State of SC GFOA. October 14 th, 2014

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1 State of SC GFOA October 14 th, 2014

2 State of the state 73 State Agencies 82 Local Governments 26 Colleges & Universities 2

3 State of the state $321,183,123 Total spend volume 2013/2014 rebate period 1,261,285 Total # of transactions 2013/214 $268 Average transaction size 18,480 Total # of open cards July 12,068 Avg. # of active cards per month Total savings based on industry average purchase order reduction, based on RPMG 2012 study: Industry average savings of $74 per transaction 1,261,285 total transactions x $74.00 = $93,335,090 3

4 State of SC rebate history 2014 Rebate: $4,773, : $4,441,643 Total Rebate 2013 : $4,558, : $3,727, : $3,481, : $3,163, : $3,207,294 4

5 Optimization drives program growth, process savings Traditional purchase order process Purchase Card process Savings $91 Average process cost * $17 $74 process cost $253,526 Average process cost per month ** $47,362 $206,164 process cost per month $3,042,312 Annualized process cost $568,344 $2,473,968 annualized process cost Between # of steps Less than steps *Based on the 2012 Purchasing Card Benchmark Survey results by RPMG Research Corporation ** Rounded transaction count; based on average monthly card spend of $1MM and, per the results, of the 2012 NAPCP poll, average transaction size of $359 (based on 2,786 transactions). 5

6 North America Purchasing Card Industry Current and Project Purchasing Card Spending in North America ($B) Source: RPMG 2014 Purchasing Card Benchmark Survey Results 6

7 Future Purchasing Card Spend Growth Future Growth of Traditional Purchasing Card, Electronic Accounts Payable (EAP) and Total Purchasing Card Spending, 2014 to 2018 Source: RPMG 2014 Purchasing Card Benchmark Survey Results 7

8 PCard Spend Growth Projections By organizational type 8

9 Experience & Expertise Bank of America Merrill Lynch Card & Comprehensive Payables

10 A history of innovation and experience More than $37 billion in annual spend 27,000 card programs across the globe 100+ countries Largest issuer of epayables programs $13 billion and 2.3 million transactions 16,000 clients globally Almost 40 million acceptance locations around the globe A HISTORY OF INNOVATION 1958 First bank-issued credit card (BankAmericard) 1998 Prepaid payroll cards with signature 2011 Local currency direct debit payments in Sweden, Norway and Denmark 2013 Online PIN Check in Australia and Asia 1994 Purchasing Card 2005 epayables 2012 Chip & PIN cards in the U.S. 10

11 Strength in numbers epayables leads the industry Strength Achieve 100% automated reconciliation with epayables Robust in-house, end-to-end vendor enrollment process Bank of America Merrill Lynch is the largest issuer of epayables programs in North America, processing $13 billion and 2.3 million transactions in st to market with epayables more than 8 years ago 2.3 million epayables transactions processed annually $13 billion Annual spend processed through epayables 1,200+ Active epayables clients 100,000+ Vendors in the BofAML epayables network BofAML platform Best-in-class platforms that are integrated, online, scalable and offer visibility and control

12 Works innovation We continue to invest to create value and offer our clients flexible, innovative solutions 12 * Innovation points Simplified user interface Exact authorization override Secure Push payments Receipts imaging Push file delivery Declining balance cards Virtual cards: Card shuffler & epayables FOCUS ROBUST TECHNOLOGY TIGHTER CONTROLS GREATER AUTO- RECONCILIATION ENHANCED SECURITY SIMPLIFIED NAVIGATION

13 Payment strategy A necessary foundation for any card program

14 Goals Key drivers to payables optimization Since, on average, roughly 50% of companies working capital is tied up in the supply chain, there are very significant benefits to taking a more holistic view of the supply chain. Ernst & Young insight: Getting the most from your supply chain (March 12, 2012) Improve working capital Optimize cash flow Increase automation Improve operational efficiency & control costs Strengthen supplier relationships Gain visibility into the payments cycle Improve compliance Enable straight-through processing Payables Healthier balance sheet Increased revenue Lower costs Improved controls Effective supply chain Better supplier relationships & performance Increase/extend DPO 14

15 Challenges lead to improvement opportunities Inaccurate cash flow forecasting Frequent pay runs Inefficient working capital days payable outstanding Supplier master includes duplicates, is decentralized and has lack of governance Increase in payment disputes & don t take advantage of discounts Lack of standardized payment terms Large interest / additional charges for late payments Multiple payment terms with the same supplier 15 Credit sanctions imposed by suppliers Lack of payment term approval mechanism

16 Accounts Payable automation Payment Trends Accounts Payable 27% One in four companies have made significant investments in automation Biggest Accounts Payable challenges Missed discounts 35% Duplicate payments 28% Lack of payment visibility 26% Loss from fraud 7% Key drivers behind increased acceptance of electronic payment methods: The evolution of low-cost web portals Increased buyer demand for suppliers who accept electronic payment The proliferation of flexible card and virtual card payment platforms High processing costs 59% Late payments 44% The coattail effect of previous automation 16 Source: Paystream Advisors, 2012

17 Gain efficiencies with P2E migration Initiate Reconcile Research Forecast paper process $4 Average cost per check payment 4 electronic process or less internal cost $1 for current electronic payments 52% point to cost savings as the reason to move away from paper AFP Electronic Payments Report of Survey Results 4 Cashflow Reengineering, James Sagner; IOMA AP Department Benchmarks and Analysis; The Blue Book of Bank Prices Phoenix-Hecht

18 Extend your days payable outstanding with electronic payments * 50 days Extend your DPO Electronic payments can provide 15 more days of DPO over the traditional payment process epayments can extend DPO out to 50 days 0 Days 1 Invoice entered into A/P 10 Days 2 epayment is made 25 Days 3 Card statement billing cycle 50 Days 4 Statement due date Supplier terms shortened to Net 10. Provides 15 more days of DPO over the traditional payment process; eliminates check payments 0 Days 30 Days 35 Days Typical payment terms of net 30 1 Invoice entered into AP 2 Payment mailed 3 Check cashed Traditionally, your normal DPO is 35 days (30 days net payment and 5 days for check cashing) 18

19 Strategies for a comprehensive payables approach Leverage networks for rapid adoption Segment payments Take advantage of early payment discounts Segment suppliers Improve order-to-pay with invoice management Paper-to-electronic initiatives Streamline orderto-pay processes Automate the AP process Harness the benefits of card Choosing right solutions for strategic suppliers 19

20 Developing a payments strategy Identify Payments Supplier payments Payroll Benefits Tax payments Bond payments Investments Travel & expenses Claims (healthcare) Suppliers Businesses Employees Individuals Governments Creditors Shareholders Solutions Electronic Purchasing card Virtual cards Prepaid cards Dynamic Discounting Supply Chain Finance ACH Wire FX Paper checks HealthLogic 20

21 Developing payables and supplier strategies

22 Payment strategy variations One payment method does not meet all needs Segment suppliers to determine optimal payment method Mandate suppliers be paid by card or selected payment method PO Required Small dollar purchases MRO e-procure Catalog vendors One-time purchases Direct materials Strategic/preferred suppliers Services 22

23 What s your baseline? Establish a baseline by performing an AP vendor analysis Understand your current payment mix Understand and prioritize payment terms Define your preferred payment terms Create a preferred vendor status and establish unique terms Mandate card acceptance with preferred suppliers Add card acceptance as a requirement in RFPs/supplier contracts Indentify existing suppliers to migrate to preferred status and terms Mandate card acceptance with new suppliers Define Measurable Goals Amount of spend to convert to epayables or card Percentage of Suppliers to move to preferred payment terms Milestones and deadlines for goal achievement Periodically conduct internal Payment Strategy Review sessions with key partners and senior management 23

24 Supplier segmentation Strategic supplier Ample competition Favorable terms help buyer fund fixed or less flexible costs Focused on client retention per size and volume Significant buyer leverage Active suppliers Low-dollar One-time payments No buyer leverage Strategic supplier New supplier Buyer Working capital Access to products Cost of goods sold Active supplier High-value supplier New supplier Eager to grow relationship Ample competition Significant buyer leverage High-value supplier Goods critical to buyer Best of breed / only provider Buyer dependency limits terms negotiation Limited buyer leverage 24

25 Fine-tuning your payment approach 1. Understand supplier payment life cycles 2. Execute supplier payment optimization strategy 3. Re-evaluate your strategy on an annual basis Recurring supplier payment High-dollar supplier payments Dynamic discounting Foreign exchange Wire Supply chain finance Virtual card/epayables ACH Low-dollar/ non-recurring payments Card Check ACH 25

26 Expanding your success EXPAND DRIVE After initial supplier campaign efforts are finished, leverage program tools and technology to further drive supplier adoption of card. EVALUATE Evaluate supplier base on a regular basis. Execute follow-up marketing efforts as needed either via formal calling campaigns or self managed vendor enrollment. MONITOR Monitor payment activity to ensure supplier adoption and ongoing adherence to the card program. Ensure card is presented as the preferred payment type for new suppliers. Performance measurements/metrics, adoption, cash discounts and saved. Expand paper-toelectronic migration to other payables transactions. Review existing supplier payment arrangements to optimize card acceptance and electronic payment conversion. 26

27 Offering solutions for every type of spend These solutions work effectively together to help improve working capital Procure-to-pay automation tools Paymode-X Invoice Management Paymode-X e-invoicing Workflow Approval Electronic Payments Payment & working capital tools Supply Chain Financing Paymode-X Early Payment Invoice Discounting epayables Purchasing/Travel Card Prepaid Card Paymode-X ACH Wire FX 27

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