June 2019

Integrated Payables & Best Practices for Card Program OptimizationFlorida School Finance Officers Association |

F S F O A

This presentation was prepared exclusively for the benefit and internal use of the J.P. Morgan client to whom it is directly addressed and delivered (including such client’s subsidiaries, the “Company”) in order to assist the Company in evaluating, on a preliminary basis, certain products or services that may be provided by J.P. Morgan or its affiliates. This presentation contains information which is confidential and proprietary to J.P. Morgan, or its affiliates, which may only be used in order to evaluate the products and services described herein and may not be disclosed to any other person. In preparing this presentation, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was provided to us by or on behalf of the Company or which was otherwise reviewed by us.

This presentation is for discussion purposes only and is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by J.P. Morgan. Neither this presentation nor any of its contents may be used for any other purpose without the prior written consent of J.P. Morgan. J.P. Morgan and its affiliates make no representations as to the legal, regulatory, tax or accounting implications of the matters referred to in this presentation.

Notwithstanding anything in this presentation to the contrary, the statements in this presentation are not intended to be legally binding. Any products, services, terms or other matters described in this presentation (other than in respect of confidentiality) are subject to the terms of separate legally binding documentation and/or are subject to change without notice.

Neither J.P. Morgan nor any of its affiliates, directors, officers, employees or agents shall incur any responsibility or liability whatsoever to the Company or any other party in respect of the contents of this presentation or any matters referred to in, or discussed as a result of, this document.

J.P. Morgan is a marketing name for the treasury services businesses of JPMorgan Chase Bank, N.A. and its subsidiaries worldwide.

J.P. Morgan is licensed under U.S. Pat Nos. 5,910,988 and 6,032,137.

© 2019 JPMorgan Chase & Co. All rights reserved

F S F O A

Transactional

Drive economic benefits from using most efficient payables channels

Improve efficiency through automation

Drive working capital improvement

Customer

Improve customer experience and loyalty by rethinking payment interaction

Reinforce your brand promise and value with your customers

Security

Increase fraud prevention through use of emerging technologies

Proactive cyber operations that are risk-based & intelligence-led

Strategic

Utilize data and analytics to assess areas of business opportunity

Rapidly capture advances in technology development

Treasury management has evolved to be a key strategic function

Sources: AFP: 2015 Payments Cost Benchmarking Survey, 2018 Fraud and Control Survey & 2017 Strategic Role of Treasury Survey

of B2B payments are by check at ~$3 each to process

of fraud originates from checks

believe that the strategic role of treasury will grow51% 74% 80%

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F S F O A

Payment Options and Costs

* Based on $20mm Card spend and 10,000 transactions. Includes WC benefit of 15 days on $15mm SUA spend @ 12% hurdle rate; operational savings from moving from check to Card; rebate at 160bp (60bp LTI)

** Source: 2015 AFP Payments Cost Benchmarking Survey; 50th Percentile

Paper Checks Check Print Outsourcing ACH

Non-urgent paper payment vehicle

Typical cost to process: $3-$5/check due to postage, supplies, clerical work time, etc…

Extended processing time to settle: 7-10 business days

Challenges with lost or damaged checks

1:1 amount : payment ratio

Positive pay fraud protection

Option to issue file to the bank via H2H or manual upload requesting checks to be sent

Client desires to outsource this to cut down on administrative costs, processing time, take advantage of our postage rates, etc.

$50/month plus per transaction fee

Typically low value, non-urgent payments for payroll and vendors

$.10-$.43 per ACH debit/credit transaction

1-2 business day settlement or same day if under $25k

ACH formats

─ CCD: no remittance

─ CCD+: 1 remittance line

─ CTX: full remittance available

Wire Corporate Quick Pay Card / Virtual Accounts

Global urgent payments; domestic receipt typically in less than 1 hour

Mostly costly: $8-$35/wire to sender and receiver

Foreign exchange (1-2 day settlement)

ACH sent with emailed or text notification to receiver

Good product for consumer refunds when bank account information is unknown and checks are costly and cumbersome

$150/mo plus per transaction $.35-$.90 per transaction plus

Virtual Accounts, OneCard, PCard & Corp Card

─ SUA includes full remittance and payment detail in one notice

Extends DPO increasing working capital value

Cash rebate

Reduces other payment costs ($3-$5/check)

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F S F O A

An integrated payables approach unlocks economic value

Key payables priorities

Drive operating efficiencies

Enhance control environment

Optimize working capital

1 Days Payable Outstanding

Key principles

Illustrative value

Digitize your payment channels

Reduce transactional cost by 80%+

Prioritize spend based on total return

Earn rebates and increase DPO1 on converted card spend

Incorporate FX

Reduce frictional costs on international supplier payments

Strategically leverage grace period on Card

Pay earlier to increase rebate or pay later to increase DPO1

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F S F O A

Virtual card payments are growing three times as fast as plastic card payments

U.S. purchasing card enabled payments (billions)

$70 $1922014

$170 $2582018

$104 $2242016

Plastic cardVirtual card

CAGR: Compound annual growth rateSource: U.S. Single-Use Account Card Market Update: 2016 Market Landscape Analysis, Mercator Advisory Group; Mercator Advisory Group estimates; Federal Reserve, Visa

24.7% CAGR 7.7% CAGR

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F S F O A

How do virtual accounts work?

Reconciliation file is sent for upload to ERP where transactions are matched and posted

011000111

Transaction is authorized and confirmation file goes to J.P. Morgan

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Buyer Supplier

Virtual Account

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011000111

011000111

Supplier receives notification with full remittance details and

processes payment

A/P approves invoices and sends payment instruction file

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Virtual Account functionality generates a unique, virtual account number for each payment with supplier, pay date and amount

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F S F O A

Virtual account optimization requires collaboration across your organization and a companywide focus on growing your program across six key areas

Supplier Recruitment

PaymentCapture

Program Optimization

Process Efficiencies

Usage & Controls

Program Goals & Foundation

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Earn rebates, reduce costs,

improve working capital & deliver

bottom line results

“

”

We can help you position Virtual Accounts within your organization to ensure the visibility and focus required to achieve your goals, including a well-articulated strategy for growth in the near and long term. Even mature, well-established programs have room to grow. We can help uncover new ways to add more spend to your virtual account program and deliver greater value across your organization.

Liz AldermanSenior Product Manager, U.S.

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F S F O A

Virtual account optimization requires collaboration across your organization and a companywide focus on growing your program across six key areas

Supplier Recruitment

PaymentCapture

Program Optimization

Process Efficiencies

Usage & Controls

Program Goals &

Foundation

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4

Earn rebates, reduce costs,

improve working capital & deliver

bottom line results

Gain added control over payments

Improve security & reduce risk/fraud

Optimize payables strategy & reduce checks

Increase rebate potential/revenues

Streamline reconciliation

Reduce supplier calls/inquiries

Monitor vital spend patterns/metrics

Gain greater ROI on more spend

Increase float & improve cash flow

Increase efficiencies,reduce processing costs

Rationalize supply base

Strengthen preferred supplier relationships

Ramp up & accelerate speed to spend

Automate spend oversight

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F S F O A

Best practices: Program goals & foundation

Structure your program to accelerate growth

Secure executive sponsor to mobilize resources and promote internal alignment

across A/P, Finance, IT, Sourcing/Procurement, etc.

Communicate program benefits to all end users and

deliver training on how to use/promote virtual accounts to suppliers

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1Establish success

metrics/goals, link them to broader company objectives and

create business case

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F S F O A

Best practices: Supplier recruitment

Mobilize your resources around supplier recruitment

Provide clean, comprehensive

supplier data via an all-inclusive (check, ACH, etc.) spend file at the “remit to”

level

Engage all key stakeholders to

support recruitment effort and work closely with

your campaign manager/team

Target 100% of your supplier base across all forms of payment; work with your virtual account team to develop a rigorous strategy

and approach

Track suppliers who decline and reasons why; re-

engage them in future recruitment efforts

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Monitor enrollment weekly and respond promptly to requests

for information to help drive acceptance

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F S F O A

Best practices: Payment capture

Give suppliers every opportunity to accept

Equip front line people with virtual accounts supplier value story to educate suppliers on the benefits

Make virtual accounts first and fastest form of payment; create disincentives on other methods

Work with Procurement to convert strategic suppliers (e.g., trade early pay discount for virtual accounts, pay on order)

Send payment notifications daily to make sure suppliers get paid faster per your payment terms

Accommodate supplier preferencesand make virtual account payments via alternate channels (phone, web or print/mail/fax) where appropriate

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F S F O A

Best practices: Usage & controls

Minimize risk while satisfying program needs

Choose integration option and payment

methods that best align with your company’s needs and IT

resource availability

Set appropriate controlsat the user level including

access, spend limits, expiration dates and MCCs; use single

authorizations whenever possible

Maintain rigorous security protocols, audit

activity and encourage suppliers to receive payments

via Voltage SecureMailTM

Regularly log into the Virtual Account

Payables platform to view open payment orders,

manage supplier information and address any declines

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F S F O A

Best practices: Process efficiencies

Tap into the power of automation and resources

Dedicate IT resources and invest the time to integrate virtual accounts

into payables systems/processes to minimize manual work

Customize your Payment Instruction File with full remittance detail to streamline reconciliation for you

and your suppliers

Set up email reminders for suppliers to minimize

missed/expired payments; create email address for bounce backs and

monitor daily

Promote a Supplier Portal so suppliers can track payments and access remittance data they can upload to their ERP to simplify

reconciliation

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Promote our toll-free supplier support line so we can help your suppliers process payments, reset

passwords and answer general questions

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F S F O A

Best practices: Program optimization

Validate results & set goals for ongoing growth

Offer employees incentives to identify/sign up new

vendors; communicate successes across internal channels

Monitor the virtual account program against benchmarks and refine goals as needed; share

reports/updates with key stakeholders and senior

management to keep virtual accounts top of mind

Review RAMP reports with your relationship team and reach out to underperforming suppliers

to promote virtual accounts

Work with Procurement to integrate virtual accounts

into policies and systems (RFP/contracts, vendor

negotiations, etc.)

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Provide an A/P spend file for analysis every 12 to 18 months

and initiate a recruitment campaign to capture additional virtual

account spend

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F S F O A

Use Virtual Account API integration for pay on-demand

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F S F O A

Virtual Account Web Service application: Travel

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F S F O A

Mobile wallet integration

A simpler way for employees to pay

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F S F O A

Extensive supplier services help retain suppliers in your virtual account program

A Supplier Services team is comprised of Retention specialists dedicated to addressing specific supplier concerns, with the goal of retaining suppliers in your virtual account program.

Identification of supplier attrition risk through

various channels

Assessment of attrition impact to your virtual

account program

Evaluation of supplier objectives, attrition

factors, and opportunities

Direct engagement with your suppliers to

address their specific concerns

Supplier Services

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F S F O A

Case study: The ABCs of ACH conversion to Virtual Accounts

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F S F O A

Industry Benchmarking

Data - Rolling 12 Months Ending 12-31-2018 Client Example Industry Average 1st Quartile 2nd Quartile 3rd Quartile 4th QuartileSpend Statistics

Spend (Rolling 12 Months) $10,042,006 $9,734,143Spend Growth (Period Over Period) ***** 3.89%Average Spend Per Card $51,497 $44,430Average Monthly Spend $836,834 $811,179

Transaction StatisticsAverage Transaction Size $914 $661% Transactions <$2.5k 95.30% 95.86%% Transactions $2.5k to $10k 3.46% 3.27%% Transactions >$10k 1.24% 0.87%

Spend Categories (% Total Spend) Client Example Industry Average 1st Quartile 2nd Quartile 3rd Quartile 4th QuartileAirline % 0.68% 0.63%Car Rental % 0.02% 0.09%Entertainment % 1.05% 1.10%Lodging % 1.23% 1.15%Restaurants % 0.73% 5.64%Computer, Hardware, Software and Peripherals % 3.03% 7.10%Education % 5.63% 5.05%Government % 1.14% 1.10%Healthcare % 0.70% 1.69%Lease and Rental Payment % 0.03% 0.78%Media and Advertising Services % 0.18% 0.14%MRO % 20.48% 18.61%Office Equipment and Supplies % 0.36% 4.68%Other % 1.14% 1.30%Print and Duplicating Services % 15.80% 3.69%Professional Services % 20.31% 11.10%Retail % 25.09% 22.27%Telecom % 0.00% 0.94%Temporary Help Services % 0.04% 0.12%Transportation - Other % 0.12% 0.64%Utilities % 0.03% 8.83%Vehicle Maintenance and Fuel Services % 2.21% 3.29%Warehousing, Freight and Delivery % 0.00% 0.05%

T&E Categories 3.72%PCard Categories 96.28%

Benchmarking can provide insights to unlock potential incremental spend

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F S F O A

RFP Process: Key Card Provider Questions

CARD AND VIRTUAL ACCOUNT PROGRAM CONSIDERATIONS

Asking the right questions during the RFP process positions your organization for success after awarding the contract.

How often do you perform a vendor file analysis and how are the results communicated and acted upon? What is your success rate with growing existing programs once implemented? For example:

Who is responsible for a supplier enrollment campaign and what support is offered?

Do suppliers have access to view their payment activity on-line in order to reduce inquiries into Accounts Payable?

Do you provide any supplier support for on-going questions and communications?

What creative solutions are available when suppliers attempt to opt out of card acceptance?

How often do you recommend performing a vendor file analysis and can you include ACH and Purchasing Card recruitment in one single supplier campaign?

Which ERP and eProcurement systems are your card and virtual account programs integrated with?

Who will be supporting the program? Will I have a dedicated relationship manager?

What are the benefits of chip/signature versus chip/pin?

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Existing E-payable Program

JPM Virtual Account Program Growth

City Client $6,703,600 $21,700,000 324%County Client $3,365,730 $14,392,008 428%School District Client $4,500,468 $10,497,646 233%