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Transcript of CONFIDENCE, SAVINGS AND CONTROL FROM THE #1 ISSUER 0 Purchasing Card Best Practices : Reduce Costs...
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Purchasing Card Best Practices :
Reduce Costs and Generate Income
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Agenda
9:00 a.m. Welcome and Introductions
Charlie Pride and John Rogers
9:15 a.m. Purchasing Card Best Practices
Presentation – Brian Rodgers
9:35 a.m. City of Westfield - Efficiencies &
Benefits Recognized through a Card Program
Presentation – John Rogers
9:55 a.m. Q & A
Charlie Pride, John Rogers and Brian Rodgers
10:15 a.m. Adjournment
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www.westfield.in.gowww.westfield.in.govv
J.P. Morgan Chase◦ Brian Rodgers, Commercial Card Solutions
Manager State Board of Accounts
◦ Charlie Pride, Cities, Towns and Libraries Office Supervisor
City of Westfield, Enterprise Division◦ John Rogers, Director of Enterprise◦ Tammy Havard, Financial Strategist◦ Teresa Evans, Project Manager
City of Westfield, Clerk Treasurers Office◦ Cindy Gossard, Clerk Treasurer◦ Kerri Gagnon, Deputy Clerk Treasurer◦ Micha Farrar, Deputy Clerk Treasurer
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We evaluated everyday tasks and activities:◦ Are they value-add?◦ Is this the best way to get this task done?◦ Are there best practices?◦ Is Apple going to announce an iClerk to do this
for us?
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How many invoices were we processing last year?◦How many are we
averaging this year? How much did it
cost us to invoice?
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When does authorization for spending occur?◦When the budget is approved by the
common council?◦When the claims docket is approved?◦When Charlie says so….
A: When the budget is approved by the common council.
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What do the State auditors require as proof for all expenses?◦Paper receipts and signed
approval vouchers◦Images of receipts and
electronic approvals◦Let’s ask CHARLIE……
A: Charlie has the answer!
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Agenda
Purchasing Card Best Practices :
Reduce Costs and Generate Income
Presented by: Brian Rodgers, Commercial Card Solutions Manager
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This presentation was prepared exclusively for the benefit and internal use of the J.P. Morgan client or potential client to whom it is directly delivered and/or addressed (including subsidiaries and affiliates, the “Company”) in order to assist the Company in evaluating, on a preliminary basis, the
feasibility of a possible transaction or transactions or other business relationship and does not carry any right of publication or disclosure, in whole or in part, to any other party. This presentation is for discussion purposes only and is incomplete without reference to, and should be viewed solely in
conjunction with, the oral briefing provided by J.P. Morgan. Neither this presentation nor any of its contents may be disclosed or used for any other purpose without the prior written consent of J.P. Morgan.
To the extent that the information in this presentation is based upon any management forecasts or other information supplied to us by or on behalf of the Company, it reflects such information as well as prevailing conditions and our views as of this date, all of which are accordingly subject to change. J.P. Morgan’s opinions and estimates constitute J.P. Morgan’s judgment and should be regarded as indicative, preliminary and for illustrative purposes
only. In preparing this presentation, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was provided to us by or on behalf of the Company or which was otherwise reviewed by us. J.P.
Morgan makes no representations as to the actual value which may be received in connection with a transaction nor the legal, tax or accounting effects of consummating a transaction. Unless expressly contemplated hereby, the information in this presentation does not take into account the effects of a possible transaction or transactions involving an actual or potential change of control, which may have significant valuation and other
effects.
Notwithstanding anything herein to the contrary, the Company and each of its employees, representatives or other agents may disclose to any and all persons, without limitation of any kind, the U.S. federal and state income tax treatment and the U.S. federal and state income tax structure (if
applicable) of the transactions contemplated hereby and all materials of any kind (including opinions or other tax analyses) that are provided to the Company insofar as such treatment and/or structure relates to a U.S. federal or state income tax strategy provided to the Company by J.P. Morgan.
J.P. Morgan's policies on data privacy can be found at http://www.jpmorgan.com/pages/privacy.
IRS Circular 230 Disclosure: JPMorgan Chase & Co. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters included herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the
promotion, marketing or recommendation by anyone not affiliated with JPMorgan Chase & Co. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.
Chase, JPMorgan and JPMorgan Chase are marketing names for certain businesses of JPMorgan Chase & Co. and its subsidiaries worldwide (collectively, “JPMC”) and if and as used herein may include as applicable employees or officers of any or all of such entities irrespective of the
marketing name used. Products and services may be provided by commercial bank affiliates, securities affiliates or other JPMC affiliates or entities. In particular, securities brokerage services other than those which can be provided by commercial bank affiliates under applicable law will be provided
by registered broker/dealer affiliates such as J.P. Morgan Securities LLC, J.P. Morgan Institutional Investments Inc. or Chase Investment Services Corporation or by such other affiliates as may be appropriate to provide such services under applicable law. Such securities are not deposits or other
obligations of any such commercial bank, are not guaranteed by any such commercial bank and are not insured by the Federal Deposit Insurance Corporation.
This presentation does not constitute a commitment by any JPMC entity to extend or arrange credit or to provide any other services.
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Agenda
What is a Purchasing Card
What Can a Purchasing Card Do For You?
Generate Income
Prevent Fraud and Misuse
Reporting
Implementation and Support
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Agenda
What is a Purchasing Card
What Can a Purchasing Card Do For You?
Generate Income
Prevent Fraud and Misuse
Reporting
Implementation and Support
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What is a Purchasing Card?
Commercial cards are charge cards with special controls and value-added functionality
Different from a small business or private label card Spend and merchant controls Credit based upon organization, not principal officer Statement balance due in-full Sophisticated analytical tools available
Terminology Purchasing card (P-Card) Commercial Card Corporate card (T&E) OneCard (combination of these)
Optional hot-stamp logo
Two lines of embossing
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Agenda
What is a Purchasing Card
What Can a Purchasing Card Do For You?
Generate Income
Prevent Fraud and Misuse
Reporting
Implementation and Support
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With a card program you can…
Gain efficiencies
Reduce costs
Optimize cash flow
Earn financial incentives
Improve vendor relations
Empower employees
If 90% of your invoices make up 10% of your dollars ~ does that mean that
accounts payable is spending 90% of their time on 10% of your dollars?
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Efficiency drives cost savings
The traditional cost of the purchase order and payment process ranges from $50-$250
The average cost of a traditional PO process is $93*
The average cost of a P-card transaction is $22*
The average cost savings across all industry types is $71*
The average procurement cycle time savings is 10 days*
Need to buyReceive goods
Receive goods
Employee Receiving Employee
Generate PO or
requisition
Approve purchase
Purchase goods
Receive invoice
Match per purchase
Pay per purchase
Employee Manager Purchasing EmployeeAccounts Payable
Accounts Payable
PO or requisition information
Shipping notice
* 2010 RPMG Purchasing Card Benchmark Survey
Generate PO or
requisition
Approve purchase
Purchase goods
Receive invoice
Match per purchase
Pay per purchase
PO or requisition information
By moving just 100 invoices per month to a
card your organization can save over $85,000
annually
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The expense category may determine the payment method
ACH/EDI/Wires
ACH/EDI for your top tier suppliers Wires transfers for immediate needs
AP Cards
Use commercial cards in AP to reduce check volume
Checks continue to decline
Commercial Cards and Direct Deposit
Commercial Cards for low dollar procurement and travel
Direct Deposit and Payroll Cards for payroll
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Card payments can add an average of 40 days of float
30-day billing cycle with a 25-day grace period is standard
Day 1 of billing cycle
Billing cycle begins
Pay vendor with purchasing card throughout cycle
Vendor processes payment for settlement
Day 1 of billing cycle
Billing cycle begins
Pay vendor with purchasing card throughout cycle
Vendor processes payment for settlement
30-day billing cycle 25-day grace period
Day 30
Billing cycle closes
Statement is presented
Payment not due for another 25 Days
Day 30
Billing cycle closes
Statement is presented
Payment not due for another 25 Days
Day 55
Payment due in full
Day 55
Payment due in full
AVERAGE PAYMENT FLOAT = 40 DAYS
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Empower your employees with controlled purchasing ability
Accounts payable
Central purchasing
Administrative assistants
Maintenance (facilities/transportation)
IT staff members
Office and department managers
Parks and recreation
Fire and police
Courts
Conference and meeting planners
Principals and teachers
Athletics and theater
Travelers
Commercial cards benefit anyone in your organization that needs to make purchases as a regular part of their daily job routine.
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Typical card use for best practice organizations
Aberdeen Research
Office Equipment and Supplies
Computer hardware, software and peripherals
Catering
Food/Groceries
Fuel
Media
Print and Duplicating Services
Maintenance, Repair & Operating (MRO) Goods
Clothing/Uniforms
Professional Services
Inventory
Telecommunications
Mail Delivery
Transport/Delivery
Construction Materials
91%
81%
78%
77%
71%
66%
60%
59%
56%
53%
52%
49%
39%
36%
69%
Note: * RPMG 2010Purchasing Card Benchmark Survey Report
Rental Payments 32%
Percentage of Best Practice Organization card uses:Percentage of Best Practice Organization card uses:
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Increased Supplier Leverage
Using the purchasing card spend data to drive supplier negotiations can yield powerful benefits
■ 60% of organizations that use spend data to support supplier negotiations report receiving higher discounts
■ 53% of organizations report that they receive 1.1% to 3% absolute improvement in discounts
■ 22% say they generate more than 3% absolute improvement in supplier deals
Leveraging purchasing power has become more lucrative as suppliers offer substantial incentives to use the card.
Supplier Benefits
Status as a preferred vendor
Faster payment (within a few days)
Automated processing
Potential of increased sales
© 2010 Purchasing Card Benchmarking Survey Results, RPMG Research Corporation.
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Agenda
What is a Purchasing Card
What Can a Purchasing Card Do For You?
Generate Income
Prevent Fraud and Misuse
Reporting
Implementation and Support
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Rebates have become commonplace for qualified programs
Factors that affect rebate earning potential Annual volume Billing cycle length Speed of pay Program dynamics
While cost/incentive is a large factor, other factors should weigh in:* Technology Experience and expertise Customer and cardholder services
* Source: Best Practices Task Force Report: Optimizing Revenue Sharing, NAPCP, November 2006
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Agenda
What is a Purchasing Card
What Can a Purchasing Card Do For You?
Generate Income
Prevent Fraud and Misuse
Reporting
Implementation and Support
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Best Practices for program control
Establish policies and procedures with “teeth” – Highlight consequences of misuse.
Cardholder agreement
Senior management support and visibility
Mandate program
Training and communication
Cards can be completely customized for the user
Spend Limits Single purchase limit Monthly spending limit Authorizations per day Transactions per cycle
Merchant Category Code restrictions
Cash access Allow, block, or block
organization-wide
Daily access to data via MasterCard smartdata.gen2TM
(“smartdata”)
Monthly reconciliation Cardholder and manager review
transactions
Audit “spot check”
Exception reports to monitor “high risk” MCC’s or high dollar transactions.
THE RESULT: A successful and secure program
PROGRAM COMPLIANCE1 POINT-OF-SALE
CONTROLS2 TRACKING & MONITORING3
MasterCard smartdata.gen2 is a registered trademark of MasterCard International Incorporated. The smartdata tool is a MasterCard International Incorporated solution.
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Additional cardholder security and protection
Insurance benefits Travel accident insurance ($400,000) Lost luggage ($1,250 supplemental
coverage) Primary vehicle collision/loss damage
waiver Emergency medical coverage ($2,500
secondary coverage)
MasterCard Travel Assistance Services Available toll-free 24/7 Medical referrals/prescription filling Trip information and planning Legal/embassy referral Roadside assistance VAT reclaim service
MasterCoverage Liability Insurance Liability Insurance* – Insures against employee misuse
* Up to a maximum limit of USD 25,000 per cardholder for companies that have two to four cards, or up to a maximum limit of USD 100,000 per cardholder for companies that have five or more cards provided that all program conditions are met.* Up to a maximum limit of USD 25,000 per cardholder for companies that have two to four cards, or up to a maximum limit of USD 100,000 per cardholder for companies that have five or more cards provided that all program conditions are met.
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Agenda
What is a Purchasing Card
What Can a Purchasing Card Do For You?
Generate Income
Prevent Fraud and Misuse
Reporting
Implementation and Support
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Web-based reporting for your program management and reporting tool
Multiple user types to provide appropriate access to data Program level administrator Manager/supervisor Cardholder
Create and maintain a reporting hierarchy to mirror your organizational structure Able to run reports at hierarchy levels Allow manager access based on hierarchy level
Email messages to managers and/or cardholders One-off or scheduled messaging Filter messages by reviewed status
Card maintenance
Request new cards
Real-time access for limit changes
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Robust accounting allocation options make transaction review painless
Define default accounting information Cost center information can be defaulted based on the cardholder Expense code can be populated based on MCC or card account Additional information can be added to the transaction (job or project code) Default information can be reallocated Split transactions into multiple codes for accurate accounting
Standard Reports Supplier, Transaction, Cardholder including Exception Reporting
Custom Exports for specific reporting needs Variety of file formats General Ledger Upload
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Agenda
What is a Purchasing Card
What Can a Purchasing Card Do For You?
Generate Income
Prevent Fraud and Misuse
Reporting
Implementation and Support
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Keys to a successful implementation
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Clearly define program goals Allows you to benchmark and quantify successes Do a Vendor Match to help estimate the size of your program and rebate potential
Garner senior management and oversight body support and approval Program champion
Involve key areas during the planning process Oversight Body, Accounts Payable, Purchasing and Auditing
Establish and enforce policies and procedures Be sure your policies are ‘enforceable’
Determine program administrator Decision-making abilities and authority
Comprehensive training Cardholders Management
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Provide us with your vendor information
Quick and cost free service. We’ll help you identify which vendors already accept MasterCard and what level of data they provide.
Essential to determine program spend potential
Confirm Merchant Category Codes for easier program set-up Providing annual spend and number of invoices will allow for a thorough analysis
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Implementation and Support
Dedicated specialists guide and support your program before, during and after implementation
Understand RequirementsUnderstand Requirements Implement and TrainImplement and Train Service & SupportService & Support
Identify project resources
Review technical and reporting requirements
Develop policies
Determine readiness
Identify project resources
Review technical and reporting requirements
Develop policies
Determine readiness
Attend Program Administrator Training
Launch solution within clients needs and parameters
Train Users to provide faster ramp-up
Attend Program Administrator Training
Launch solution within clients needs and parameters
Train Users to provide faster ramp-up
Program Coordinator Team
• Day-to-day servicing and maintenance
• Program Administrator’s main point of contact
Technical Support Team
Cardholder Support Team
Program Coordinator Team
• Day-to-day servicing and maintenance
• Program Administrator’s main point of contact
Technical Support Team
Cardholder Support Team
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Training
Successful implementation continues with effective training
Dedicated trainers are responsible for product training and consulting
Program Administrator training
Online through our Learning Website
Telephone consultations
Train-the-trainer sessions
SmartData® “how-to” guide
Quick reference cards
On-demand Webcasts
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Purchasing Card Best Practices :Reduce Costs, Generate Income and Prevent Fraud
Questions
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Ask Why◦ Why does the procure-to-
pay process take so long?◦ Why are we paying two
different prices for a similar product or service?
◦ Why are we cutting checks to the bank in lieu of ACH payments?
◦ Why are there interstate highways in Hawaii?
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A pCard program reduces the steps of the procure-to-pay process by:◦ Moving some aspects of the back office support
closer to the transaction◦ Settlement of the transactions (less invoices)◦ Account reconciliation ◦ Reporting
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The pCard can provide more efficient control of purchasing activity◦ Clerk’s office can adjust or limit spend by sector,
day and time (much more effective than open PO’s at local suppliers
◦ Limit maverick spend by placing tight controls on the pCard
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Additionally, the pCard data organizes our vendor and spend information for analysis◦Facilitating a review of purchase
activity/inconsistencies enterprise-wide through a single database
◦Allowing for vendor and spend management A vehicle for increasing revenue
◦The annual rebate currently competes with the interest received on short-term investment notes
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