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Turning AP into a Revenue Generator<br />
Benefits of automated, card-based payments<br />
June 20, 2013
Speakers<br />
Robert O’Conner, Senior Global Treasury Advisor,<br />
<strong>Silicon</strong> <strong>Valley</strong> <strong>Bank</strong><br />
Carmela Montes de Oca, Senior Product Advisor,<br />
<strong>Silicon</strong> <strong>Valley</strong> <strong>Bank</strong> (Moderator)<br />
Mary Rountree, Vice President, Finance,<br />
Implantable Provider Group<br />
2
Agenda<br />
Review current payment trends<br />
Evolution of payment cards<br />
Targeting new spend via virtual accounts<br />
Client conversation with IPG<br />
Q&A<br />
3
Executive Summary<br />
More organizations focusing on electronic payments<br />
Payment costs are now key considerations<br />
Organizations are looking to reduce cost and seek increased control<br />
Commercial cards help in cutting operating costs, providing expanded<br />
control and more<br />
4
Polling Question 1<br />
Do you currently use credit cards for indirect payables such as<br />
system maintenance, general repair, marketing & operations<br />
expenditures?<br />
A. Yes<br />
B. No
Factors Driving Electronic Payment Focus<br />
Reduce Procure-to-Pay<br />
Transaction Costs<br />
65%<br />
Maximize Rebates and<br />
Incentives<br />
49%<br />
Improve Employee<br />
Convenience<br />
44%<br />
Improve Employee<br />
Productivity<br />
38%<br />
Reduce Procure-to-Pay<br />
Cycle Time<br />
25%<br />
0% 10% 20% 30% 40% 50% 60% 70%<br />
Source: PayStream Advisors, Electronic Payments and P-Cards Adoption Survey, Q3 2009<br />
6
Payments Landscape:<br />
B2B Electronic Payments Continue To Grow<br />
Current annual B2B payments in <strong>the</strong> U.S.: Approximately $17.2 trillion<br />
57% of B2B<br />
Payments<br />
26% of B2B<br />
Payments<br />
13% of B2B<br />
Payments<br />
4% of B2B<br />
Payments<br />
7
Payment Choices Have Evolved<br />
Existing Spend Capture<br />
Check/Wire/ACH<br />
Expanded Spend Capture<br />
Check/Wire/ACH<br />
Virtual Account Numbers<br />
Pcard<br />
Pcard<br />
T&E<br />
T&E<br />
Technology drives automation of payments<br />
8
Polling Question 2<br />
What value do you perceive that purchasing cards can create for<br />
your company?<br />
A. Earn points or revenue share (rebate)<br />
B. Save time in AP process<br />
C. Manage cash more effectively (e.g. extend DPO)
First – A Definition<br />
Electronic Accounts Payable (EAP) Cards<br />
Electronic Accounts Payable (EAP) cards are “non-plastic card<br />
accounts used to pay for invoiced goods and services (whe<strong>the</strong>r set<br />
up as a rotating pool of card accounts, ghost card accounts funded<br />
only to pay invoices from specific suppliers, or ano<strong>the</strong>r arrangement<br />
similar in purpose).”<br />
Source: RPMG Research<br />
EAP Terms:<br />
Virtual cards<br />
Single-use accounts<br />
Straight through processing<br />
Buyer-initiated payments<br />
10
<strong>Silicon</strong> <strong>Valley</strong> <strong>Bank</strong> Virtual Card - Overview<br />
Virtual Card Numbers (VCNs)<br />
Unique, non-plastic account numbers used for secure purchasing<br />
Increased transaction-level control<br />
Defined Authorization Controls for Each VCN<br />
Number of transactions (single-or multi-use)<br />
Transaction amount limit (exact, maximum, or<br />
min-max range)<br />
Validity period<br />
Suppliers and merchant category codes<br />
Enhanced Client-Supplied Data<br />
Capture up to 30 client-specified data<br />
elements with each VCN for enriched data<br />
analysis, reconciliation, and allocation<br />
Two Interface Options<br />
Request website with customizable approval<br />
workflows (Purchase Control)<br />
Batch file interface (transAct Gateway aka:<br />
tAG)<br />
Secure VCN delivery to Suppliers<br />
Sent via encrypted email to suppliers<br />
11
A Closer Look at Virtual Cards / EAP
Using Card in Accounts Payable Processing<br />
SVB transAct Gateway enables clients to seamlessly use card payments for Accounts Payable<br />
spend, helping to remove process inefficiencies and generate key financial benefits<br />
Benefits<br />
Controlled Payments,<br />
Reduced Fraud<br />
Streamlined<br />
Processing<br />
Commercial Card<br />
Rebate Eligibility<br />
Working Capital<br />
Improvements<br />
VCN Enablers<br />
Exact Amount Control: Pay invoices to <strong>the</strong> penny,<br />
avoiding short payments and reducing exception<br />
processing<br />
Set Validity Period: Defined start and end dates to track<br />
and manage outstanding, unprocessed card payments<br />
Single-Use: Reduced fraud and supplier misuse,<br />
improved transaction risk management<br />
Batch File Interface: Automated method to generate<br />
card numbers from an ERP or AP system<br />
Secure Delivery of Card Numbers: Encrypted email<br />
delivery from SVB to suppliers<br />
Enhanced Reconciliation: Capture invoice numbers,<br />
payment reference numbers, etc. to streamline<br />
reconciliation and reduce reliance on merchant-provided<br />
data<br />
Standard 16-digit account numbers: No additional<br />
enablement or training is required for card-accepting<br />
suppliers<br />
13
Virtual Card Numbers: Payable Process Flow<br />
The virtual card numbers payment process flow mirrors<br />
your existing Accounts Payable setup<br />
Initiate<br />
Authorize<br />
Route<br />
Payment<br />
Reconcile<br />
• You receive<br />
invoice from<br />
supplier<br />
• You authorize<br />
payment<br />
• AP department<br />
uploads<br />
payment file to<br />
card system<br />
• Card system<br />
generates<br />
single-use<br />
account<br />
number for<br />
each<br />
transaction<br />
• Card system<br />
emails<br />
supplier:<br />
payment is<br />
ready<br />
• Supplier<br />
securely<br />
retrieves,<br />
processes<br />
payment<br />
• Your system<br />
imports<br />
settlement file<br />
and reconciles<br />
14
Supplier Benefits<br />
Hypo<strong>the</strong>tical Example<br />
Remittance Information:<br />
Virtual Card Number: 5563382407077635<br />
Expiry Date (MM/YY): 07/13<br />
CVC: 297<br />
Cardholder Name: WestdaleWireless AP<br />
Cardholder Address: 516 Edgewater Drive<br />
Wakefield, MA 01880<br />
Purchase Type: Office Supplier<br />
Transaction Amount: $5350.00<br />
Supplier:<br />
ABC Supplier<br />
Supplier Email Address: AR1@abcsuppliers.com<br />
Email Sent:<br />
Yes<br />
Valid From: 6/20/13<br />
Valid To: 7/31/13<br />
Invoice ID: 9999000101<br />
Invoice Description: Office supplies<br />
15
Virtual Card Number: Reporting<br />
VCN offers additional reporting data to <strong>the</strong> standard suite of Commercial Cards transaction data,<br />
enriching and simplifying your analysis, allocation, and reconciliation processes<br />
Reporting<br />
Data Analysis<br />
Allocation<br />
Reconciliation<br />
GL 1 IIII<br />
GL 2 III III<br />
GL 3 III II II<br />
For Each Transaction:<br />
•Rich Commercial Card<br />
Transaction Data<br />
•Virtual Card Number<br />
•Client Custom Data<br />
Fields<br />
Capture additional info to<br />
enrich data analysis<br />
Use this data to<br />
automatically allocate to<br />
<strong>the</strong> proper GL<br />
Easily track matched<br />
expired, and active<br />
Virtual cardsMatch<br />
transactions to payment<br />
instructions by invoice or<br />
ref #<br />
Combine standard<br />
Commercial Card<br />
transaction data with<br />
virtual card number and<br />
custom data fields<br />
Capture up to 30 custom<br />
data fields at time of card<br />
creation for later reporting<br />
Create custom reports<br />
tailored to your program<br />
View trends, monitor<br />
spending patterns, and<br />
track goals of your card<br />
program<br />
Track requestor, reason<br />
for purchase, meeting ID,<br />
project ID, etc. to enrich<br />
data analysis<br />
Example Use: Track<br />
actual meeting spend vs.<br />
budget<br />
Allocate transactions to<br />
<strong>the</strong> correct accounting<br />
codes and cost centers<br />
With VCN, record<br />
accounting codes or<br />
requestor information at<br />
time of payment<br />
Automate or simplify<br />
expense allocation<br />
Sample custom data: GL<br />
code, cost center<br />
Leverage invoice,<br />
payment reference, or<br />
order numbers to identify<br />
transactions<br />
Match transactions<br />
automatically with<br />
purchase/invoice<br />
documents to track<br />
payment status<br />
Sample custom data:<br />
invoice number, PO<br />
number<br />
16
Virtual Card Number: Controlled Spending<br />
Purchase Control as a workflow purchase tool<br />
When an employee needs to make a business purchase but does not have authorized access to a<br />
purchasing card, Purchase Control is an ideal solution.<br />
Step 5: With <strong>the</strong> transaction<br />
completed, Purchase Control can<br />
facilitate a quick and easy<br />
reconciliation process, matching <strong>the</strong><br />
virtual card number, which is unique<br />
to each transaction, in three<br />
important places: on <strong>the</strong> approved<br />
purchase request, online payment<br />
receipt, and <strong>the</strong> company’s monthly<br />
statement.<br />
Step #5<br />
Step #1<br />
Step 1: Company’s system<br />
administrator sets up spending limits<br />
for each employee - such as a<br />
$3,000 limit for a marketing<br />
manager, with purchases above that<br />
requiring approval by his or her<br />
supervisor.<br />
Step 4: Once approved,<br />
Purchase Control will generate<br />
a virtual card number. Key<br />
transaction data that was<br />
entered when <strong>the</strong> purchase<br />
request was made—such as<br />
cost center and general ledger<br />
codes—is now attached to <strong>the</strong><br />
virtual card number. The virtual<br />
card number can only be used<br />
within <strong>the</strong> parameters of its<br />
approval (transaction amount,<br />
date, and vendor) providing<br />
built-in transaction security.<br />
Step #4<br />
Step #3<br />
Step #2<br />
Step 3: Logging in to <strong>the</strong> Purchase Control<br />
application, <strong>the</strong> supervisor can review<br />
and approve or decline <strong>the</strong> purchase request<br />
Step 2: The marketing<br />
manager starts <strong>the</strong> process<br />
by going to <strong>the</strong> Purchase<br />
Control application and filling<br />
out a purchase request. A<br />
request that exceeded his or<br />
her limit—for example, a<br />
purchase of $4,000—would<br />
trigger an automatic e-mail<br />
notifying <strong>the</strong> supervisor for<br />
that approval.<br />
17
Polling Question #3<br />
Is your organization leveraging single use accounts to extend <strong>the</strong><br />
use of your purchasing card program and/or automating your<br />
Accounts Payable department?<br />
A. Yes<br />
B. No
A Conversation with IPG
Implantable Provider Group (IPG) Fast Facts<br />
Founded in 2004<br />
Implantable Device Benefit Management Industry Leader<br />
Grown at a 218% compounded annual rate for <strong>the</strong> past three years<br />
Privately owned by its management team and Sequoia Capital , a <strong>Silicon</strong> <strong>Valley</strong><br />
based financial partner<br />
Annual sales = approximately $50M<br />
Mission: To provide implantable Device Benefit Management (DBM) solutions that<br />
deliver tangible value to health plans, providers, physicians, manufacturers and<br />
patients, which improve quality, affordability and patient access to life saving and<br />
life enhancing implantable devices<br />
Annual purchasing spend = $20M and approximately $3M of that is indirect spend<br />
5500 - B2B transactions<br />
800+ - vendors<br />
20
Implantable Provider Group: The Challenge<br />
In order to ensure timely payments to its suppliers under <strong>the</strong> current<br />
setup, IPG needs to make a large number of payments to a variety of<br />
different vendors.<br />
The company’s existing vendor set-up process for each payee is<br />
cumbersome and inefficient. IPG would prefer a payment tool that is<br />
both secure and more efficient as well as electronic.<br />
The company would like to increase payments on cards, leading to<br />
fewer check payments, reduced paper processing, improved working<br />
capital and increased visibility into expenditures.<br />
IPG has two major concerns about increasing its current purchasing card program:<br />
1. Compliance/Fraud – IPG requires several approvals before releasing payments.<br />
2. Lack of necessary data – Credit card data is missing certain key fields including<br />
PO numbers and General Ledger information.<br />
21
Implantable Provider Group: A Focused Approach<br />
Reduce cost through streamlined business processes<br />
Gain greater control over discretionary expenses<br />
Automate supplier payments<br />
Leverage appropriate technology<br />
Improve <strong>the</strong> company’s working capital position<br />
22
Implantable Provider Group: Execution Strategy<br />
Reduce cost through streamlined business processes<br />
<br />
Expense management automation<br />
Gain greater control over discretionary expenses with <strong>the</strong> SVB<br />
Multi Card payment solution<br />
<br />
<br />
<br />
Purchasing<br />
Payables<br />
Ensure compliance to corporate policy<br />
Automate supplier payments and reconciliation process<br />
<br />
<br />
Reduce check disbursements<br />
Generate cost savings through e-Payables<br />
23
Implantable Provider Group: Execution Strategy<br />
Automate supplier payments and reconciliation process<br />
(continued)<br />
Executive support for <strong>the</strong> program<br />
Implementation team<br />
<br />
<br />
Define <strong>the</strong> execution strategy<br />
Policy and procedures<br />
Integrate, enroll supplier, test, pay and reconcile<br />
Supplier enrollment campaign<br />
Benchmark<br />
24
Implantable Provider Group: The Value<br />
In <strong>the</strong> first three months, we have successfully enrolled over 48<br />
suppliers and have ano<strong>the</strong>r 20 actively engaged, representing a<br />
total of more than $6M in annual payments<br />
<br />
<br />
SVB provides proactive supplier enrollment support<br />
Solid methodology and execution based on best practices<br />
An alternative payment type to check, completely automated with<br />
reconciliation features<br />
Average cash flow improvement of 15+ days<br />
Cost savings from reduced checks, bank fees, research, etc.<br />
Triple-digit growth month-over-month<br />
25
Implantable Provider Group Lessons Learned<br />
Ensure you have all <strong>the</strong> necessary controls and data in place to<br />
reconcile your transactions<br />
Start small – enroll one vendor to ensure your processes and<br />
controls work prior to open enrollment<br />
Consistently improve communication – often people do not fully<br />
read or understand letters and emails.<br />
26
Questions?
Next Steps:<br />
1. Gain top management support for payment process<br />
transformation and partner with key players in <strong>the</strong> organization<br />
to ensure buy-in.<br />
2. Implement strategies to reduce reliance on checks.<br />
3. Demonstrate <strong>the</strong> benefits that preferred suppliers will receive<br />
from commercial card acceptance. (They can expect faster pay<br />
and efficiency savings while you will gain control and revenue.)<br />
4. Incorporate commercial card acceptance language into<br />
preferred supplier contracts.<br />
5. Institute a set of upfront spend controls (e.g., customized limits<br />
based on cardholder, supplier or transaction size) and backend<br />
audits.<br />
28
Robert O’Conner<br />
Senior Global Treasury Advisor,<br />
<strong>Silicon</strong> <strong>Valley</strong> <strong>Bank</strong><br />
972.455.0959<br />
Robert O’Connor is a Senior Advisor with <strong>Silicon</strong> <strong>Valley</strong><br />
<strong>Bank</strong>’s Global Cash Management team. In this role, he<br />
focuses on developing credit card and payments<br />
solutions for clients.<br />
Prior to joining <strong>Silicon</strong> <strong>Valley</strong> <strong>Bank</strong>, Robert was Vice<br />
President of U.S. Commercial Product Sales at<br />
MasterCard Worldwide. During his seven years with<br />
MasterCard, Robert worked with many U.S. commercial<br />
card issuers on developing <strong>the</strong>ir commercial card<br />
strategies. Robert’s previous experience includes various<br />
business development roles with U.S. <strong>Bank</strong>’s Corporate<br />
Payment Solutions and Merrill Lynch.<br />
29
Carmela Montes de Oca<br />
Senior Product Advisor, <strong>Silicon</strong><br />
<strong>Valley</strong> <strong>Bank</strong><br />
(404)264-8323<br />
Carmela Montes de Oca is a Senior Global Treasury<br />
Advisor with <strong>Silicon</strong> <strong>Valley</strong> <strong>Bank</strong> serving corporate clients<br />
in <strong>the</strong> Sou<strong>the</strong>ast and is a sales manager for <strong>the</strong> East<br />
Coast. In this role, she is responsible for not only building<br />
relationships but providing domestic and international<br />
treasury management advice, products and services that<br />
contribute to clients' continued growth and success.<br />
Carmela joined <strong>Silicon</strong> <strong>Valley</strong> <strong>Bank</strong> in 2006, and is<br />
focused on delivering treasury solutions for payments &<br />
collections and information reporting. Before joining SVB,<br />
Carmela was responsible for treasury services at o<strong>the</strong>r<br />
large banking institutions.<br />
Carmela has over 25 years of banking experience<br />
serving clients in <strong>the</strong> commercial and technology<br />
industries. She earned a Bachelor of Science Degree in<br />
accounting and is a Certified Treasury Professional, a<br />
certification granted by <strong>the</strong> Association of Financial<br />
Professionals.<br />
30
Mary Rountree<br />
Mary Rountree is <strong>the</strong> Vice President, Finance, for<br />
Implantable Provider Group. Mary has been with <strong>the</strong><br />
company for two years. Prior to that, she was Director of<br />
Accounting for Foodbuy, LLC, a division of Compass<br />
Group in <strong>the</strong> food service industry. Mary resides in <strong>the</strong><br />
Atlanta metro area with her family. She loves spending<br />
time with her family on <strong>the</strong>ir boat and her personal hobby<br />
is running.<br />
Vice President, Finance,<br />
Implantable Provider Group<br />
31
Disclaimers<br />
This material, including without limitation <strong>the</strong> statistical information herein, is provided for<br />
informational purposes only. The material is based in part upon information from thirdparty<br />
sources that we believe to be reliable, but which has not been independently<br />
verified by us and, as such, we do not represent that <strong>the</strong> information is accurate or<br />
complete. The information should not be viewed as tax, investment, legal or o<strong>the</strong>r advice<br />
nor is it to be relied on in making an investment or o<strong>the</strong>r decision. You should obtain<br />
relevant and specific professional advice before making any investment decision.<br />
Nothing relating to <strong>the</strong> material should be construed as a solicitation or offer, or<br />
recommendation, to acquire or dispose of any investment or to engage in any o<strong>the</strong>r<br />
transaction.<br />
©2013 SVB Financial Group. All rights reserved. <strong>Silicon</strong> <strong>Valley</strong> <strong>Bank</strong> is a member of FDIC<br />
and Federal Reserve System. SVB>, SVB>Find a way, SVB Financial Group, and<br />
<strong>Silicon</strong> <strong>Valley</strong> <strong>Bank</strong> are registered trademark. <strong>Silicon</strong> <strong>Valley</strong> <strong>Bank</strong> and IPG are not<br />
affiliated. 0613-0083<br />
32