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In Accounts Payable and Procurement departments, generating millions in early payment discounts is possible--but it isn't easy. PayStream's 2014 AP & Working Capital report uncovered the latest research from large corporations who have already implemented eInvoicing and Dynamic Discounting, or are interested in implementing in the next 6 months. In this webinar, you'll learn the top metrics on: 1. Why companies are missing discount opportunities 2. Top concerns with dynamic discounting 3. Companies' main benefits of ePayments
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Based on findings from the AP & Working Capital Increasing Revenues from Early Payments
HOW TO MAXIMIZE DISCOUNT CAPTURE
HENRY IJAMS Managing Editor
PayStream Advisors
JOE HYLAND Chief Marketing Officer
Taulia
Meet Your Experts
1 3 2
CURRENT STATE OF PAYABLES
FINDINGS FROM THE REPORT
4
WHAT DOES “PERFECT” LOOK
LIKE?
Q & A
Today’s Agenda
1. CURRENT STATE OF PAYABLES
The Situation LARGE CORPORATES are holding record amounts of cash generating low returns
SMALL BUSINESSES are in need of cash and have little to no access to capital – the #1 challenge for small businesses
TRADITIONAL SUPPLY CHAIN connectivity creates delays in supplier payment
Excess cash is earning a record
LOW RETURNS
Buyer Excess Cash
U.S. Non-Financial Companies’ Cash & Liquid Assets
Low Return on Cash
U.S. Interest Rate – 10-Year Treasury Rate
($ in tn)
0%
2%
4%
6%
8%
10%
1990 1995 2000 2005 2010 $0.0
$0.5
$1.0
$1.5
$2.0
1990 1995 2000 2005 2010
Suppliers face a
FINANCING GAP and predatory costs of
CAPITAL
Traditional supplier finance only serves the largest suppliers
Suppliers have limited access to financing.
Traditional supplier finance only serves the largest suppliers
Banks continue to enforce strict lending requirements
Suppliers have limited access to financing.
Traditional supplier finance only serves the largest suppliers
Banks continue to enforce strict lending requirements
“Long-tail” suppliers limited to factoring, p-cards and other expensive forms of finance
Suppliers have limited access to financing.
Lack of connectivity
DELAYS payments
Inefficient buyer/supplier connections lead to no visibility into
invoice process
Average Time to Approve a Valid Invoice
55+ DAYS
Average U.S. Payment
Terms
1 2
3
10 DAYS
And banks benefit from this
INEFFICIENCY
BUYER Approves Invoice
on Day 5
Invoice-Net 60
1
BUYER Approves Invoice
on Day 5
BANK
Invoice-Net 60
Buyer Earns 0.75% APR until
Due Date
1
2
SUPPLIER Invoices Customer
BUYER Approves Invoice
on Day 5
BANK
Invoice-Net 60
Buyer Earns 0.75% APR until
Due Date
Suppliers Borrow at 20+%
APR
1
2
3
Suppliers could check the status of their invoices online 24/7?
Suppliers could incentivize early payments?
You can address your suppliers’ needs for early payment?
You keep all the returns that would have normally gone to the bank?
There is a way for you to pay your suppliers less and have them thank you?
!at if…
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0%
0 10 Days 20 Days 30 Days
2% 10 Net 30
Pay your invoice before day 10 or miss out on a discount.
!e Antiquated Way of D,counting:
The New, Advanced Way: DYNAMIC DISCOUNTING
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0%
0 10 Days 20 Days 30 Days
$
$
Capture a d,count even a/er 10 days!
0 DAYS invoice
10-15 DAYS approval
60 DAYS due date
OPPORTUNITY
AVERAGE PAYMENT TERMS (DAYS)
Anheuser-Busch
Hertz
Apple
Industry Average
120 DAYS
60 DAYS
45 DAYS
56 DAYS
Use payabl2 3 an opportunity for revenue.
Buyers save money and improve return on cash by paying suppliers early
Suppliers access less expensive financing alternatives by accepting time-variable Dynamic Discounts
Generate revenue with the win-win solution.
2. FINDINGS FROM THE REPORT
What
Paystream Advisors AP & Working Capital Survey
Who
More than 300 AP, treasury, and procurement professionals
When
Q1 2014
| Company Size
Job Title |
26.2%
11.1%
9.5%
7.1%
15.1%
10.3%
5.6%
15.1% Under $50M
$50M-$100M
$100-$250M
$250-$500M
$500M-$1B
$1B-$2.5B
$2.5B-$5B
Over $5B
49%
13% 13%
12%
10%
10%
8%
8% 7%
AP Manager
AP Clerk
VP Finance
Procurement
AP Director
Controller
CFO/President/Chairman
Treasurer
Other
Survey covered businesses of all sizes
Respondents were mostly in AP, Finance and Procurement
Dynamic Discounting Adoption Adoption is climbing at 63% annual growth rate
3% 5% 8% 15%
24%
33%
82%
71%
59%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
2012 2014 2014
Current Using
Implementing in next 6 months
Not Using
Top Reasons for Missed Discounts Inefficiencies in payables come at a c7t!
15%
10%
26%
7%
7%
35%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Manual Routing of Invoices
Missing Information on Invoices
Large Number of Exceptions
Lengthy Approval Cycles
Lost Invoices
Decentralized Invoice Receipt
Dynamic Discounting solutions ease the pain of missing early payment discounts through centralizing processes, handling exceptions, and streamlining the invoice delivery and approval process.
26%
15%
27%
7%
25%
0%
5%
10%
15%
20%
25%
30%
Internal Resistance
Security Concerns
Supplier Resistance
Banking Difficulty Integration Difficulty
Primary Buyer Dynamic Discounting Concerns Organizations believe suppliers will resist Dynamic Discounting
25%
29%
45%
30%
20%
49%
80%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Reduction in duplicate payments
Increased ability to capture early payment discounts
Increase in on-time payments
Increased vendor satisfaction
Reduction in fraudulent/lost checks
Reduction in P2P cycle times
Lower processing costs
Top Reasons For Using ePayments Buyers are focused on c7t and cycle time
ePayments act as an enabler for Dynamic Discounting
W h e n m o v i n g t o w a rd s d y n a m i c discounting, setting goals is a critical ingredient. PayStream has developed the Perfect Payment Index to help in this process.
�% on time
paid electronically �% % of discount potential
captured
Perfect Payment Index (PPI) PPI striv2 to balance payment efficiency & working capital needs
Company
Payment Discounts / Incentives 1 2 3 4 Average
% Paid on Time (< 60 Days) 92% 92% 93% 91% 92%
% Paid Electronically (ACH or Card) 55% 52% 39% 68% 53%
% of Potential Discounts Captured 32% 76% 26% 74% 45%
Perfect Payment Index 16.2% 36.4% 9.4% 45.8% 27.0%
3. WHAT DOES “PERFECT” LOOK LIKE?
Pacific Gas & Electric
PG&E is one of the largest combination natural gas and electric utilities in the United States. Based in San Francisco, the company has approximately 24,000 employees who provide the transmission and delivery of energy.
Incorporated in 1905
Over 15 Million Customers
Service area covers 70,000 sq. miles in North. and Central CA
2013 Revenues of $15.6 Billion
95K
178K
226K
312K
403K
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
2002 2005 2008 2011 2014
0.01200%
0.00500%
0.00400%
0.00008%
0.00008% 0.000%
0.002%
0.004%
0.006%
0.008%
0.010%
0.012%
0.014%
2002 2005 2008 2011 2013
eInvoices Payment Errors
72% 78% 81%
94% 97%
0%
20%
40%
60%
80%
100%
120%
2002 2005 2008 2011 2014
73%
87% 90% 95% 95%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2002 2005 2008 2011 2014
On Time Payments Discount Efficiency
1M 2M 4M
32M
46M 43M 42M
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
50,000,000
2002 2005 2008 2011 2012 2013 2014
Dynamic Discounting was Implemented
Early Payment Discount Capture
Questions?
