the 5-step plan for building a business case for payments ... · business case for payments...

May 19-21, 2019 | Walt Disney World Resort®, FL

The 5-Step Plan for Building a

Business Case for Payments Automation

Jim ScottACOM Solutions

Mark BrousseauBrousseau & Associates

May 19-21, 2019 | Walt Disney World® Resort, FL

Today’s Speakers

Mark BrousseauBrousseau & Associates

Jim ScottACOM Solutions

Jim is SVP of ACOM Solutions, a leading FINTECH B2B payment solution innovator. A 25 year financial industry veteran, Jim is a frequent contributor in payment industry conferences and venues.

Mark Brousseau is a noted analyst, speaker, writer and marketer, with more than 26 years of experience in advising leading providers of financial operations solutions and services.

The situation

The 5-Step Plan for Building a Business Case for Payments Automation


How Businesses Pay Suppliers

39%

30%

6%

11% 9%

5%

Paper check ACH Virtual card P-card Wire transfer Other

What % of payments do you make via the following methods?

Source: Institute of Finance and Management


Why Organizations Still Use Checks

• Familiarity

• No technology required

• Easy delivery of remittance data

• Perceived control

• “Everyone accepts checks”

• Float while check is in mail


The Tide is Turning Against Checks

18%

38%

16%

12%9%

7%


How do you expect you will pay suppliers 3 years from now?



The Tide is Turning Against Checks

18%

38%

16%

12%9%

7%


How do you expect you will pay suppliers 3 years from now?

70% of AP departments currently have a strategy to increase their percentage of electronic payments.



Why Automate Supplier Payments?

48%of AP departments identify reduced operational costs as the biggest benefit of

electronic payments.

24%of AP departments cite faster cycle times as the biggest benefit of paying suppliers electronically.

6%of AP departments identify fewer errors and less fraud

as the biggest benefit of electronic payments.



Complete the ‘Last Mile’


AP Will Become More Strategic

9.52%

42.86%

25.17%

21.77%

0.68%

Significantly higher strategic importance

Slightly higher strategic importance

Unchanged (we are of high strategic importance)

Unchanged (we are of low strategic importance)

Slightly lower strategic importance

How will your AP department’s strategic importance change?



Biggest Electronic Payments Barriers

25%

of AP departments identify a lack of accounts payable

department resources as their biggest barrier to increasing electronic payments adoption.

20%of AP departments

identify concerns about supplier adoption as

their biggest barrier to electronic payments.

8%of AP departments

identify a lack of senior management support.

7%have no strategy.



5 Steps to Building a Business Case

Low-hanging fruit

Reduced costs

Extended DPO

Early payment discounts

Cash-back rebates

Step 1: low-hanging fruit



Comprehensive Spend Analysis

• Current relationship

• Current payment type

• Current payment terms

• Early payment requests

• Payments methods accepted

• Number of transactions

• Average transaction amount


Supplier Onboarding

• Comprehensive outreach & communications strategy

• Project objectives & goals

• Rules of engagement

• Critical action items

• Milestones

• Clear timeline


STEP 2: REDUCED COSTS



Paper Checks Waste Staff Time

Manual processes, 84%

Value-added activities, 16%

How the typical AP practitioner spends

their time.



Paper Checks Cost 30X as Much

• Printing, signing and mailing paper checks

• High bank fees

• Replacing lost checks

• Responding to supplier payment inquiries

• Manually reconciling payments/invoices

• Adding temporary staff as volume increases

• Fraud losses


Percentage of Duplicate Payments

PEER GROUP LESS THAN 1%

Limited Automation 61%

Moderate Automation 60%

Significant Automation 66%



Use a Single Payment File

Intelligent Payment Hub

Electronic PaymentConversion

Payment

Check Printing& Delivery

Global Payments

Credit Card Processing

ACH Bank Payments

File

APAutomation

Step 3: Extended



Senior Execs Care About DPO

13%

37%

28%

18%

30%

30%

13%

11%

26%

37%

33%

29%

9%

15%

None

Days Payables Outstanding

Percentage of invoices paid to terms

Value of early-payment discounts offered

Percentage of early-payment discounts captured

Percentage of supplier payments made electronically

Percentage of duplicate supplier payments

Number of suppliers in our vendor master database

Number or percent of touchless transactions

Cost savings and cost avoidance

Cost per invoice processed

Value of annual card rebates/rewards

Annual fraud losses

Accruals

Which metrics are most important to senior management?



When Suppliers are Paid

0 - 10 days13% 11 - 29 days

8%

30 days 55%

31 - 45 days14%

46 - 60 days6%

Over 60 days4%



Most Businesses Don’t Track DPO

30%

70%

Does your organization currently track DPO?

Average DPO is 30 days among organizations that track the metric.



Senior Execs are Championing Accounts Payable Automation

28%26%

33%

1% 2%3%

8%

CFO Controller Accountspayable

Procurement Treasury IT Someone else

Who will champion your AP department’s automation initiatives?



STEP 4: EARLY PAYMENT DISCOUNTS



80% of Suppliers Offer Early Payment Discounts

The Opportunity

0 DaysInvoice

15 DaysApprove

60 DaysDue Date



Percentage of Invoices w/ Discounts

None20%

1% - 5%46%

6% - 10%19%

11% - 15%6%

16% - 25%3%

Over 25%6%



Early Payment Discounts Captured

PEER GROUP% OF EARLY PAYMENT

DISCOUNTS CAPTURED

Limited Automation 52.9%

Moderate Automation 58.5%

Significant Automation 74.2%



Invoices Paid On-Time

46% 46%

53%

37% 35%

55%

Limited Automation Moderate Automation Significant Automation

SHARE WHO PAY > 90% OF THEIR INVOICES ON TIME

PO Non-PO



STEP 5: CASH-BACK REBATES



Leveraging Rates and Terms

• Extending DPO with unsecured, low-cost credit

• Balance sheet: trade payable financing (not debt)

• Better supplier acceptance

• Suppliers take advantage of buyer credit rates

• Rebate revenue, working capital or a combination

How Credit WorksBuy/Sell Transaction

Reduce DSOAR Balance

Increase DPOAP Balance

+ Bank Balance - Bank Balance +

Supplier wants to get paid earlier Buyer wants to pay later

Cash

How Credit WorksBuy/Sell Transaction

Reduce DSOAR Balance

Increase DPOAP Balance

+ Bank Balance - Bank Balance +

Supplier wants to get paid earlier Buyer wants to pay later

Cash

Virtual Credit Cards Supply Chain Financing

CashCash

Supplier Paid Earlier Buyer Pays Later

Credit


Supplier Payments

# of Suppliers

Payment Size $


Supplier Payments

# of Suppliers

Payment Size $

# of Transactions


Supplier Payments

# of Suppliers

Payment Size $

Virtual Cards

# of Transactions


Supplier Payments

# of Suppliers

Payment Size $

Virtual Cards

# of Transactions

ACH (Checks)


Supplier Payments

# of Suppliers

Payment Size $

Virtual Cards

# of Transactions

FlexPay


$50 Million AP Spend Example

Current Environment

Virtual Card CreditTrade Payables

CreditTotal

Customer Rebate $50,000 0 $50,000

Working Capital $416,000 $1,388,000 $1,804,000


$500 Million AP Spend Example

Current Environment

Virtual Card CreditTrade Payables

CreditTotal

Customer Rebate 500,000 0 $625,000

Working Capital 4,166,000 $13,888,000 $18,054,000


WRAP-UP



How to Sell CFOs on Automation

Show how improvements will

increase efficiencies, how and the overall

effectiveness

Include the cost savings, new discounts

captured and rebate opportunities

Detail the comparative return on investment+


Thank You!

Jim ScottACOM [email protected]

Mark BrousseauBrousseau & [email protected]@markbrousseau

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