Creating the Merchant Value Proposition for Electronic Payments October 17, 2012.

Creating the Merchant Value Proposition for Electronic Payments

October 17, 2012

2012 Ceridian Corporation. All rights reserved.

Agenda

Market Background Electronic Payments Overview Case Studies Merchant Value Proposition Defined Enrollment Best Practices

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Market Background

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Source: Aberdeen Group, E-Payables Solution Selection Guide

“Manual, paper-based accounts payable departments are eroding the bottom line of large and mid-market enterprises by an order of millions of dollars each year….and the stage is set for a major financial makeover.”

Today’s Payment Landscape


Market Background

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74%B2B payments made with paper checks

$38B Total transaction cost savings

Source: 2010 Purchasing Card Benchmark Survey, RPMG; Association of Financial Professionals


Payment choices have continued to emerge, giving organizations more choices that deliver process efficiency improvements, revenue benefits

and greater overall control

T&E T&E

Purchasing CardPurchasing Card

Check/Wire/ACH Check/Wire/ACH

Single-Use Accounts

Advanced Technology Drives Evolution of Payments

Existing Expanded

Market Background


Market Background

Payment Method

Current Volume % Respondents Changed over Past Two Years

% Respondents Expecting

Change over Next Two Years

Check 50% - 41% - 71%

EFT/ACH 32% + 58% + 77%

P-Card 9% + 27% + 38%

Wire Transfer 9% + 7% + 2%

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Source: Aberdeen Group, August 2011

Payment Methods – Past, Present and FuturePayment Types by Volume, Recent and Planned Changes


Electronic Payments Overview

Payment optimization is a framework for extracting permanent benefits from corporate accounts payable

and procurement functions.

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“Transforming the payment process has moved from a long-range goal to a short-term priority.” --Treasury executive

The Goal: Streamline business processes,

lower overall costs and contribute to incremental margin improvement



Top-down Cost-reduction Mandate

Difficulty of Working with Information in Paper Format

Difficulty Managing Cash

Risk of Fraud

Impact of Process Inefficiency

0% 10% 20% 30% 40% 50% 60%

Top Pressures that Drive AP Optimization

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Source: Aberdeen Group, May 2010



Percent of Respondents

Lack of integration between electronic payments and account systems

38%

Inability to send or receive automated remittance information with electronic payments

31%

Shortage of IT resources for implementation 27%

Difficult to convince suppliers to accept electronic payments 27%

Check system works well 26%

No executive sponsorship 20%

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Source: Aberdeen Group, May 2010

Top Challenges that Impede Payments Optimization


Payment Optimization Framework

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Electronic Card Payments Overview

Alternative to check or ACH

Unique, one-time use account number

Specific payment and dollar amount

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13 2012 Ceridian Corporation. All rights reserved.

Simplified Remittance for Supplier

• Convenient, easy to accept and process

• Detailed information delivered via mail or email

• Settlement instructions communicated

• Flexible network options• Access to Comdata

Business Network


Company AP Financial System

2. Response file

Vendor

5. Transaction data

3. Payment information

4. Authorize and settle

6. Matched reconciliation

Campaign Management

1. Payables disbursement file

Processing Network

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Electronic Card Process Overview


Case Study:

NYSE: CAB 2011 revenue $2.8B 34 retail stores

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Leading specialty retailer and the world’s largest direct marketer of hunting, fishing, camping and related outdoor merchandise


Case Study:

Process• Transition from check to

electronic payments• Leverage another payment

type to achieve savings• Contribute to incremental

margin improvement• Utilize a variety of tools

• Executive sponsorship• Employee orientation• Systems integration• Supplier strategy – direct and

indirect

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Overview> Virtual card payments for AP> Daily reconciliation> Suppliers enrolled> Implementation challenges> Payment improvements> $10M monthly program goal

Results: $1.3M Annually


Case Study:

Migrate to virtual card Reduce manual checks Reconcile daily Build supplier participation Contribute monthly revenue

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Average Cost Per Check $5.14

Number of Virtual Cards 19,400

Average Transaction Size $4,600

Transaction Volume $90,478,044

Rebate $1,266,692

Check Elimination Savings $99,716

Total Annual Return $1,366,408*Example only – rebate based upon billing and payment terms.


Value Proposition

Buyer’s Perspective/ Supplier’s Perspective

Moving to Electronic Payments• Check to card, ACH, wire• Payment terms (30, 45, 60, 90 days)• Discounts (payment incentive)• Remittance detail (information delivered)• Systems integration (information reconciled)

Considerations• Treasury management strategy• Supplier leverage• Value equation

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Overcoming Objections

• Listen to your suppliers • Discuss payment options• Leverage payment terms• Include in contract negotiation• Provide acquiring partners

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Supplier Considerations

• Value of accelerated cash flow• Card acceptance 1.5% to 3.0%• Discount offered 2% net 10-15

• Simplified process• AR reconciliation and internal

processes• Average receivable amount,

ticket size, DSO• Lower collection cost or bad

debt reduction• Pricing strategy

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Enrollment Best Practices

• Secure executive sponsorship• Communicate internally• Target 100% of vendors• Segment and profile vendor base• Be consistent with your message• Campaign continuously

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Organizational Commitment

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Moderate ~ to Full Engagement


Summary

• Focused efforts yield cost savings, margin improvement and streamlined processes

• Transition to electronic settlements and lower overall processing costs

• Maintain a balanced approach• Continuous improvement

requires effective change management

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Questions?

For more information, contact Bob Sneed at Comdata Corporation

p. [email protected]

www.comdata.com

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Creating the Merchant Value Proposition for Electronic Payments October 17, 2012.

Documents

Transcript of Creating the Merchant Value Proposition for Electronic Payments October 17, 2012.