Electronic Payments: Six Supplier Savvy Steps Toward ePaymentSuccess 

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Henry Ijams

Henry Ijams, CAPP/CPMManaging DirectorPayStream Advisors, Inc.

Mr. Ijams' 25 years of experience focuses on trends and technologies in financial operations automation including  strategies regarding the automation and benchmarking of Purchasing and Payables processes. 

Through PayStream Advisors, Mr. Ijams consults with domestic and international organizations that want to take advantage of leading practices and automation solutions.

About the Speakers

Cedric Bru

Cedric BruGlobal Head of Sales, Marketing & Business DevelopmentSyncada from Visa

Based out of San Francisco, California, Mr. Bru is responsible for expanding the Syncada network around the world with the addition of global and domestic financial institutions.  He brings experience relating to payments, finance, information management and supply chain. 

Prior to joining Syncada, he held roles in product strategy, corporate development, sales and consulting at Visa and Hewlett‐Packard. Cedric holds an M.S. from the Institut National des Sciences Appliquees de Toulouse, France and an M.B.A from the Haas School of Business, University of California at Berkeley.

About the Speakers

Agenda

• Current State of Payables Automation

• ePayments Trends

• The Savvy Six to Success

• Syncada from Visa Overview

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PayStream’s ePayment Survey

• More than 500 respondents

• Geography: 98.4% respondents from North America

• Size– Large Co’s (annual rev > 1B): 40.3%

– Mid size Co’s (100 M < annual rev < 1B): 33.4%

– Small Co.’s (annual rev < 100 M): 26.3%

Footnote: PayStream’s ePayment & P‐Card Survey was conducted in  January 2011 with the understand demand drivers for payment innovationPayStream’s “Electronic Payments and Purchasing Cards Benchmarking Survey” 10/2009

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Electronic Payment Technologies have Matured

• Purchasing cards and e‐payments have matured with more than two‐thirds of companies using these tools

• Latest survey results reveal that while ePayments adoption is high, ePaymentspenetration is low 

Adoption of US B2B Payments has lagged

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Current State B2B Payments‐ Paper Checks still dominate‐ ACH payments only make up 21 percent of 

the 8.4 Billion in annual B2B payments‐ 3,800 Large enterprises  (<$500 MM) initiate 

more than 80 percent of these transactions

ACH‐Remittance Enabled‐ ePayments promotion by banks and 

Payment Services Providers such as Syncadahave boosted growth to 16 percent annually

‐ PayStream counsels clients to look for ways accelerate the use ePayments

‐ Benefits: ‐ Lower business payment processing 

costs ‐ Drive revenues from disbursement 

operations

Footnote: 8.4 Billion annual B2B Payments; ACH Volume is  1.7 billion transactions annuallyPayStream’s ePayment & P‐Card Survey was conducted in  January 2011 to understand demand drivers for payment innovation

Why is this so?

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The Chicken or the Egg?

Is the Problem,Lack of payers wanting to pay

ORLack of billers ability to 

accept?

The Worlds Greatest Paper Processor

• The US has a world class check payment infrastructure: – The Federal Reserve and Banks developed a very efficient way of reconciling 

paper payments – since the 1800’s

– The corporate payables and receivables environments in most companies are optimized for check payments, not ePayments

– Most companies making B2B payments are geared to issue checks 

– Most companies receiving payments have established lockboxes or internal receivables processes to post payments from the check and accompanying remittance documents.

– Until 9/11, many organizations also had the perception that current check‐based processes work well.

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Problems Implementing ePayments

• Payer’s Accounting software system weaknesses: – Accounting applications such as enterprise systems from SAP, PeopleSoft do not sufficiently support 

the creation of electronic payment transactions (for example, trading partner profiles which store ACH routing numbers); 

• Lack of enrollment processes:– Collecting payment routing details and the associated remittance instructions from billers and then 

populating these into payables or ERP software is a significant task.  

• Data mapping is complex: – Companies using  ACH transactions that carry remittance detail within the payment may require 

unique coding to generate a payment that is acceptable to their trading partners.

• Remittance limitations: – Remittance capacity within certain payment types, such as wires and cards, is limited.  

• Data translation is not automatic: – Labor intensive processes for the billers to receive the electronic payments and post them into their 

financial applications stymie the adoption of electronic payment solutions.  

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What do businesses want?NACHA conducted a study to understand the payment needs of suppliers1.

especially small businesses.

Key Insights:65 percent of surveyed Payers and Billers  would increase their use of electronic payments if: 

• Enabled payment via their bank’s online system.• Make an e‐payment without sharing account information.• Make a payment electronically and reconcile automatically with an accounting software.• Ability to link invoice and payments electronically.

Footnote: 1.NACHA Sponsored Small Business Payment Study – 2008 ‐ Celent

POLL  QUESTION

ONEPLEASE TURN YOUR ATTENTION TO THE POLL QUESTION POD

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Top Automation Goals

Source: PayStream Invoice Automation Benchmarking 2010

Q: What is your top AP automation goal for 2011?

Organizations are not interested in merely handling paper better, but want to remove paper from the source

Six Steps to ePayment Success

Savvy Six Pack

1. Become the ‘Payments Czar’ at your organization2. Demonstrate the value3. Evaluate Working Capital/Discount Opportunity4. Involve your suppliers5. Don’t aim too wide6. Empowerment through experts

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Savvy Six Pack ‐ #1: Who owns payments?

• “Ownership” of payments is tenuous– Treasury, Finance, or Procurement?

• Where does payments start?– When a payment is made or when an order is created?

– Or is it the entire process?• Become the Czar

– The informal political term "czar" or "tsar" is employed popular usage to refer to high‐level officials who oversee a particular policy.

• Empower the Organization for Change16

Top Reasons for ePayments Automation

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Savvy Six Pack #2: Demonstrate the value

• Knowledge is your power– Increased awareness drives adoption– Most CFO’s & Controllers don’t understand how simple savings can 

be achieved

• Conduct a payment spend assessment– Sort file by invoices per supplier– Dollars per supplier

• Develop a conversion forecast– Prepare a return on investment model– Prove the business case

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Savvy Six Pack #3 ‐ Evaluate The Working Capital/Discount Opportunity

1. Discount opportunities are frequently multiples of your P‐Card rebate

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Importance of early payment discounts

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Payments & Working Capital

• Electronic invoicing reduces mail latency and “desk float” so invoices reach AP faster

• Invoice validation capabilities reject exception invoices back to suppliers so only ‘clean’ invoices come into AP

• Faster approval means improved control of discount capture

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Discount Capture is a best practice

Automate to minimize

missed discounts1

Day 100%

0.5%

1.0%

1.5%

2.0%

2.5%

Day 45

$$$$

Pro-rated discount to cover

remaining missed opportunities2

Goal:

Capture all discount opportunities

• Capture discounts against current standard terms

• Employ pro-rated terms across supplier base

• Drive incremental dynamic discounts

POLL  QUESTION

TWOPLEASE TURN YOUR ATTENTION TO THE POLL QUESTION POD

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Savvy Six Pack #4: Involve your Suppliers

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NACHA conducted a study to understand the payment needs of suppliers1.

especially small businesses.

Key Insights:65 percent of surveyed Payers and Billers  would increase their use of electronic payments if: 

• Enabled payment via their bank’s online system.• Make an e‐payment without sharing account information.• Make a payment electronically and reconcile automatically with an accounting software.• Ability to link invoice and payments electronically.

Footnote: 1.NACHA Sponsored Small Business Payment Study – 2008 ‐ Celent

Barriers to Adoption of Electronic  Payment Methods

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Overcoming the  Major Barrier to Adoption

Supplier Resistance:The biggest barrier hindering ePayments initiatives is supplier adoption

Thus, you must Involve Suppliers from the Start

Buyers fail to effectively communicate the value of AP automation initiatives to their suppliers, and as a result, struggled to generate the results they expected. 

Buyer organizations need to be more proactive in providing supplier‐driven visibility into the invoice approval and settlement process

Technology providers that deliver supplier on boarding services in conjunction with the solution itself are gaining strong traction in the market

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Traditional Vendor Enrollment Methods

• Staff up with temps or gear up team for a big push

• Send 2‐3 mailers notifying vendor base of initiative                   

and asking for electronic banking information

• Follow‐up with 2‐3 e‐mails notifying & asking

• Start the calling process

• Typically a one‐time effort that lasts 3‐9 months

Traditional Problems Encountered

• Don’t mandate change strongly enough => poor adoption

• Day‐to‐day work prevents continual, consistent follow‐up

• One‐time effort means that bank account data goes stale

If your initiative is too broad, it has a higher chance it will:

a)Get derailed in the political process

b)Never get started

Savvy Six Pack #5: Don’t aim too wide

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Many clients use the savings or “revenues”generated to drive other improvement initiatives•Discount Management can be an very important tool to boost your eInvoicing ROI

•Growth of electronic payment has not suffered due to a lack of supplier adoption…rather the idea (egg) was never “born”•Buyer organizations generally have neither the expertise, nor the resources to convert a their own suppliers from paper to electronic payment

•The proven strategy is to leverage the experts to recruit your suppliers

Savvy Six Pack #6: Use third parties to augment your capabilities

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Transformation in Payment types over past 2 years

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The Open Global Financial Supply Chain Network

SyncadaBuilt for banks

• Joint venture - Visa and U.S. Bank

Consistent network rules Backed by patented global technologySupports compliance activitiesWeb-hosted network

Quick Facts• Operational since 1998• Headquartered in

Minneapolis, USA • Operations in North

America, Asia and Europe (global staff 500+)

• Processed more than USD $18B in 2009

• Nearly 200 buyers (Fortune 2000 companies and govt)

• 16,000+ suppliers• Customer service in 22

languages• Local payments in

47 countries in 15 currencies

Network

Invoice Process

Invoice Payment

Invoice Financing

Business Intelligence

What is Syncada?

1. Orders for Goods or Services

How It Works:Process & Pay (1)

1

2 2. Invoices

1. Orders for Goods or Services

How It Works:Process & Pay (2)

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3 23. Reference Documents2. Invoices

1. Orders for Goods or Services

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23. Reference Documents2. Invoices

4. Audits

1. Orders for Goods or Services

How It Works:Process & Pay (4)

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5. Invoice Approval4. Audits

1. Orders for Goods or Services

How It Works:Process & Pay (5)

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6. Call for Funds

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1. Orders for Goods or Services

How It Works:Process & Pay (6)

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7. Single Payment6. Call for Funds

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1. Orders for Goods or Services

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3. Reference Documents2. Invoices

8. Payment AcrossMultiple Buyers with Detailed Remittance

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5. Invoice Approval4. Audits

1. Orders for Goods or Services

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9. Net Settlement

8. Payment AcrossMultiple Buyers with Detailed Remittance

7. Single Payment6. Call for Funds

5. Invoice Approval4. Audits

1. Orders for Goods or Services

How It Works:Process & Pay (9)

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3. Reference Documents2. Invoices

10. Analysis9. Net Settlement

8. Payment AcrossMultiple Buyers with Detailed Remittance

7. Single Payment6. Call for Funds

5. Invoice Approval4. Audits

1. Orders for Goods or Services

How It Works:Process and Pay

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Value to Business

Reduce processing costs• Paper invoices• Paper check

Improved visibility to A/P processStandardized receipt and workflow processIncrease financial control and regulatory complianceImprove working capital

LOGO FPO

• Invoices paid in error • Fees: late or post audit

Questions & Answers

Paystream Advisors, IncHenry IjamsManaging Directorhenry.ijams@paystreamadvisors.com

Syncada from VisaCedric BruGlobal Head Sales, Marketing, Developmentcedric.bru@syncada.com