getting your suppliers to accept electronic payments
TRANSCRIPT
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Getting Your Suppliers to Accept Electronic Payments
Joyce Olson
Finance Manager – Disbursements, The Valspar Corporation
Mary Hughes
Sr. Payments Information Consultant, Federal Reserve Bank of Minneapolis
31st Annual MNAFP Conference April 23, 2013
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Agenda
Introductions
B2B Payments Today
Valspar’s E-Payments Initiative: A Case Study —Successful Tactics to Get Suppliers to Give Up Checks
—Lessons Learned from Valspar’s E-Payment Initiative
Tips to Get You Started on Cutting Costs Instead of Checks
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Who We Are Joyce Olson Finance Manager - Disbursements The Valspar Corporation Minneapolis, MN • 25+ years of experience in financial
analysis & management
• Strength in the development & implementation of payments strategies
• Responsible for:
—Accounts Payable
—Payroll
—Business Expense (T&E)
About the Valspar Corporation
• Global leader in the paint & coatings industry. Since 1806, Valspar has been dedicated to bringing customers the latest innovations, the finest quality & the best customer service in the coating industry.
• For more information, please visit: www.valsparglobal.com
Accounts Payable Mission: To provide timely & accurate expenditure processing of company funds, while maintain an exceptional level of customer service. We are dedicated to continued growth, identifying increasingly efficient ways to achieve our mission, while making a positive contribution to Valspar’s bottom line.
3 ©2013 Federal Reserve Bank of Minneapolis. Materials are not to be used without consent.
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Who We Are Mary Hughes Senior Payments Information Consultant Federal Reserve Bank of Minneapolis Minneapolis, MN Payments Information & Outreach Office
25+ years experience in financial services & payments
Active in the Remittance Coalition
Federal Reserve representative to the EMV Migration Forum & various ANSI X9 subcommittees
Supports national & district outreach on payments issues
Federal Reserve System
• Establishes & executes U.S. monetary policy
• Promotes a stable financial system
• Supervises & regulates financial institutions (FIs)
• Provides financial services to FIs & U.S. government
Mission in payments: To foster the integrity, efficiency & accessibility of U.S. payments & settlement systems in support of financial stability & economic growth
©2013 Federal Reserve Bank of Minneapolis. Materials are not to be used without consent. 4
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Business to Business (B2B) Payments Today
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Changes to Fed’s Infrastructure
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From 45 check
processing sites to 1
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B2B Payments Are Mainly Made by Check
Mainly ACH, 26%
Mainly card, 3%
Other, 3% Don't know, 8%
Primary Method for Making B2B Payments
N=654
Source: 2012 Remittance Coalition Survey
All or mainly check, 60%
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% of All Transactions, by Payment Type
Check, 64.6%
ACH, 20.4%
Wire, 8.1%
Cards, 6.6% Other, 0.3%
% of Payment Transactions Made by Corporations, by Payment Type
©2013 Federal Reserve Bank of Minneapolis. Materials are not to be used without consent.
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Source: 2013 Phoenix-Hecht Treasury Management Monitor
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Checks Are Primary Method for All Organization Sizes
5%
2%
2%
14%
23%
38%
79%
70%
56%
0% 50% 100%
Small <$50M(N=132)
Medium $50-500M(N=159)
Large >$500M(N=297)
Primary Method for Making Payments
6%
1%
2%
17%
19%
28%
73%
71%
62%
0% 50% 100%
Primary Method for Receiving Payments
All orMainlyCheck
MainlyACH
MainlyCard
©2012 Federal Reserve Bank of Minneapolis. Materials are not to be used without consent. 9
Source: 2012 Remittance Coalition Survey
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Dominant Fraud Type Experienced by Businesses? Checks!
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8%
11%
27%
29%
87%
7%
5%
9%
10%
69%
ACH credits
Wire Transfers
ACH debits
Corporate Cards
Checks
% of Organizations Subject to Payments Fraud in 2012
% Greatest Losses
% Attempts or Actual
Source: 2013 AFP Payments Fraud & Control Survey, Association for Financial Professionals, March 2013
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Benefits of B2B Electronic Payments Adoption
% of Organizations Rating this Benefit in Top Three All Respondents
Cost savings 52%
Improved cash forecasting 40
Fraud control 37
More efficient reconciliation 32
Working capital improvement 28
Straight through processing to A/P or A/R 24
Better supplier/customer relations 24
Reduction in days sales outstanding 22
Ability to take early payment discounts 18
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Source: 2010 AFP Payments Survey
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Main Barriers to Sending & Receiving More B2B E-Payments
20%
20%
22%
33%
38%
44%
63%
Electronic payments cost more
Using more e-payments is not apriority for senior management
It is difficult to verify e-payment is receivedby the correct account owner
Customers/suppliers cannot accept/receiveelectronic remittance information
Insufficient internal IT resources
Our back office systems do not integrate easilywith electronic payments
It is difficult to convince our customers &/orsuppliers to send/receive payments electronically
N=609
Source: 2012 Remittance Coalition Survey
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Businesses Want More E-Payments & E-Remittances
3%
7%
44%
46%
Other/Don'tknow
Low
Moderate
High
5%
9%
36%
50%
N=646
Interest in Making & Receiving More E-Payments
N=635
Interest in Automating Exchange & Reconciliation of
More E-Remittance Data N=646
N=635
Source: 2012 Remittance Coalition Survey
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Trend: Increased Use of E-Payments
78%
48%
31%
6%
21%
51%
59%
26%
1% 1%
10%
68%
ACH P-Cards Wires Checks
Change in Use, by Payment Type
Increased
Stayed the Same
Decreased
©2013 Federal Reserve Bank of Minneapolis. Materials are not to be used without consent.
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Source: 2012 PayStream Advisors Electronic Supplier Payments – Pushing Forward with Buyer Initiated Payments
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Top Factors Driving Electronic Payments Usage
0% 10% 20% 30% 40% 50% 60%
Better fraud protection ability
Convenience/ease of use
Better/complete remittance info.
Better working capital mgmt.
Supplier acceptance
Ease of integration with AP system
Better data security
Less costly
ACH
P-Card
Wire
©2013 Federal Reserve Bank of Minneapolis. Materials are not to be used without consent.
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Source: 2012 PayStream Advisors Electronic Supplier Payments – Pushing Forward with Buyer Initiated Payments
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Provide Leadership
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Valspar’s E-Payments Initiative: A Case Study
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How many times per week do you process outgoing payments? Are you printing checks in-house?
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Valspar’s Accounts Payable Goals
1. Pay all bills in a timely manner, but no sooner than required
2. Work closely with Purchasing to ensure contract terms & policies are met
3. Maintain excellent relationships with suppliers
4. Understand suppliers’ importance to Valspar’s businesses; identify specific supplier groups & work with them to accept electronic payments
5. Meet Treasury goals for A/P
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Successful Tactics of Valspar
Conducted segmentation study of our suppliers Direct vs. indirect taxonomy Value/importance to our core businesses % of spend Replacement options Goal: identify best candidates for e-payments
Analyzed the costs of checks vs. electronic alternatives and the benefits of switching
Prepared supporting evidence to convince unwilling suppliers
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Overcoming Objections Objection of Supplier Your Response
“I don’t want to pay an interchange fee on a credit card payment.”
“Our card option comes with a more favorable payment term but ACH at our standard term is also available.”
“What about remittance details? How can I reconcile the P-card payment?”
“We will send you detailed remittance information via email.”
“I don’t want to give you my bank account information.”
“The fraud risk with a check payment is far greater than any ACH payment."
“My system is set up to accept checks.”
“Electronic payments are faster and more predictable – by far.” “E-payments are safer than checks. Check fraud is rampant.” “Consider the environmental impact: reduce paper and go green.”
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Valspar’s Approach to Reducing Checks
Sent letters to suppliers explaining favorable alternatives to checks: e.g., greater reliability, security, cost-effectiveness, etc.
Continue to slow the check payment process — Outsourced check printing & process checks only
once per week
Made e-payments an attractive alternative to checks
Staggered terms initiative
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Offer Incentives
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How many organizations have accounts payable processing done in multiple locations? Of you, how many of these A/P locations are on different systems?
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Lessons Learned from Valspar’s E-Payments Initiative
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Why Valspar Was Successful
Centralized A/P for North America
One processing system
Senior management buy-in to e-payment initiative
Empowered, educated A/P staff
Convinced suppliers of e-payment benefits
Thoughtful rollout to specific supplier groups
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Lessons Learned: What Not to Do
Don’t assume suppliers & you speak the same payment terminology. Explain what you are proposing & confirm understanding.
Don’t expect overnight results
Don’t expect to completely eliminate checks
Don’t assume 100% cooperation
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Lessons Learned
Know your suppliers
Be flexible
Ask more than once: it may take several appeals to effect the switch to e-payments
Understand that the trading partner relationship is fluid
Be transparent about your A/P goals
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Tips to Get You Started on Cutting Costs Instead of Checks
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Tips to Get Started
Segment your suppliers & identify those most advantageous to move away from checks
Understand your costs to process checks
Determine best e-payment alternatives
Obtain senior management buy-in to concept
Work with your financial institution(s) to craft solutions that are best for your organization
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Work in Harmony
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QUESTIONS?
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Contact Information
Joyce Olson
Finance Manager - Disbursements
The Valspar Corporation
www.valsparglobal.com
©2013 Federal Reserve Bank of Minneapolis. Materials are not to be used without consent. 33
Mary Hughes
Senior Payments Information Consultant
Federal Reserve Bank of Minneapolis
www.frbservices.org
www.minneapolisfed.org