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Payment Management: Improve Your Financial Gains
05 . 04 . 2017
Neil D. McHugh, CTP, CPCP
Segment Manager
The Bottom Line
Enhance Your Bottom Line
with Payments
2
1. Financial Impact of Payments
2. Best-in-Class Payment Management Practices
3. Emerging Payment Technologies
3
Discussion Topics
4
Financial Impacts
Cash Conversion Cycle (CCC)
DIO Days Inventory
Outstanding
DSO Days Sales Outstanding
DPO Days Payable Outstanding
CCC Cash Conversion
Cycle
Net Working Capital (WC)
Current Liabilities
Current Assets
Net WC
5
Additional Impacts
Cost / Efficiency / Productivity
Payment Risk
Supplier Relationships
Customer Loyalty
6
Adding Shareholder Value
Shareholder Value
Revenue Growth
Volume
Price Realization
Operating Margin
Selling, General & Admin (SG&A)
Cost of Goods Sold
(COGS)
Income Taxes
Asset Efficiency
Property, Plant & Equip.
Inventory
Receivables & Payables
Expectations
Company Strengths
External Factors
Source: Deloitte, online in the public domain
1. Impact of Payments & Opportunities to Create Value
2. Best-in-Class Practices for Payment Management
3. Emerging Payment Technologies
7
Discussion Topic 2
8
Order-to-Cash (O2C) Strategy
Order-to-Cash
Analyze
Order
Credit Management
Fulfillment
Delivery
Payment
Invoice
Cash Application
AR
Source: Modeled after a workflow diagram from the IOFM
GL
9
Procure-to-Pay (P2P) Strategy
Procure-to-Pay
Analyze
Supplier Selection
Approveü .
Order
Receive
3-Way Match
Invoice
Pay
AP
Source: Modeled after a workflow diagram from the IOFM
Payment Strategy Design
10
1
2
3
4
Roles and Responsibilities
5
Supplier Segmentation
Payment Formats and Utility
Delivery Channels
Fraud Protection and Liability
Source: AFP Payments Decision Guide to Creating a Payables Strategy, Part 1, 2013
Supplier Segmentation
11
n Supplier Type
n Frequency
n Spend
n Supplier Contract
– Price
– SLAs
– Payment Terms
– Payment Type
n Experience / Relationship
Preferred
Commodity
Strategic
Competitive
Supplier Type Matrix Example
Value
Ris
k
Source: AFP Payments Decision Guide to Creating a Payables Strategy, Part 1, 2013
12
Payment Conditions
DIO
DPO
DSO
CCC
Supplier Payment
Customer Payment
Acquire Inventory
Customer Sale
For the Sophisticated
13
Supply Chain Finance
Dynamic Discounting
Consumer Buying Behavior
14
Problem / Need
Search
Evaluate
Decide Post Purchase Behavior
Where is the
Payment?
15
Take a Broader View
Outbound Logistics
Marketing & Sales
OperationsInbound Logistics
Service
Firm Infrastructure
Human Resource Management
Procurement
Technology
Value
Source: Based on Competitive Advantage: Creating and Sustaining Superior Performance, Michael Porter, 1985
Primary Activities
Support
Activi
ties
1. Impact of Payments & Opportunities to Create Value
2. Best-in-Class Practices for Payment Management
3. Emerging Payment Technologies
16
Discussion Topic 3
17
Sizing the Payments Industry
It's
HUGE!
Source: McKinsey U.S. Payments Map, Release Q1-2015; U.S. Bureau of Economic Analysis (BEA)
Payments Innovation & Fintech
18
Over $100 Billion Invested in 3 Years
Will Investments Continue to Decline?
Payments Innovation & Fintech
19Source: McKinsey Panorama Fintech Database
Distribution of Fintech Activity
UBIQUITYSPEEDSECURITYEFFICIENCYGOVERNANCELEGAL
THE FEDERAL RESERVE FASTER PAYMENT TASK FORCE
The Federal Reserve
Source: The Federal Reserve Bank, public domain 20
Source: The Clearinghouse, U.S. Real-Time Payments Business Playbook, March 2016
Real Time Payments Emerge
21
RTP Characteristics & Use Cases
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RTP Characteristics
1 24/7/365 Model
2 Immediate Availability
3 Payment Certainty
4 Ubiquity
5 Extensibility / Messaging
6 Account Data Privacy
7 Convenience
8 Cash Flow Control
9 Adaptability
10 Global Standards
Source: The Clearinghouse, U.S. Real-Time Payments Business Playbook, March 2016
The Road Ahead
23
Same Day ACH Debits
Future of Fintech
Real-Time Payments
Distributed Ledger
1. Opportunity in Payment Management
2. Payments are Part of the Experience
3. Technology will Define the Future
24
Summary
Confidential to TD Bank
You don’t have to be great to start,
but you have to start to be great.
- Zig Ziglar
25
Call to Action
Confidential to TD Bank
