procure-to-pay best practices and solutions for the … · procure-to-pay best practices and...

© 2011 Elavon: Confidential and Proprietary. 1

2010

Procure-to-Pay Best Practices and Solutions

for the Public Sector

Sylvie Parent Regional Vice President

Public Sector Relationship Management


Discussion Topics

• Public Sector Landscape

• Payment Trends

• ePayables Overview

• Best practices using ePayables and cards


Public Sector Landscape

• In a word – “UGLY”

• Budget issues across Canada

• Record deficits

• Probable tax increases

• Stimulus programs ended


Public Sector Landscape (continued)

•Federal

– Budget reductions

•Provinces and Municipalities

– Funding cuts

– Stimulus funds extinguished

•Universities and schools

– Funding cuts

– Reduced private funding


Forcing a Fresh Look at Alternatives

• “We can’t do this because…” naysayers being kicked to the gutter

• Efficiencies being looked at more closely if:

– They are not capital-intensive to implement

– Offer multiple benefits

• Alternative revenue streams

– Rebate incentives take on even greater importance to:

• Offset budget cuts

• Fund technology costs


• Cheque usage is decreasing across North America

• B2B cheque payments are down from 81% (2004) to 57% (2010)

• Majority of buyers plan to convert major suppliers from cheques to e-payments over the next three years

Increased

Same

Decreased

Change in Usage of Payment Methods

Sources:

PayStream Advisors, “Electronic Payments: Streamline P2P, Reduce Costs,” Q2 2010

Association for Financial Professionals, “Electronic Payments Survey,” 2010

Payment Method Trends


Key drivers of change

• The rationale for ePayment adoption continues to be time and cost savings

• New technologies are a key factor driving growth of e-payments • Electronic accounts payable (EAP)

• Electronic invoice presentment and payment (EIPP)

• Increased “float” potential

Source: Association for Financial Professionals, “Payments Fraud & Control Survey,” 2010


Business-to-Business Trends

Source: 2010 Purchasing Card Benchmark Survey, RPMG Palmer & Gupta

Source: AFP Electronic Payments Survey data for 2004, 2007, and 2010.

• Growth of commercial cards

• Growing adoption of Electronic Accounts Payable (EAP)

• Expansion of Electronic Invoicing

• Regulatory rulings


9

Payment and Reconciliation Electronic payments are a significant opportunity for cost savings

Payment Costs:

Wire $9.86

Aberdeen Group May 2010 s tudy: "Global Payments: Maximizing

Cash Flow with Electronic Payments and Process Automation"

Cheque $7.15

EDI/EFT $4.72

Card $3.96

EIPP $2.35

Reconciliation Costs: Manual EIPP

$12.00 $5.00

Accenture 2007 s tudy: "The Role of Procurement Cards in the Source-to-Settle Process"

Automated, electronic reconciliation saves FTE’s precious time

and allows them to focus on more valuable activities

Greatest cost

savings benefits

are achievable by

moving from

paper-based

payments to

e-payments

Illustrative Example Only


Key Trends: e-Invoicing and e-Payment

Adoption of e-Invoicing Solutions Source: Invoice Automation, Automating AP Processes, PayStream Advisors, Q3 2010


11

Which Paperless Option Is Best?

Source: IAPP, Accounts Payable Automation Survey, Sept. 2010


12

Most Organizations Use More than One

Cap Ex

MRO Ad Hoc

COGS

Business Purchase Landscape

CARDS ACH/EFT

CHEQUES

WIRES EDI


ePayables


ePayables Terms

• Virtual card or virtual accounts

• Cardless accounts

• Ghost accounts

• Single-use accounts

• Straight-through processing

• Buyer-initiated payments

• Electronic Invoice Presentment and Payment (EIPP)


• “Non-plastic card accounts used to pay for invoiced goods and services…” 2010 Palmer Benchmarking Survey

• Allows an organization to keep in place traditional and sometimes necessary procurement and payables controls

• Purchase order, 3-way matching and A/P processing

• During payment process run, creates an extract file sent to financial institution which instructs merchant to process select invoices on card-based accounts

ePayables – Card-based Solutions


ePayables – Card-based Solutions (continued)

• Recognizes the need for certain transactions to require additional front/backend scrutiny

• Allows control whole still cutting costs

• Targets specific vendors

• May be used to settle eCatalog orders

• Allows for capture on cards of spends that are above traditional purchase card spend limits


ePayables – EIPP

• Electronic Invoice Presentment and Payment

• Collaborative internet based payment networks

• Transactions reviewed and managed online

• Removes card interchange as payment acceptance barrier

• Can house contracting and invoice-related documentation


ePayables – Non-Card EIPP

• Focus on larger transactions

– Contract management

– Construction project

– Legal fees

– Inventory items

• Smaller merchant audience due to complexity

• Significantly more complex technical integrations

© 2011 Elavon: Confidential and Proprietary. 19 19

© 2011 Elavon: Confidential and Proprietary.

Cost

reduction

Compression

of the procure-to-pay cycle

Increased

ability to capture early

payment

discounts

Improved

visibility into payments and overall spend

Enhanced

process efficiencies and rebate

opportunities

Reduction in

the losses incurred from cheque fraud

1 2 3 4 5 6

ePayables Benefits


How the Public Sector

Uses ePayables


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


Virtual Card Examples

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


Examples of Public Sector Usage of EIPP

• Reduced processing costs & support “green" initiatives

– “We’re into the 21st century and out of the paper business.”

• Contract management

– Construction

– Legal bills

• Housing Authorities - utilities

• Health Services – pharmaceuticals

• Education – school supplies, equipment and text books


Best Practices from the

Public Sector


Analyze Your Payments

• What are you buying, from whom are you buying and how much are you spending?

• Are you buying from contract?

• What’s the processing cost of your transaction?

• Is value added by current payment method or process?

• Cross check your spend data with card provider matching services


Leverage the Data

• Evaluate spend categories/supplier types and payment methods

• Transition what makes sense – One size does not fit all – Pay with the most cost effective method

• Capture and utilize the level II and III detail if it helps the reconciliation

• Use technology for more than just program management –using the data for strategic sourcing opportunity and measuring both card use and contract compliance is immensely important


Prioritize & Implement

• What matters the most – at what point in the life of your program?

– Growing volume & transitioned spend by supplier type and/or categories

– Cost reduction

– Program compliance report-ability/audit-ability

– Purchasing card data integration with ERP

• Technology has to matter


Measure

• Data Analysis to measure a successful program

• Transactions/Volume

• Transition of checks to electronic payments

• Cost/Benefit Ratio

– Decreased processing cost

– Increased revenue


Questions

Sylvie Parent [email protected]

procure-to-pay best practices and solutions for the … · procure-to-pay best practices and...

Documents