facilities – Canada, USA, Mexico, Australia3 surface coal minesMix of coal 58%, gas 29%,hydro 9%18.6 million tonnes of coal mined100.4 million GJ of gas consumed
Energy Marketing
115,682 GWh of electricity, 413.8 million GJ of gas tradedFocus on enhancing returns of generation assets, disciplined approachArranging transmission, capacity, and scheduling of movementFocus is long term contracts, new products, strategic growth opportunities
TransAlta- Commercial Card Program
Scotiabank since 1999Approx 1200 CardsApproaching 50000 Annual TransactionsAnnual Spend approaching $12MMBar Codes used for Expense Report reconciliation / Pathway NetSAP / Document Imaging System
TransAlta’s Infrastructure
Card Usage Statistics
Card Usage Ratio 50%Monthly Card Spending $1M(CAD)Monthly Spending Per Card .8KSpending Per Transaction .3K
Central Purchasing function that manages the processes for acquiring goods and services.
Competitive bidding NegotiatingContractsPurchasingInventory and warehouse managementParts data management
TransAlta’s Infrastructure
TransAlta’s Infrastructure
Payment and Processing Centralized invoice processing Canada, USA and MexicoSAP ERP 2005 Purchase Order DrivenKPI based on on-time performance; cost per invoice; payment settlement performance
TransAlta Infrastructure
KPI Annual Volumes 120,00075% Purchase Order 95% $$ settled electronically (still issue to many cheques)87% on time payment (net 30 days)Processing cost/invoice $8.0065% of invoices are less than $1K
The VISA AP Tool Analysis
Scotiabank / Visa AP Tool Analysis- what is it?
Vital tool for improving efficiency and reducing costsScotia expertise & resourcesDiscover opportunities for improvementAchieves fast, measurable results
The analysis process consists of five steps involving TransAlta, Scotiabank, and VCA
VCA performs analysis
TransAlta provides data
• Data includes A/P data and, optionally, card transaction data• Analysis requires all 10 data elements (see template)
Step Description
1
Scotiabank obtains data and submits to VCA
• Scotiabank assists TransAlta in collecting and verifying all required data elements• Scotiabank electronically submits data to VCA in an encrypted format via a secure
connection to VIM (Visa Information Management)2
Scotiabank receives reports
• VCA notifies Scotiabank by email once analysis is complete• Scotiabank downloads reports through VIM and determines recommendations to make
to TransAlta based on Scotiabank’s understanding of client’s needs
3• VCA cleanses and formats data as needed• VCA processes A/P data to match suppliers against VCA’s Merchant Profile Database
(Supplier Matching Service)• VCA applies data to the A/P Tool to generate reports
Scotiabank presents findings to TransAlta
• Scotiabank delivers customized findings and recommendations for card program expansion to TransAlta5
4
The analysis is performed in three phases: Data cleansing, supplier matching, and A/P tool analysis
Data Cleansing Supplier Matching(SMS) A/P Tool Analysis
Data tables are reformatted as needed
A unique list of supplier names is generated from data tables
Multiple payments against a single invoice are consolidated
Suppliers are matched against VCA’s Merchant Profile Database to identify which suppliers accept Visa cards as a form of payment
Transaction data is grouped by supplier and sorted by transaction volume
Transaction data is grouped by spend category and/or business unit and sorted by transaction volume
Cardable transactions are identified and summed by supplier, spend category and business unit, based on data about card-accepting suppliers
A/P processing cost savings are computed
Reports are generated
The A/P Tool produces reports on card value, migration targets and metrics
The three types of reports generated by the A/P Tool provide a number of views into an organization’s spend in order to identify opportunities for cost savings.The reports answer the following questions regarding card program expansion:
Quantifying Card Program Value
Identifying Migration Targets
• Which suppliers accept cards but are currently paid by other forms of payment?• Which spend categories have the most transactions that could be paid by card?• Which business units & cost centers make frequent cardable transactions and what are
the gains of migrating those transactions to commercial cards?
• What are the operational savings offered by commercial cards?• What are the rebate opportunities offered by commercial cards?
Report Category Questions Answered
Setting Migration Metrics and Benchmarks
• What is the cash flow and ROI for an expanded commercial card program over the next three years?
• What should the program include at each phase of expansion?
Scotia & TransAlta to work together to execute findings
True working partnershipLow dollar transactions eliminatedNew spend categories identified and new purchasing efficiencies realizedIncreased knowledge of Company spending
TransAlta’s use of the AP Tool
Recognition that the card program could be under-utilizedAP Analysis to serve as foundation for business case to key stakeholdersSCM, Audit, Finance will have to get onboard to execute recommendations from analysisDevelopment of a project plan for execution / Scotia to partner
Suspected there were opportunities to
Target non PO spendEliminate multiple payment methods for individual suppliersThrough revising RFP requirementsTo rationalize vendor tableTo reduce TransAlta process costsTo maximize program rebate potential
Results- How large is the opportunity?
* $565MM in spend with VISA vendors
* 32% of all company spend
Results- Lost Opportunities- Accept VISA but paid via other methods
Over 61,000 transactions available on top 75 Visa Accepting Suppliers
Nearly 51,000 transactions / $18MMin cardable transactions <$2500
Additional opportunity through targeted approach to non-accepting vendors
AP Analysis confirmed strong possibilities for success & program optimization
Significant spend with Visa-accepting vendors Lost opportunities- Visa Vendors paid by other methodsHuge opportunity to eliminate transaction process costs- especially at transactions <$2500Opportunity to target non-accepting vendors where metrics attractive to do so
Turning the findings into actions- making it happen
Formal presentation of results to stakeholders by Scotiabank / VisaBusiness Case for execution of recommendations developedObtain required approvals / sponsorsMutually develop project plan in line with Company goals
The process is not complete yet…there are other benefits to be realized
Ongoing plans to strengthen relationshipContinue increasing card useImprove supplier participation & data flowsReduction in paper based transactionsLeverage SAP infrastructurePosture for possible acquisitions
What can the VISA AP Tool Analysis do for your Company / Program ?
Contact your Scotiabank Relationship ManagerNo charge for this serviceTake your program to the next levelDrive tangible process savingsDemonstrate the strategic value of this payment toolDraw attention to the value of the program and your role