ach, eipp, stp… omg!
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ACH, EIPP, STP… OMG!. Sifting Through the Jargon to Develop a Cohesive ePayment Strategy. 06/06/12. Agenda. 1. The current landscape and where we’re heading. 2. The options available to you. 3. How to get started. - PowerPoint PPT PresentationTRANSCRIPT
ACH, EIPP, STP… OMG! ACH, EIPP, STP… OMG!
Sifting Through the Jargon to Develop a Cohesive ePayment Strategy.Sifting Through the Jargon to Develop a Cohesive ePayment Strategy.
06/06/1206/06/12
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Agenda
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3
Source: Forbes Global 2000; PayStream Advisors, 2010: Association for Financial Professionals, 2010
The current landscape and where we’re heading
The options available to you
How to get started
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3
Paper-based Payables Volume is a ResourceDrain for Companies of All Sizes
In 2010, the Global 2000 had…
11.2 billion invoices1
85% of invoices are paper2
57% of payments are check3
What is your organization’s costfor ineffective payables processing?
Source: Forbes Global 2000; PayStream Advisors, 2010: Association for Financial Professionals, 2010
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The Tide is Rapidly Shifting
Source: IAPP, Accounts Payable Automation Survey, Sept. 2010
24.5%
61.3%
9.1%
46.0%
30.9%
18.3%
0%
20%
40%
60%
80%
100%
Now In 3 Years
Payment Method Usage: Now vs. in 3 Years
P-card
Paper Check
ACH/EFT
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The Tide is Rapidly Shifting
Source: IAPP, Accounts Payable Automation Survey, Sept. 2010
26%
61%
7%
6%
47%
24%
22%
6%
24%
61%
10%
3%
44%
33%
19%
2%
0%
20%
40%
60%
80%
100%
Health careNow
Health care +3 yrs
All other now All other + 3yrs
Payment Method Usage: Now vs. in 3 Years
ACH/EFT PAPER CHECK P-CARD WIRE/OTHER
Healthcare
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Payment and Reconciliation
$0
$2
$4
$6
$8
$10
$12
Wire Check ACH Card EIPP$0
$2
$4
$6
$8
$10
$12
Manual EIPP
Aberdeen Group May 2010 Study: "Global Payments: Maximizing Cash Flow with
Electronic Payments and Process Automation"
Accenture 2007 Study: "The Roleof Procurement Cards in theSource-to-Settle Process"
Electronic payments are a significant opportunity for cost savings
Illustrative Example Only
Payment Costs Reconciliation Costs
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Which Paperless Option is Best?
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Lots of Tools in the Payables “Tool Kit” E-Payments
• ACH/EDI• Commercial Cards• Wire• Electronic Accounts Payable
– Dynamic Adjustment Accounts
– Single Use Accounts– Ghost Accounts
Electronic Invoice Presentment& Payment
End-to-End Automation
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Most Organizations Use More than One
Cap Ex
MROAd Hoc
COGS
Business Purchase Landscape
CARDSACH
CHECKS
WIRES EDI
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The Options
ACH
Wire Transfers
Cards
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2
3
Electronic Accounts Payable (EAP)4
Electronic Invoice Presentment and Payment (EIPP)5
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ACH has Broad Acceptance and Uses
COMMON USES BENEFITS
Collections – Utilities, Charitable, RE, Membership
Disbursement – Payroll, Dividends, Refunds, Pension Payments…
B2B Trade Payables B2C One Time or Repetitive
Collections or Disbursements International ACH Payments Check Conversion – ARC,
BOC, POP Decoupled Debit – POS Return Fee Collection
Low Cost per Item Supports both Debit and Credit B2B or B2C Ideal for Repetitive Transactions Can Contain Remittance Info that
Travels with the Payment – Native Electronic Payment
Ubiquitous Acceptance through Banking System
Long Established NACHA Format Supported by all ERP Systems, NACHA File Software and Services Widely Available
“Green” Alternative
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Key Considerations – ACH
ACH Payables/Receivables (DR/CR) (22,32,27,37) Payment that are the right fit for ACH? (COGS, MRO) Payment Applications (PPD, CCD, CTX, IAT, WEB) File creation (WEB,PC, Direct File) Format (NACHA format, Non-NACHA format) Addenda (STP 820, ANSI X12 formats, tax addenda) Rules and operating guidelines? (REG E, Reg CC, UCC4A) Returns, notification of changes, authorizations and enrollment Driving adoption (Direct Payment, Direct Deposit, UPIC) Remittance Reporting (EDI, Data Capture, Formatting, STP)
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Wire Transfers Speed Payment Processing
COMMON USES BENEFITS
Where funds need to be available immediately, and where finality of payment needs to be certain – mortgage closing, broker dealer, high dollar value B2B transactions
Can be used in conjunction with other payment types, e.g., a draw wire to fund an ACH credit file
Has high potential for wider B2B usage once the new FED wire remittance is in place
Funds available for immediate use Initiation flexibility and security Automated batch input can send
large volumes in automated fashion
Accurate, safe, and confidential Increased financial flexibility Simplified transfers, repetitive and
voice initiated options
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Key Considerations – Wires
WIRES Type of wire input (Voice, Phone, PC, Web, Direct Connection) Network (FED, SWIFT,CHIPS, internal) Wire type (Repetitive, Semi-Repetitive, Free Form) Wire cutoff times per bank but follow Federal Reserve Security requirements Wire instructions (valid characters for each network, BNF, OBI,
BBI fields) New FED wire remittance data Wire reporting and advice information Tracking
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Cards are Easy to Use
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CARDS
COMMON USES BENEFITS
Decentralized purchases Large number of purchases –
small amounts per purchase Travel, fuel, private aviation
expenses
Easy to use Network standardization Transfer of risk from supplier to
card issuer Increased productivity Revenue share opportunities Reduced processing costs Better cash flow forecasting
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Key Considerations – Cards
CARDS Supplier adoption is key Buyers need to articulate benefits to suppliers The more spending you push onto the card, the greater the
benefits to all Consider mandating their use Enhanced spending controls (optional) Payment analytics can spot employee misuse (optional) Still growing
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Virtual Card Accounts
CARDS
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COMMON USES BENEFITS
Management of strategic supplier relationships
Single Use Accounts “Ghost” Accounts Virtual Accounts Straight Thru Processing
Enhanced visibility and control Reduced operating costs from
process improvements Reduced fraud Improved on-time payment Increased early payment discounts Improved revenue sharing
opportunities Enhanced cash flow forecasting
abilities
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Virtual Card Accounts
Considerations Ideal if you have a substantial number of regular suppliers who
offer discounts for early payment Significant IT investments are not necessarily required by either
buying and selling organizations For best results, need to “sell” epayments as the standard for
conducting business to all internal/external partners
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Virtual Card Accounts
Over 25% of organizations have adopted virtual purchasing cardaccounts
For organizations with $1 billion+ revenue, the adoption rate is nearly double
Over the next three years, EAP use will grow byover 40%*
*Source: 2010 RPMG “Purchasing Card Benchmark Survey Report”
16.2%
21.9%
45.3%
37.9%
26.4%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
<$250M $250M to$1B
$1B to$5B
>$5B AllRevenues
Virtual/Cardless Purchasing Accounts Usage
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Electronic Invoice Presentment &Payment (EIPP)
CARDS
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COMMON USES BENEFITS
When the buyer’s goal is invoice-to-payment automation
When the goal is to reduce your payment costs, reduce your paper use and maximize your efficiency
Bank can pay the suppliers how they want to be paid
Buyers can pay the bank the way they want to pay
Bank acts as the “converter”
Easily converts paper to electronic Everything - from invoice to final
payment – is electronic Buyer and supplier to have equal
access to data – promotes collaboration, mitigates disputes
Payment method neutrality Fewer lost or missing invoices Minimize fraud and duplicate
invoices Finance options for buyers
and suppliers Maintain a complete audit trail
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Electronic Invoice Presentment &Payment (EIPP)
Considerations Significant IT investments are not necessarily required by either
buying and selling organizations Implementation may take a little more time Rebates are not part of it, but the cost savings might exceed any
possible rebate
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Electronic Invoice Presentment &Payment (EIPP) Incremental benefits
available... eliminating large capital investment
Buyer and supplier benefits are not dependent on each other
EIPP solutions are reaching critical mass
Organizations are recognizing A/P automation as an area offering tremendous potential for achieving tactical and strategic objectives.
Organizations are recognizing A/P automation as an area offering tremendous potential for achieving tactical and strategic objectives.
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Electronic Invoice Presentment &Payment (EIPP)
Almost 16% of organizations have adopted Electronic Invoice Presentment and Payment (EIPP) tools
• Currently, $1 billion+ organizations have the highest adoption rates
• 50% of organizations have plans to adopt within the next three years
13.1% 12.3%
22.6% 20.7%
15.7%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
<$250M $250M to$1B
&1B to$5B
>$5B AllRevenues
Current EIPP Usage
41.07%
55.81% 53.13%57.14%
49.66%
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
<$250M $250M to$1B
$1B to$5B
>$5B AllRevenues
Plans to Implement EIPP with in 3 years
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How EIPP Works
Cooperative approach between two participants• Buyer – uses EIPP for A/P• Supplier – uses EIPP for A/R
Both parties review and manage their transactions online Both parties have real-time visibility to invoice and payment status Both parties collaborate online to resolve disputes or exceptions
PRESENT
PROCESS PAY
FINANCE
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How Do I Get Started?
Map out current payable and receivable processes
Review IT resources;
determine desired automation level
Consult with banking partners
Consult with trading partners todetermine interest and effort required
Obtainsenior manager
buy-in
Driveadoption
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The Low-Hanging Fruit
COMMERCIALCARDS
ACH FORRECURRING LOWVALUE PAYMENTS
INVOICE PROCESSINGAND PAYMENT
SOLUTIONS
ZB2B PAYMENT
NETWORKS
WIRES FORIMMEDIATE
FUNDS, HIGHVALUE PAYMENTS
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Is Now the Right Time?
Should I wait for the mobile revolution instead?
You needto get started
yesterdayYou have tools now to
fit your needs
Mobile and other
innovation will build on
these options
Cards, EIPP, ACHand Wires will
form the backbone for the
foreseeable future
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Questions
Thank You!Jeff PapeSVP Group Product Manager
Corporate Payment Systems
U.S. Bank
Greg Rettinger AVP Global Treasury Management, AAP
U.S. Bank