CAPITALIZE ON YOUR PURCHASING CARD PROGRAM Agenda ...
9/12/2013
CAPITALIZE ON YOUR PURCHASING CARD September 20, 2013 PROGRAM
Agenda Why Use a Commercial Card? Review the benefits of a card solution
Travel Cards Automate expense reporting and gain visibility into spend
Purchasing Cards Streamline low dollar procurement solutions
Accounts Payable Cards Realize the value and ease of capturing larger transactions on a card
2
With a card payment you can: Maximize Rebate Dollars Extend Cash Flow and Days Payable Outstanding (DPO) Decrease Vendors Days Sales Outstanding (DSO) Reduce the Number of Checks Issued Improve Internal Operational Efficiencies Enhance Negotiating Positions with Vendors Maintain Control and Visibility into Company Spend
3
1
9/12/2013
What concerns do you have? Losing purchasing control and visibility Cooperation from cardholders Losing vendor history It won’t work with my system Too much work/Not worth the change Fraud Control
4
One Card Solution addresses all areas of spend
Transaction Size
Travel
Purchasing
Accounts Payable Supplier and transaction control
Project level budget control
Merchant Category control Account-level control Importance of Process
Increased importance of Control
Travel Cards
Purchasing Card
Accounts Payable Cards
Solution used for hotel, airline
and other business related travel and entertainment expenses
Solution used at the point of sale for smaller dollar transactions, typically less than $5,000
Solution used to pay large dollar invoices that have gone through the typical procurement process
5
Automate expense reporting and gain visibility into spend
TRAVEL CARDS
6
2
9/12/2013
Paper based T&E process is inefficient T&E spend is often employee funded or funded with cash advances
Spreadsheets are utilized for expense reporting
Creates a manual reconciliation and reimbursement process Labor intensive and time consuming
Manual processes provide no visibility into travel data
Difficult to monitor for policy exceptions
No insight into where travel dollars are spent
Difficult to negotiate vendor discounts
7
Automation brings efficiencies Travel Cards allow for automated expense reporting using smartdata.gen2 (smartdata) online expense reporting platform or a third party expense reporting system
Smartdata provides an economical option Account allocation, review and approval Upload receipts Capture out of pocket expenses Allows for non-card users Exception monitoring
Card data can be fed into third party expense reporting platforms Sophisticated approval routing Higher level of policy compliance monitoring
Companies that use card data to negotiate contracts with vendors receive deeper discounts than those don’t have card data to share* *Source: 2011 RPMG Travel Card Benchmarking Study
8
Travel Cards provide additional program benefits Chase and MasterCard also provide benefits to employees who use their corporate cards to secure travel
Travel Accident Insurance - $400,000
Lost Luggage Insurance - $1,250
Primary Rental Car loss damage waiver
Roadside assistance
Emergency Medical Coverage
9
3
9/12/2013
Streamline your low dollar procurement solutions
PURCHASING CARDS
10
The 80/20 Rule at its best ACH/EDI/Wires ACH/EDI for your top tier suppliers Wires transfers for immediate needs
AP Card solutions – Ghost Cards Accounts Payable Cards reduce check volume Checks continue to decline
Commercial Cards and Direct Deposit Purchasing Cards for low dollar procurement
and travel related spend Direct Deposit and Payroll Cards for payroll
11
Circle of efficiency Transactions post to smartdata Accounting information appended
Cards issued to designated employees
Receipts image attached
Pre-set spending limits Merchant controls
Key to savings
Accounting system integration
Single invoice for
all transactions Single auto-debit payment Single account upload file Rebates paid on spend
Transaction file import Automated posting and payment
12
4
9/12/2013
Efficiency drives cost savings The average cost of the traditional purchase order is $90.77*
The average cost of a card transaction is $17.24 resulting in an 80% cost savings
The average cycle time savings is 8.5 days over the traditional process
Employee
Employee
Manager
Purchasing
Receiving
Employee
Employee
Accounts Payable
Accounts Payable
Need to buy
Generate Generate PO PO or or requisition requisition
Approve Approve purchase purchase
Purchase Purchase goods goods
Receive goods
Receive goods
Receive Receive invoice invoice
Match per per Match purchase purchase
Pay per purchase
Shipping notice
PO PO or or requisition requisition information information * 2012 RPMG Purchasing Card Benchmark Survey
13
Three stages of program control
1 PROGRAM COMPLIANCE Establish and enforce
2 POINT-OF-SALE CONTROLS Spend Limits
policies and procedures
Single purchase limit Monthly spending limit
Cardholder agreement
Authorizations per day
Senior management
Transactions per cycle
support and visibility Mandate program Training and
communication
Merchant Category Code
restrictions
& 3 TRACKING MONITORING Daily access to online
reporting Monthly reconciliation Cardholder review
transactions Manager approves
transactions Audit “spot check”
Block cash access
Take advantage of
exception reporting
THE RESULT: A successful and secure program
14
Key to success: Smartdata online reporting Best Practices for online review and approval: Transaction review and approval by cardholders and
managers Receipt upload to avoid paper shuffling Accounting defaults simplify the review process Generate automated emails to remind cardholders and
managers they have transactions to review
Best Practices for program management: Create hierarchy structure to simplify reporting and transaction
approval Schedule reporting to simplify the administrative tasks Define user roles and access Maintain card limits and controls in real time Streamline posting process via general ledger upload
15
5
9/12/2013
Realize the value and ease of capturing larger transactions on a card
ACCOUNTS PAYABLE CARD
16
The Accounts Payable Solution Card accounts are issued to the Accounts Payable Department and are used to pay invoices in lieu of issuing checks Purchasing and approval processes remains intact Vendor is flagged in AP data base as a card paying vendor A/P Department already has processes in place to capture – Account allocation – Capital equipment accounting
Benefits of an Accounts Payable Card Reduce the number of checks issued Retain vendor history Increase DPO and decrease Vendor DSO
The financial incentive can turn Accounts Payable
into a profit center
17
A/P Card process works with all systems Your Company
1. The process for matching, entering and approving invoices in your company’s AP system remains intact – nothing changes
2. Process payments for card-accepting vendors
Payment Instructions
Your Supplier
3. Notify your supplier of approved payment
4. Supplier processes transaction on POS device and is paid within 48 hours
6. Transaction data extracted from smartdata for account reconciliation
5. Vendor transaction is posted and becomes available in smartdata
18
6
9/12/2013
Suppliers benefit from card payments Receives payment within 1-2 days from merchant processor Reduces credit approval costs Vendor receives payment directly from their merchant bank
Lowers billing and collection cost Decreases days sales outstanding (DSO) Reduces check handling costs Improves cash forecasting Eliminates risk of check delays
A vendor match will help identify cardaccepting vendors
19
A vendor match uncovers opportunity A vendor match is a quick and cost free service Identify which vendors accept card and what level of data they provide MCC codes for matched merchants should be provided Simply provide an Excel spreadsheet with basic vendor information Tips for a successful vendor match Provide 12 consecutive months worth of data Include: – Annual number of invoices – Annual spend – Payment type (ACH, check, wire)
20
Summary - Benefits of Commercial Card Classic Organizational Benefits
Cardholder Benefits
Vendor Benefits
Reduce paperwork and automate
Easier and faster procurement
Improves cash flow - get paid in 2
processes Consolidated payment saves time
and money Reduce number of one-time
suppliers in A/P database Faster payment results in
improved supplier relationships
Unsurpassed card acceptance Travel accident and lost luggage
insurance gives peace of mind Easy on-line reconciliation Emergency services and no-strand
policies protects travelers
days Lowers billing and payment
processing costs Eliminates collection activities Increased sales opportunities over
non-card accepting vendors Improvement in DSO (Days Sales
Electronic data provides visibility
Outstanding)
into spend
Easier cash forecasting
Real-time program management
and control Improved cash flow - take
advantage of float Easier cash forecasting
29
7
9/12/2013
QUESTION & ANSWER
22
Card payment can alleviate 1099 MISC reporting IRS regulations effective for the 2011 tax year shifted the burden for 1099 reporting on transactions paid by card to the acquirer
Acquiring entity is now responsible for reporting all card transactions to the
IRS You no longer have to marry card and check transactions to verify
payments at the $600 reporting threshold Your company still has to report transactions paid via check,
cash, ACH and wire
MasterCard’s whitepaper
outlines the legislation
8
CAPITALIZE ON YOUR PURCHASING CARD September 20, 2013 PROGRAM
Agenda Why Use a Commercial Card? Review the benefits of a card solution
Travel Cards Automate expense reporting and gain visibility into spend
Purchasing Cards Streamline low dollar procurement solutions
Accounts Payable Cards Realize the value and ease of capturing larger transactions on a card
2
With a card payment you can: Maximize Rebate Dollars Extend Cash Flow and Days Payable Outstanding (DPO) Decrease Vendors Days Sales Outstanding (DSO) Reduce the Number of Checks Issued Improve Internal Operational Efficiencies Enhance Negotiating Positions with Vendors Maintain Control and Visibility into Company Spend
3
1
9/12/2013
What concerns do you have? Losing purchasing control and visibility Cooperation from cardholders Losing vendor history It won’t work with my system Too much work/Not worth the change Fraud Control
4
One Card Solution addresses all areas of spend
Transaction Size
Travel
Purchasing
Accounts Payable Supplier and transaction control
Project level budget control
Merchant Category control Account-level control Importance of Process
Increased importance of Control
Travel Cards
Purchasing Card
Accounts Payable Cards
Solution used for hotel, airline
and other business related travel and entertainment expenses
Solution used at the point of sale for smaller dollar transactions, typically less than $5,000
Solution used to pay large dollar invoices that have gone through the typical procurement process
5
Automate expense reporting and gain visibility into spend
TRAVEL CARDS
6
2
9/12/2013
Paper based T&E process is inefficient T&E spend is often employee funded or funded with cash advances
Spreadsheets are utilized for expense reporting
Creates a manual reconciliation and reimbursement process Labor intensive and time consuming
Manual processes provide no visibility into travel data
Difficult to monitor for policy exceptions
No insight into where travel dollars are spent
Difficult to negotiate vendor discounts
7
Automation brings efficiencies Travel Cards allow for automated expense reporting using smartdata.gen2 (smartdata) online expense reporting platform or a third party expense reporting system
Smartdata provides an economical option Account allocation, review and approval Upload receipts Capture out of pocket expenses Allows for non-card users Exception monitoring
Card data can be fed into third party expense reporting platforms Sophisticated approval routing Higher level of policy compliance monitoring
Companies that use card data to negotiate contracts with vendors receive deeper discounts than those don’t have card data to share* *Source: 2011 RPMG Travel Card Benchmarking Study
8
Travel Cards provide additional program benefits Chase and MasterCard also provide benefits to employees who use their corporate cards to secure travel
Travel Accident Insurance - $400,000
Lost Luggage Insurance - $1,250
Primary Rental Car loss damage waiver
Roadside assistance
Emergency Medical Coverage
9
3
9/12/2013
Streamline your low dollar procurement solutions
PURCHASING CARDS
10
The 80/20 Rule at its best ACH/EDI/Wires ACH/EDI for your top tier suppliers Wires transfers for immediate needs
AP Card solutions – Ghost Cards Accounts Payable Cards reduce check volume Checks continue to decline
Commercial Cards and Direct Deposit Purchasing Cards for low dollar procurement
and travel related spend Direct Deposit and Payroll Cards for payroll
11
Circle of efficiency Transactions post to smartdata Accounting information appended
Cards issued to designated employees
Receipts image attached
Pre-set spending limits Merchant controls
Key to savings
Accounting system integration
Single invoice for
all transactions Single auto-debit payment Single account upload file Rebates paid on spend
Transaction file import Automated posting and payment
12
4
9/12/2013
Efficiency drives cost savings The average cost of the traditional purchase order is $90.77*
The average cost of a card transaction is $17.24 resulting in an 80% cost savings
The average cycle time savings is 8.5 days over the traditional process
Employee
Employee
Manager
Purchasing
Receiving
Employee
Employee
Accounts Payable
Accounts Payable
Need to buy
Generate Generate PO PO or or requisition requisition
Approve Approve purchase purchase
Purchase Purchase goods goods
Receive goods
Receive goods
Receive Receive invoice invoice
Match per per Match purchase purchase
Pay per purchase
Shipping notice
PO PO or or requisition requisition information information * 2012 RPMG Purchasing Card Benchmark Survey
13
Three stages of program control
1 PROGRAM COMPLIANCE Establish and enforce
2 POINT-OF-SALE CONTROLS Spend Limits
policies and procedures
Single purchase limit Monthly spending limit
Cardholder agreement
Authorizations per day
Senior management
Transactions per cycle
support and visibility Mandate program Training and
communication
Merchant Category Code
restrictions
& 3 TRACKING MONITORING Daily access to online
reporting Monthly reconciliation Cardholder review
transactions Manager approves
transactions Audit “spot check”
Block cash access
Take advantage of
exception reporting
THE RESULT: A successful and secure program
14
Key to success: Smartdata online reporting Best Practices for online review and approval: Transaction review and approval by cardholders and
managers Receipt upload to avoid paper shuffling Accounting defaults simplify the review process Generate automated emails to remind cardholders and
managers they have transactions to review
Best Practices for program management: Create hierarchy structure to simplify reporting and transaction
approval Schedule reporting to simplify the administrative tasks Define user roles and access Maintain card limits and controls in real time Streamline posting process via general ledger upload
15
5
9/12/2013
Realize the value and ease of capturing larger transactions on a card
ACCOUNTS PAYABLE CARD
16
The Accounts Payable Solution Card accounts are issued to the Accounts Payable Department and are used to pay invoices in lieu of issuing checks Purchasing and approval processes remains intact Vendor is flagged in AP data base as a card paying vendor A/P Department already has processes in place to capture – Account allocation – Capital equipment accounting
Benefits of an Accounts Payable Card Reduce the number of checks issued Retain vendor history Increase DPO and decrease Vendor DSO
The financial incentive can turn Accounts Payable
into a profit center
17
A/P Card process works with all systems Your Company
1. The process for matching, entering and approving invoices in your company’s AP system remains intact – nothing changes
2. Process payments for card-accepting vendors
Payment Instructions
Your Supplier
3. Notify your supplier of approved payment
4. Supplier processes transaction on POS device and is paid within 48 hours
6. Transaction data extracted from smartdata for account reconciliation
5. Vendor transaction is posted and becomes available in smartdata
18
6
9/12/2013
Suppliers benefit from card payments Receives payment within 1-2 days from merchant processor Reduces credit approval costs Vendor receives payment directly from their merchant bank
Lowers billing and collection cost Decreases days sales outstanding (DSO) Reduces check handling costs Improves cash forecasting Eliminates risk of check delays
A vendor match will help identify cardaccepting vendors
19
A vendor match uncovers opportunity A vendor match is a quick and cost free service Identify which vendors accept card and what level of data they provide MCC codes for matched merchants should be provided Simply provide an Excel spreadsheet with basic vendor information Tips for a successful vendor match Provide 12 consecutive months worth of data Include: – Annual number of invoices – Annual spend – Payment type (ACH, check, wire)
20
Summary - Benefits of Commercial Card Classic Organizational Benefits
Cardholder Benefits
Vendor Benefits
Reduce paperwork and automate
Easier and faster procurement
Improves cash flow - get paid in 2
processes Consolidated payment saves time
and money Reduce number of one-time
suppliers in A/P database Faster payment results in
improved supplier relationships
Unsurpassed card acceptance Travel accident and lost luggage
insurance gives peace of mind Easy on-line reconciliation Emergency services and no-strand
policies protects travelers
days Lowers billing and payment
processing costs Eliminates collection activities Increased sales opportunities over
non-card accepting vendors Improvement in DSO (Days Sales
Electronic data provides visibility
Outstanding)
into spend
Easier cash forecasting
Real-time program management
and control Improved cash flow - take
advantage of float Easier cash forecasting
29
7
9/12/2013
QUESTION & ANSWER
22
Card payment can alleviate 1099 MISC reporting IRS regulations effective for the 2011 tax year shifted the burden for 1099 reporting on transactions paid by card to the acquirer
Acquiring entity is now responsible for reporting all card transactions to the
IRS You no longer have to marry card and check transactions to verify
payments at the $600 reporting threshold Your company still has to report transactions paid via check,
cash, ACH and wire
MasterCard’s whitepaper
outlines the legislation
8
