© 2011 financial operations networks llc the power of e-payments! harness it now! david w. hay...
TRANSCRIPT
© 2011 Financial Operations Networks LLC
The Power of e-Payments! Harness It Now!
David W. HayFinancial Operations Networks
Tuesday, April 12, 2011
www.TheAPNetwork.com Page 2
THE ACCOUNTS PAYABLE
Leadership ConferenceA Word About Checks
• Checks have their roots in the bill of exchange which has been in use for centuries
• The earliest checks were issued in the U.K. in the early 1700s
www.TheAPNetwork.com Page 3
THE ACCOUNTS PAYABLE
Leadership ConferenceChecks
• However, it is almost time to say “RIP” to checks – at least in the U.K.
• The U.K. plans to phase out personal checks by Oct. 31, 2018
• The U.S. still has a long way to go; with a GDP 6.5 times larger than the U.K., the U.S. issues 28 times as many checks
www.TheAPNetwork.com Page 4
THE ACCOUNTS PAYABLE
Leadership Conference
U.S. estimate for 2009is 17.9 billion
www.TheAPNetwork.com Page 5
THE ACCOUNTS PAYABLE
Leadership Conferencee-Payments
Key reasons for switching to e-payments:• Discount recovery
— Ability to offer dynamic discounting
• Cost— As check volume declines, unit processing costs rise
• Fraud prevention—Millions of paper checks are “intercepted” each year
www.TheAPNetwork.com Page 6
THE ACCOUNTS PAYABLE
Leadership Conference
• e-payments include:― Credit and debit cards― Portal systems such as PayPal and CheckFree― ACH payments― Wire payments― Cross-border payments― And soon your phone, iPad, etc.
e-Payments (Cont’d.)
www.TheAPNetwork.com Page 9
THE ACCOUNTS PAYABLE
Leadership ConferenceP-Cards
Card providers are beginning to offer new and effective
payment methods
www.TheAPNetwork.com Page 10
THE ACCOUNTS PAYABLE
Leadership ConferenceCard Types
• Procurement card―Can be physical or ghost card
• T&E cards―Used for travel – usually physical
• Fleet cards―Used specifically for fleet management
• One card―Combines the functions of a procurement and a
travel card
www.TheAPNetwork.com Page 11
THE ACCOUNTS PAYABLE
Leadership ConferenceBasic Card Information from Merchants• Level 1
― Similar to personal card, • Date, supplier and total amount
• Level 2― Includes level 1 data plus
• Sales tax• Variable data field that includes an order number and employee name
• Level 3 – line item detail― Includes level 1 and 2 data plus
• Product number• Quantity• Unit of measure• Product description• Price
www.TheAPNetwork.com Page 12
THE ACCOUNTS PAYABLE
Leadership ConferenceProcurement Card • Benefits
― Introduced in the early 1990s as a feature to reduce the amount of low-value invoices
― Many companies report that the average savings using a p-card is in excess of 50% per transaction
• Card-issuing banks charge vendors a per transaction fee on card purchases averaging 2%–2.5%
• Issues― Cultural change is an important factor in successfully
implementing a p-card program― Most companies do not allow use of a p-card to purchase
hazardous materials, capital equipment or for personal charges― Suppliers need to have an agreement with a merchant
service company
www.TheAPNetwork.com Page 13
THE ACCOUNTS PAYABLE
Leadership ConferenceGhost Card or AP Card• A ghost card is a single card that can be used by
multiple users
• The number is given to a single supplier, or multiple suppliers with similar NAICS codes
• The requestors do not know the account number, reducing the chance of fraud and misuse
• No physical card exists
• Monitoring and control resides with the department responsible for the account
www.TheAPNetwork.com Page 14
THE ACCOUNTS PAYABLE
Leadership ConferenceP-Card as aPayment Method
The merchant charges the p-card for the transaction and then creates and mails an invoice marked as paid• Benefits
— Payment cost reduced— Reduced chance of check fraud— Level 2 and 3 data not required
• However!— Care must be taken that the invoice is not paid twice— Invoice must contain CC or Credit Card in the “Terms” box on
the invoice— May still require merchant service provider
www.TheAPNetwork.com Page 16
THE ACCOUNTS PAYABLE
Leadership ConferenceBuyer InitiatedPayments (BIP)New offering from credit card issuers completely reverses the normal card transaction flow• In a normal card transaction, the card holder
presents his card to the supplier who initiates the payment process as soon as the card is “swiped”
• With BIP, the buyer initiates the payment which is electronically remitted to the supplier
• Supplier does not need a point of sale terminal
www.TheAPNetwork.com Page 17
THE ACCOUNTS PAYABLE
Leadership Conference
• Benefits― Supplier receives payment usually within 48 hours from invoice approval― Buyer benefits from float― Rebate potential for the buyer― Lower cost than a check― No card number is given to the supplier for the ultimate in security― Buyer can use one provider for traditional p-card, e-payments and
payables financing― Normal invoice approval process still applies― Benefit from online payment status and reporting portal― Complete remittance data is passed to supplier― Most providers help or completely conduct vendor enrollment― Some providers offer selective acceptance so a supplier is not forced
to accept this form of payment from all of their buyers
Buyer InitiatedPayments (BIP) (Cont’d.)
www.TheAPNetwork.com Page 18
THE ACCOUNTS PAYABLE
Leadership ConferenceACH Payment Documents• CCD+
―Cash Concentration and Disbursements plus Addenda Entry• Commonly used for business transactions• Has an 80-character addenda record
• CTX―Corporate Trade Exchange
• Contains complete RA details
• PPD―Prearranged Payment or Deposit
• Primary consumer-to-business transaction
www.TheAPNetwork.com Page 21
THE ACCOUNTS PAYABLE
Leadership ConferenceEDI
• EDI systems can be used to send both remittance data to the supplier and the payment instructions to the bank
• Can handle all types of payment transactions including check, ACH, SWIFT, wire, etc.
• Key document used is the ANSI 820 which can act as both the Remittance Advice and the Payment Instruction
www.TheAPNetwork.com Page 22
THE ACCOUNTS PAYABLE
Leadership ConferenceInternet
• Banks― Banks offer Internet services on their own platforms or
through a service provider such as CheckFree
• Service providers― Such as Xign (now owned by JPMorgan Chase)― Trade card― EDI vans (for EDI payments)
www.TheAPNetwork.com Page 23
THE ACCOUNTS PAYABLE
Leadership ConferenceInternational Payments• Wire
― Similar to domestic wire• Higher priced, except if transmitted through CHIPS
• ACH― As of Sept. 2009, all International ACH transactions must be
in the form of an IAT
• SWIFT― Service used by banks to remit payments cross-border
• Letter of Credit― Transaction guaranteed by banks, used for trade transactions
• OFAC― Office of Foreign Asset Control. All transactions must be
checked against OFAC SDN list
www.TheAPNetwork.com Page 25
THE ACCOUNTS PAYABLE
Leadership ConferenceIs My Transaction an IAT?
Payment transaction? IAT
Yes Yes Yes
MessageDomestic
ACHForeign/
Proprietary
No No No
Instruction + settlement
Location of originator & receiver not
relevant
At any point
Not an IAT
Still subject to OFAC
rules!
Financial agencyoutside U.S.?
U.S. ACHnetwork?
www.TheAPNetwork.com Page 26
THE ACCOUNTS PAYABLE
Leadership ConferenceEuropean Payments
• All payments going to—or crossing borders within—Europe must contain the International Bank Account Number (IBAN)
• IBAN is up to 28 digits plus a 2-digit country code― For example, a U.K. IBAN would look like this when printed: GB99 RBOS 1234 5612 3456 78― IBAN consists of country code and check digits, bank name
sort, or routing code and account number. A currency code can be added after the IBAN i.e. (USD)
www.TheAPNetwork.com Page 27
THE ACCOUNTS PAYABLE
Leadership Conference
27
GLOBALCUSTOMER
Global GatewayBank Architecture
LOCAL CLEARING
Branch
LOCAL CLEARING
Branch
LOCAL CLEARING
Partner Bank A
LOCAL CLEARING
Partner Bank Z
LOCAL CLEARING
Branch
LOCAL CLEARING
Branch
LOCALREGIONAL
EMEA
NA Hub
ASPAC Hub
LATAM Hub
GlobalGatewayHub
GlobalGateway File
GlobalGateway WEB
www.TheAPNetwork.com Page 28
THE ACCOUNTS PAYABLE
Leadership ConferenceU.S. E-Payment Providers
• The ACH is the backbone of all low value payments in the U.S. Go to www.nacha.org for details
• Credit card providers
• Non-bank entities such as the EDI vans and Web players offer solutions for the very smallest businesses to the largest
• Banks – increasing the range of their services through their own systems, or by partnering or purchasing non-bank providers
www.TheAPNetwork.com Page 29
THE ACCOUNTS PAYABLE
Leadership ConferenceWeb Players (Sample List)
• Probably the best known is PayPal owned by eBay. There is an “App for That”
• CheckFree: used by many billers in the B2C and smaller B2Bs
• Fresh Books: Web-based solution targeted at small business, uses PayPal or credit card for payment
• Vendoran: a trading partner network that facilitates the move from paper to electronic B2B payments.
www.TheAPNetwork.com Page 30
THE ACCOUNTS PAYABLE
Leadership ConferenceBanks
Most large banks offer services ranging from standard ACH payments to a complete order-to-pay service. These include:• JPMorgan Chase – purchased Xign and can offer full
order-to-pay
• Citi – partnered with Ariba for procure-to-pay
• U.S. Bank through their PowerTrack division – full P2P
• Bank of America
www.TheAPNetwork.com Page 31
THE ACCOUNTS PAYABLE
Leadership Conference
Directly Supports Our Clients’ Goals for Achieving Electronic Payment Transformation:
Comprehensive Payables
Paymode-X for Reimbursement Convert costly paper expense
reimbursements to electronic payments E-mail notification of expense payment and
expense report details
The Payment Network®
Global high-value (Wires) and low-value (ACH) payments
Bulk FX payment and draft processing Additional file upload and vendor remittance
delivery options
e-Payables AP payments using the p-card network No implementation or per transaction fees Incentive cash payouts based on spend Increase float when compared to other
payment types, allowing for improved cash flow
Paymode-X®
AP payments leveraging a proven ACH vendor network
Increase processing efficiency and reduce payment processing costs
Ability to include multiple payment types including card, ACH, checks and wires in a flexible single file, turn-key solution
PayMode e-Invoicing Enable the receipt, routing, approval and/or
dispute of electronic invoices Lower administrative costs and provide greater
visibility into your procure-to-pay process
Paymentsto Suppliers/
Vendors
Client Access — Transaction & Information ServicesComprehensive Payables’ Web-based tools allow for real-time management of payment and remittance data
CashPro® Online Works®
Paymode-X
Bank, Sample Offering (B of A)
Source: Bank of America
www.TheAPNetwork.com Page 32
THE ACCOUNTS PAYABLE
Leadership Conference
Easy-to-implement and cost-effective – Designed to reduce the administrative and IT effort typically required to start an e-Payments program
Fully integrated end-to-end payment process – Uses your preferred format Single point of origination – Send instructions for all payment types in one file: card, ACH, wire
and check printing and distribution Accelerates enrollment program – Multiphase campaign enrolls your vendors Consultative services – Adds value to both the payer and receiver by going deeper into the
supply chain Expense savings – reduces per check costs and increases card rebate potential Enhances reporting – Includes supplier-friendly remittance and online access
Easily migrate from paper to electronic payments:
Bank, Sample Offering (B of A) (Cont’d.)
Source: Bank of America
www.TheAPNetwork.com Page 33
THE ACCOUNTS PAYABLE
Leadership ConferenceTrends in Payment Options
• Banks and p-card providers merging traditional payments with card options
• Payables financing offerings are replacing factoring
• P-card use extending to non-traditional purchases by state and local government