Leverage Your Buying Power With Electronic Payments, e-Invoicing, and Supply Chain Finance
Presenter/Moderator: Rebecca O’Connell- Working Capital Advisor – Bank of America Merrill Lynch Co-Presenters: Jodie Rocco- Director, Treasury– Veeco Instruments Inc. Alicia Lazarto- Manager, Treasury Operations, Veeco Instruments Inc.
May 2014
2
Introductions
Migrating from Paper to Electronic: Trends, benefits & barriers
Defining Electronic Solutions: How to leverage your buying power
A practitioner view: Veeco Instrument’s strategic transformation
Agenda
Migrating from paper to electronic Trends, Benefits & Barriers
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Managing the Global Supply Chain as a Strategic Asset 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*.
“
“
Healthier balance sheet
Increased revenue
Lower costs
Improved controls
Effective supply chain
Better supplier relationships & performance
Increase/extend DPO
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
Goals
Healthier balance sheet
Increased revenue
Lower costs
Improved controls
Effective supply chain
Better supplier relationships & performance
Increase / extend DPO
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
*Ernst & Young insight: Getting the most from your supply chain (March 12, 2012) found on http://business.financialpost.com/2012/03/12/getting-the-most-from-your-supply-chain. Sept. 2013
higher performance is achieved by companies acknowledging supply chain as a strategic asset 70%
Source: PwC Global Supply Chain Survey 2013, “Next-generation supply chains – efficient, fast and tailored” .
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Migrating from paper to electronic
Today, the typical organization makes 61 percent of its B2B payments by check. Organizations are finding that “electronifying” payments is a key driver for improving supplier relations, increasing productivity, and achieving cost savings.
APQC, “The Impending Death of the Paper Check”, Accounts Payable Automation Survey, December 10, 2010
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Migrating from paper to electronic
Benefits
Among the varied benefits of electronic payments, the most compelling are cost savings, productivity enhancements and improved cash flow Barriers
The greatest barrier to the increase of electronic payments is the perception that suppliers are unwilling or unable to accept and/or receive these payments. Another major hurdle is the internal cost and/or capability to manage the transition to electronic payments within the accounts payable and/or purchasing group itself.
APQC, “The Impending Death of the Paper Check”, Accounts Payable Automation Survey, December 10, 2010
Benefits & Barriers
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More than 75 percent of organizations expect that supplier organizations currently only accepting paper checks will be able to receive electronic payments within three years.
The growing popularity of electronic payments may address and minimize most of the perceived issues, especially as organizations achieve quantifiable, bottom-line savings as a result of electronic payment adoption. While moving payments from paper to electronic methods provides immediate efficiency gains and cost takeout, a long-term payables strategy can help an organization achieve results that are more significant.
Migrating from paper to electronic
APQC, “The Impending Death of the Paper Check”, Accounts Payable Automation Survey, December 10, 2010
Overcoming barriers
Defining electronic solutions How to leverage your buying power
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Examining options
Electronic solutions for every type of spend…
These solutions work effectively together to help improve working capital
Purchasing Card
Virtual/Ghost & Comm. Card s Settlement Networks (ACH)
Traditional ACH, Wire Transfer -
Supply Chain Finance (SCF)
$ Working Capital Improvement $$$
Type of spend
Strategic international and domestic suppliers
Invoiced spend for U.S. and Canada
Non - invoiced spend/ lower dollar
Employee and Customer
programs
Benefit
DPO extension/ COGS reduction
DPO extension/ Financial incentive/ Dynamic discounting
Financial incentive/DPO Extension/reduced processing Costs/data consolidation
Control and data capture/ Financial incentive
Travel Card U.S. and Global Prepaid Cards
Spend and Supplier Categories Drive Solutions
Electronic Invoice Presentment
10 10
Overview of Supply Chain Finance
Purpose Provides the buyer with a means to:
Extend payment terms and provide an alternative financing solution to suppliers
Increase operational efficiencies
Generate additional cash flow
Overall cost reduction
Create a “value exchange” that can improve working capital for both you and your suppliers
Program Suppliers can tap into funds earlier
in their receivable cycle by allowing them to secure discounted funds against those receivables
Integrates well with ERP technology to provide a seamless solution with minimal disruption
Available to both domestic and international suppliers
Capable of participation structure, multiple banks
Pricing Suppliers bear the ongoing program
costs, at a cost of funds aligned with the buyer, set as a per annum rate, fixed spread over the relevant LIBOR for the period of the discount
Program discount rate charged to vendors incorporates the credit spread, as well as the administrative costs of running the program
Cost of program is often lower than cost of funds at many suppliers’ local banks and usually well below their WACC or IRR
SCF
A win-win situation Increased DPO for the buyer
Accelerated cash/better financing for suppliers
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Electronic invoicing
Payment Trends
Invoice efficiency through automation #1
perceived challenges in
adopting invoice automation:
supplier reticence, IT
resource shortage and
system integration
▪ Need to automate PO
presentment, matching to
receipts, routing, invoice
approvals and more
▪ Need to clearly identify and
communicate the tangible
benefits
▪ Need onboarding assistance to
obtain internal/external buy-in
…and yield great
benefits
▪ Improved efficiencies
▪ Lower operating costs
▪ Stronger control
▪ Competitive advantage
▪ Offer greater efficiencies for
processing invoices
▪ Require changing the way
buyers/suppliers traditionally
conduct business
▪ Face considerable resistance
—both internally and from
suppliers
Electronic invoice solutions…
…can address many needs…
Source: Electronic Supplier Payments PayStream Advisors Q2 2012
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The value of an e-Invoice solution
Capture and offer invoice discounts
Purchase orders
Invoices
Matching, workflow, and approval
Payments
eRemittances
Early payment discounts
Electronic Purchase Orders & Invoices
Electronic Payments
Invoice & purchase order processing
Avoid late payments
Mitigate risk of duplicate payments
Improve visibility & control
Automation Standardization
Centralization
Veeco Instruments Inc. A practitioner view
Copyright ©2012 Veeco Instruments Inc. 14
Our Technology aligns with three mega
trends: energy efficiency,
personal mobility and
advancing thin film
technologies
We Make Thin Film
Process Equipment Growing, depositing,
etching and processing
thin films is our core
competency
Veeco At A Glance Presented by Jodie Rocco and Alicia Lazarto
High Growth
Market Focus Our equipment enables the
manufacture of:
• LEDs
• Power devices
• MEMS
• Hard disk drives
• OLEDs
Strategic locations near our customers in
the US, Europe & the JAPAC regions
Market-Leading
Positions in: • MOCVD & MBE
• IBE/IBD/PVD
Copyright ©2012 Veeco Instruments Inc. 15
Glimpse Into the Future with OLED Display Technology Presented by Jodie Rocco and Alicia Lazarto
Rigid Unbreakable Curved Bendable Foldable
Flexible Product Introductions Have Begun
Copyright ©2012 Veeco Instruments Inc.
CONFIDENTIAL
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Veeco Payment environment Presented by Jodie Rocco and Alicia Lazarto
Prior State In 2010, Veeco consolidated domestic A/P and
outsourced all A/P processing.
In conjunction with the consolidation process,
Veeco completed an analysis of all costs related to
disbursements: The company was originating a large volume of
checks.
Multiple programs with various providers.
P card program was underutilized.
Voluminous amounts of T&E cards, no ownership to
ensure timely payments, no policing/procedures in
place to ensure adequate tracking.
Ultimately rebate incentives were compromised.
Monthly labor intensive manual processes
Post Implementation Initiated an action plan to maximize incentives and
efficiencies.
Worked with our banking partners to identify qualified
programs with robust incentives/rebates.
Implemented Best Practice for commercial cards: Consolidated “One” consolidated card program with global
capabilities
Improved cash flow through active payables disbursement
management
Customized approval workflows in alignment with company
policies and instituted control guidelines
Automated reporting and GL postings
Cost reduction achieved through reducing volume of
checks and streamlining spending habits.
Payment Type
No. of
Transactions
Checks ($1.87 per chk) 12,225
Virtual Card A/P
payments -
T&E 140 cards
Travel, Group event
& T&E Card spending 6,658,000$
LOST REBATES 33,290$
Pre-implementation
Payment Type
No. of
Transactions
Checks 5,000
Virtual Card A/P
payments 445
T&E 8 cards
P Card & Ghost
Travel Card 5,000,000
REBATE 56,000$
Post Implementation - Phase I
Copyright ©2012 Veeco Instruments Inc.
CONFIDENTIAL
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Veeco Project Plan Presented by Jodie Rocco and Alicia Lazarto
Compile a complete vendor master and ensure consistencies for payment method across company codes
Send final file to Bofa for them to supply the vendor match against vendors who were already accepting virtual cards
Coordinate with A/P to offer incentives for vendor to accept virtual cards – reduced payment terms from n60 to n30, offer discounts to offset the interchange fees
Communicate to vendors – prompt consistent payments no delays, improve their cash flow, enhance company DSO
Coordinated with marketing & credit & collection departments to remove payment by check as an option and add virtual cards as a preferred payment method on new vendor setup forms along with ACH.
Phased approach – vendors that we had the most leverage with were targeted first at Phase I
Dismantled prior card programs and consolidated all card programs under one provider to ensure optimal rebate.
Worked with Bofa implementation team and coordinated with Finance to automate & reconcile GL postings into ERP system
Mirrored the company’s limits of authority policy thresholds for payment approvals within the virtual card online system
Establish controls over unauthorized transactions by customizing eligible purchases by MCC codes.
Established & created one point of contract internally as admin to oversee the entire program.
Targeting Automation, Controls, & Working Capital Management
Copyright ©2012 Veeco Instruments Inc.
CONFIDENTIAL
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Veeco Next Steps Presented by Jodie Rocco and Alicia Lazarto
Phase II –
Continued engagement with vendors to encourage additional participation in the program.
Align with Procurement:
• Take a strategic approach to procurement; using “spend analysis” to develop a better picture of what we’re spending, identify opportunities to leverage buying, save money, improve performance.
• Expand P card program – increase single limit transaction
• Explore opportunities to target strategic overseas suppliers: spend >$10M annually
Evaluate Supply Chain Finance opportunities
Conduct a cost benefit analysis to determine if current AP outsourcing process is effectively reducing costs vs. outsourcing the entire process through our banking partners.
Maximize Working Capital
Integrate Evaluate
Audience Q & A
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“The Impending Death of the Paper Check”, Accounts Payable Automation Survey, December 10, 2010
Published by APQC
http://www.apqc.org/knowledge-base/download/223662/K02521_FM_AP%20Automation%20US%20Bank.pdf
Bibliography
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