Centralizing Your Automated Payments

Centralizing Your Automated Payments Program

AMERICAN EXPRESS WHITEPAPERS

A report prepared by Global Corporate Payments

Centralizing Your Automated Payments Programis published by American Express.

Additional information can be found at: http://business.americanexpress.com/us/payment-services

is report was prepared by Federated Media in collaboration with American Express.e report was written by Michelle Goodman and edited by Michelle Rafter.

Copyright ©2013 American Express, which is solely responsible for its content. All rights reserved. No part of this report may be reproduced, stored in a retrieval system,or transmitted in any form, by any means, without written permission.

Centralizing Your Automated Payments ProgramAMERICAN EXPRESS WHITEPAPERS

Page 2 | Global Corporate Payments | August 2013



Table of Contents

Introduction 4

Payment Challenges at Mid-sized and Large Companies 5

Benefits of Using an Automated Payments Program 6

Best Practices for Centralizing an Automated Payments Program 8

Conclusion 10

American Express Corporate Payment Programs 11

Case Study: Transplace Uses BIP for Payment Reconciliation 13A Texas logistics provider see better control over vendor payments and daily cash flow.

Case Study: Knox Community Hospital Uses BIP to Minimize Costs 14A 115-bed not-for-profit institution in Ohio turns to buyer initiated payments to automate the accounts payable process.

Introduction

Companies today pay vendors using a number ofprocesses and payment methods across multiple financialinstitutions. Many companies have yet to consolidatepayments through a single platform or with a singleprovider to increase control, efficiency and transparencyof their payables.

By default, paper remains the medium of choice for 50percent of outgoing payments and 77 percent of incom-ing invoices (see Fig. 1)1, according to a 2011 report one-payables by Aberdeen Group2, the Boston technologyresearcher. Given the many advantages of automating,that’s a mistake. “It’s about 30 percent cheaper to processan electronic payment than a paper-based check, and

about 25 percent faster,” says Scott Pezza, an AberdeenGroup analyst.

Sticking with paper when electronic options abound is“foolish,” says Jonathan Casher, a senior consultant withthe Institute of Management & Administration3, thebusiness management researcher. Automation doesn’tjust save companies money, says Casher, president ofCasher Associates, Inc.4, a Newton, Massachusetts,consulting firm. “It improves control,” he says. “It elimi-nates finance and late charges, and it improves a com-pany’s credit rating and score. And you can usuallynegotiate better deals with suppliers when they knowyou have a good reputation for paying on time.”

Savvy organizations can reap substantial rewards from automating payments. An overwhelming majorityof 116 mid-sized and larger companies in the 2011Aberdeen e-payables study cited automation as theirtop strategy for improving accounts payable processes.In fact, 41 percent of companies polled said they had



Continued on next page

Incoming invoices that are paper-based

Outgoing payments made by traditional paper check

Fig. 1 – The AP Paper ChasePaper remains prevalent in accounts payable departments of small, mid-sized and large businesses, according to a 2011 Aberdeen Group survey.

77%

50%

PercentageDocument

Source: E-Payables 2011: Efficiency, Visibility and Collaboration in the Financial Supply Chain, Aberdeen Group, September 2011

It’s about 30 percent cheaper to process anelectronic payment than a paper-based check,and about 25 percent faster.

Scott Pezza, analystAberdeen Group

“”

1 http://bit.ly/I5QweO2 http://www.aberdeen.com3 http://www.ioma.com4 http://www.casherassociates.com

Introduction (cont.)

decreased use of checks in the previous two years, and71 percent anticipated cutting check use even furtherthrough 2013.

Companies can further accelerate payment automationby consolidating payments through a single platform orwith a single provider. By reducing the number of inter-mediaries and leveraging a web-based portal to improvevisibility of their payments, companies can formulate aplan to reduce paper checks and invoices, while increas-ing the use of electronic payment methods.



5 http://bit.ly/IzHs4q

Payment Challenges at Mid-sizedand Large Companies

Companies of all sizes are frustrated by manual pay-ment procedures and cumbersome workflows. Some of the top obstacles accounting departments face are:

■ Inefficiencies. Processing invoices involves muchmore than cutting checks. It also means matching invoices with purchase orders, entering data into accounting programs, storing invoices, obtaining

payment approvals and fielding payment inquiriesfrom suppliers. Paying by check takes two to threedays more than paying by corporate card and auto-mated clearing house (ACH) payments, according toAberdeen 5. Time isn’t the only issue. e more man-ual steps in the payment process and the more per-sonnel involved, the more room for error or fraud.

■ Bloated costs. Processing a check costs $7 comparedwith $4.78 to pay by ACH and $3.91 by corporate card,according to Aberdeen. Checking and postage feesaren’t solely to blame for the higher cost of manualprocessing. Considerable man hours are required. Mis -placed invoices, incorrectly keyed data and other mis-takes eat up valuable time, further increasing processing

costs. Moreover, delays in the processing cycle can re-sult in late fees and forfeited early-payment discounts.

■ Lack of controls. Earlier this year, when Aberdeensurveyed 60 single- and multi-region companies abouttheir treasury management concerns, 79 percentsaid they wanted to improve their ability to accurately

This report looks at:■ Payment challenges at mid-sized and large companies■ Benefits of using an automated payments program■ Best practices for centralizing an automated payments program

■ An explanation of American Express Corporate Payment Programs

■ How one organization benefits from American ExpressP-Cards and vPayment

When Aberdeen surveyed 60 single- and multi-region companies about theirtreasury management concerns, 79 percent said they wanted to improvetheir ability to accurately forecast cash flow.


Payment Challenges at Mid-sizedand Large Companies (cont.)

forecast cash flow6. “A lot of companies don’t havethat degree of control,” Pezza says. Handling payablesby paper makes tracking daily cash flow particularlydifficult. “Once the PO is matched to the invoice, itjust gets paid when it gets paid,” regardless of the op-

timum payment date, he says. “If you have a discountthat’s possible to capture but the next check run isn’tfor a week and that puts you past the window, youmiss out.”



6 http://bit.ly/J4n3j8 7 http://bit.ly/Jq8Duo


Benefits of Using an AutomatedPayments Program

Automated payment systems help organizations kickthe paper habit, streamline procure-to-pay processesand spend money more strategically.

Corporate cards and corporate purchasing cards, orP-Cards, help organizations automate payments byusing one card account to pay multiple vendors. e or-ganization pays a single monthly bill to the card issuer,eliminating the need to cut and mail multiple monthlychecks. In many cases, it eliminates the need for pur-chase orders altogether.

Electronic payment methods such as AmericanExpress’ BIP and vPayment offer larger companies with

higher volume expenditures additional control overhow they make those payments. Web-based buyer initi-ated payment (BIP) programs let organizations deposit

payments on the date of their choosing directly intosuppliers’ bank accounts. Organizations can integratevPayment systems with AP or procurement tools, as-signing a unique account number to each payment andlimiting its value and date.

Automated payments programs also can help mid-sizedand large companies:

■ Increase efficiency. Automating accounts payablemore than doubles productivity, according to IOMA’s2012 AP Automation Report7. Even if accountspayable is paying promptly, there’s a 30- to 40-daycycle from the day an invoice is received by a com-pany until it is posted by accounts payable, IOMA’sCasher says. “In an automated world, if an invoicegoes to accounts payable electronically, that timeframe can be close to zero,” he says. Astute companies

In an automated world, if an invoice goes toaccounts payable electronically, that timeframe (for payment) can be close to zero.

Jonathan Casher, senior consultantInstitute of Management & Administration

“”

Automated payment systems help organizations kick the paper habit, streamline procure-to-pay processes and spend money more strategically.

Benefits of Using an AutomatedPayments Program (cont.)

are taking note. In Aberdeen’s 2011 study of businessattitudes toward e-payables, 62 percent of respon-dents said demand for greater operational efficiencywas driving their focus on e-payables (see Fig. 2).

■ Drive savings. In that same Aberdeen report, 61 per-cent of companies surveyed said they were switchingto automated payments to cut transaction costs.Besides slashing check and postage costs and reduc-ing manpower and errors, paying electronically helpsensure invoices are paid on time, which reduces latepayment and financing fees. For example, using aP-Card to pay suppliers reduces the average transac-tion cost by as much as 60 percent, according to aseparate Aberdeen report8.

■ Improve cash management. Lack of predictable cashflow was named by nearly one in five respondents inAberdeen’s e-payables survey as a leading reason toautomate. No longer bound by weekly or biweeklycheck runs, companies using electronic payments canhold onto working capital longer, take advantage ofearly-payment discounts or pay early simply to im-prove supplier relationships. “Some people might stillchoose to batch payments,” Aberdeen’s Pezza says.“But it gives you the control to make those decisionson your own rather than having them made for you.”

■ Keep vendors and suppliers happy. Smart compa-nies know the value of keeping business partners sat-isfied. Nearly 200 AP departments that Aberdeen



8 http://bit.ly/IS2TOa


Stakeholder demand for improved operational efficiency

Corporate mandate to reduce overall payment transaction costs

Lack of predictability of cash flow

Growing risk of payments fraud

Compliance with Sarbanes-Oxley and other regulatory requirements

High invoice payment error rate

Fig. 2 – Pressures Driving Companies to Adopt E-PayablesBusinesses of all sizes cited stakeholder demands, erratic cash flow and other reasons for switching to automated payments, according to a 2011 Aberdeen Group survey.

Source: E-Payables 2011: Efficiency, Visibility and Collaboration in the Financial Supply Chain, Aberdeen Group, September 2011

19%

15%

11%

10%

Percentage of RespondentsPressure

62%

61%

Benefits of Using an AutomatedPayments Program (cont.)

surveyed earlier this year said maintaining and im-proving supplier relationships was a top priority, ri-valed only by paying on time and avoiding latepayment penalties. “If you have control, you can makethe decision that, for a certain supplier critical in yoursupply chain, it’s much more important to get thefunds to them” right away, Pezza says.

■ Improve payment visibility. Pinpointing how faralong an outgoing or incoming payment is in the pro-cure-to-pay cycle is as easy as checking the onlinedashboard of an automated system. Buyer initiatedpayment (BIP) systems, for example, allow non-accounting personnel, vendors or suppliers to go online to check the status of a payment. In addition,

analytical tools give buyers a more detailed view ofwhere and when they’re spending, offering valuableinformation they can use to negotiate better termswith vendors and suppliers.

■ Earn financial rewards or rebates. Some automatedpayment programs offer financial incentives that canboost a company’s bottom line. Companies that signup for corporate card programs, for example, canearn reward points and cash incentives on every dol-lar spent. Corporate card users often can redeempoints for travel, entertainment and retail items, orapply them to their card balance. P-Cards and BIPyield financial rebates based on purchase volumes.




Best Practices for Centralizing anAutomated Payments Program

Depending on a company’s starting point, switching to electronic payments can take weeks, months orlonger. “It’s important to focus on the process first,”Pezza says. e more efficient and better documented a company’s accounting processes, the easier the moveto automation will be.

To ensure a smooth transition, industry experts offerthese tips:

■ Secure an executive sponsor. Initiatives to automatepayments that are driven by a company’s CFO orother financial executive have the best chance of suc-ceeding. e project sponsor has to make a business

case for going paperless and quell concerns about the transition brought up by other business units,vendors, suppliers and consultants.

■ Involve stakeholders early. Include key players in thetransition process at the research and planning stage,including the company controller, accounts payablemanager, purchasing and IT. Besides offering valuableinput, their understanding of the benefits of automa-tion will help minimize any resistance to change.Tapping outside resources early on, such as the ITvendor managing the company’s ERP system, alsohelps identify and resolve project hiccups before theybecome roadblocks.

Best Practices for Centralizing anAutomated Payments Program (cont.)

■ Assess current metrics. Nearly one in five organiza-tions surveyed by Aberdeen Group said they didn’tknow how much it costs them to process an invoice 9.But without that kind of accurate benchmark, a com-pany can’t make a convincing business case for au-tomation or measure the return on investment later.To get started, solicit stakeholders to measure manualprocessing costs. ese metrics, which vary by com-pany, include bank fees and postage, as well as timespent entering data, receiving invoices, matching purchase orders, approving payments, correctingmistakes, fielding supplier calls and following up onlate receivables.

■ Understand competing priorities. Choose when toimplement an e-payment initiative wisely. To avoidcompeting for funding and stakeholder attention, investigate whether other companywide changes are in the works. If, for example, the company is due toupgrade its ERP system in the next six months—a project that’s bound to monopolize the IT depart-ment’s time—an automated payments program wouldhave to take a back seat until the other work is done.

■ Automate payables first. Automating payments in stages is more affordable than going paperlessovernight. Because the largest financial return lieswith paying vendors and suppliers electronically, itmakes sense to start there. Not only does writingfewer checks reduce bank fees, it reduces the man-power needed to issue payments. Companies canthen invest money saved in automating receivables.

Most vendors and suppliers appreciate the speed andconvenience of receiving e-payments. “en you can say to them, ‘Now that I’ve made life easier foryou, what can we do to make life easier for me?’”Casher says. is puts companies in a better positionto negotiate early-payment discounts, high-volumepurchasing discounts or automated receivables.

■ Approach top-tier vendors and suppliers first. Bestrategic about which vendors and suppliers you ap-proach to accept automated payments and when.Start with top-tier vendors and suppliers integral todaily operations, such as a raw materials provider

that’s critical to your manufacturing process, or sup-pliers with whom you spend the most money or havethe highest volume of transactions. Work with an au-tomated payments provider to identify top vendorsand suppliers that already accept automated pay-ments. An automated payments provider also canhelp convince vendors and suppliers to accept e-pay-ments and coach them through the setup process.

■ Get business partners to buy in. Inform suppliersand vendors of your upcoming switch. List advan-tages they’d gain by accepting electronic paymentsand create a communications strategy to promotethose benefits. Set and measure vendor enrollmentgoals. If needed, enlist your payment platformprovider’s staff to supply outreach materials and othersupport to help convince reluctant vendors to makethe switch. Some platform providers also can collect




Initiatives to automate payments that are driven by a company’s CFO or other financial executive have the best chance of succeeding.

9 http://bit.ly/J9ra1I

Best Practices for Centralizing anAutomated Payments Program (cont.)

and update vendors’ banking information for you.Provide ongoing support to vendors who have joinedand continue reaching out to those who haven’t.

■ Carefully consider payment providers. Look for a provider who can provide tightly integrated, in-house supplier enablement teams that can help speedmigrating your vendors and suppliers to electronicpayments.

■ Find easy ways to reduce paper invoices. Convinc -ing vendors and suppliers to switch from submittingpaper invoices to electronic ones may be a harder sellthan convincing them to accept electronic payments.But paying partners with corporate cards or a P-Cardhelps reduce incoming invoices by consolidating mul-tiple charges into one monthly bill. For some compa-nies, electronic reconciliation tools such as vPaymentfrom American Express system can help eliminate theneed for supplier invoices altogether.



Conclusion

Automated payment methods such as corporate cards,purchasing cards, virtual cards and B2B payment plat-forms such as PAYVE® from American Express makeAP departments more efficient. Not only do electronic payment methods speed the procure-to-pay cycle, theyreduce processing costs, help companies avoid late payment and financing fees and keep vendors and suppliers satisfied.

Centralizing automation on related payment methodsalso makes it easier for organizations to schedule andtrack payments, giving them greater control over work-ing capital. Finally, adopting such streamlined paymentmethods means key accounting personnel have moretime to spend on higher-value activities.

American Express Corporate Payment Programs

Automating the payment process is a proven way to increase AP productivity and drive savings. AmericanExpress offers a suite of automated payment systemsthat help companies reduce transaction costs, gaincontrol over spending and hold onto cash longer. issuite includes the American Express® Corporate Card,American Express® Corporate Purchasing Card,American Express® Buyer Initiated Payments (BIP) and American Express® vPayment.

American Express Corporate Card

Corporate Cards help businesses pay and manage expenses efficiently. Corporate Cards let organizations:

■ Reduce the use—and cost—of cutting checks to vendors and suppliers.

■ Pay expenditures on a 30-day billing cycle while allowing vendors to be paid by American Express in their preferred timeframe.

■ Set spending and cash access limits for individualCards.

■ Specify company, individual or shared billing and liability for each Card issued.

■ Use one integrated online tool to view all Card spend-ing and manage payment reconciliation.

■ Earn one Corporate Membership Rewards® point for every eligible dollar charged on enrolledAmerican Express® Corporate Cards. ese pointsare redeemable for gift cards, merchandise, air travel,hotel stays and more10.

American Express Corporate Purchasing Cards

Corporate Purchasing Cards help companies controlhow, when and where employees spend money. Akin to credit cards, but with enhanced features for busi-nesses, Corporate P-Cards let organizations:

■ Reduce the use—and cost—of issuing purchase orders and paper checks.

■ Optimize working capital by paying for purchases on a 30-day billing cycle while allowing vendors to bepaid by American Express in 14 days.

■ Set spending limits by supplier, industry, commodity,transaction or employee.

■ Issue Cards to specific individuals or departments foruse with specific suppliers.

■ Use one integrated online tool to view Card spendingand manage payment reconciliation.

■ Earn rebates on purchases charged to their P-Card.



10 Terms and Conditions for the Membership Rewards® program apply. Visit membershiprewards.com/terms or call 1-800-AXP-EARN (297-3276) for more information. Participating partners and available rewards are subject to change without notice.


American Express offers a suite of automated payment systems that helpcompanies reduce transaction costs, gain control over spending and holdonto cash longer.

American Express Corporate Payment Programs (cont.)

vPayment from American Express

vPayment gives companies great control overpayables by letting them limit the dollar amount andtime period for each reconciliation. Built on a com-pany’s existing Corporate Card infrastructure, this customizable electronic settlement tool increases pay-ment security by assigning a unique account number to each Card transaction. vPayment also:

■ Enhances authorization controls and improves company compliance.

■ Reduces invoices and reduces the need to manuallykey, track or reconcile data.

■ Incorporates detailed buyer data such as PO or pay-ment numbers into each settlement.

■ Easily integrates with a company’s existing AP or pro-curement tools.

■ Works with any merchant that accepts AmericanExpress® Cards.

■ Requires no change to a merchant’s processes or system.

American Express Buyer Initiated Payment

Buyer Initiated Payments (BIP) allow organizations topay many invoices from multiple vendors in a singleelectronic transaction. Leveraging their existing ac-counting or enterprise resource planning (ERP) soft-ware, organizations periodically send electronic files toAmerican Express instructing it which vendors to pay when. American Express then issues electronic

payments to the appropriate vendors, along with detailed remittance information. (See Case Study:Transplace Uses BIP for Payment Reconciliation, on pg.13.) BIP also:

■ Streamlines the payables process.

■ Offers organizations great control over when theypay suppliers.

■ Optimizes working capital by extending days payableoutstanding.

■ Reduces the hassle and cost of issuing paper checks.

■ Helps increase payment security.

■ Generates annual rebates on payments made throughthe BIP program based on charge volume.

PAYVE from American Express

PAYVE from American Express is a digital paymentservice that centralizes processing of multiple paymentmethods through a single, easy-to-use platform to help companies streamline payment processes and improve working capital management. rough PAYVE,American Express combines insights, people and technology to help you transform payments into an opportunity to:

■ Improve working capital and cash flow management.

■ Streamline payment processes.

■ Accelerate migration from paper to e-payments.



Case Study: Transplace Uses BIP for Payment Reconciliation

Transplace 11, a Dallas, Texas, third-party logisticsprovider, has seen multiple improvements to its vendorpayment process since implementing American ExpressBuyer Initiated Payments (BIP) in September 2010.

e $1.2 billion company partners with more than 2,000transportation carriers to help manufacturers and retail-ers manage freight transportation more efficiently. Byusing BIP, Transplace has better control over its vendorpayments and daily cash flow, says Steve Crowther, thecompany’s executive vice president and CFO.

Before switching to BIP, Transplace paid all carrier invoices with checks, ACH payments or cards. To reconcile charge card accounts, the company emailedcarriers details on the invoices it wanted to pay on adaily basis. Each carrier would run Transplace’s chargecard through their point-of-sale (POS) terminal, oftentwo to three days later. For Transplace, the process usually led to a several-day delay in cash reconciliation.

BIP is changing that. Transplace now makes daily de-posits directly into the bank accounts of the 20 carriersin its BIP program, totaling approximately $1 million amonth. “Instead of carriers pulling the money from us,we’re pushing the money out to them,” Crowther says.As a result, Transplace has a clearer picture of its dailycash flow, he says.

e new system also reduces payment errors. Before, carriers that accepted card payments frequently expe-rienced invoice discrepancies. Now, thanks to BIP, “We’re no longer having differences in what they takeversus what we told them to take,” Crowther says. As a result, Transplace’s accounts payable personnel makeconsiderably fewer calls to carriers to talk over pay-ment discrepancies. “We’re probably saving about fourhours a week” in each AP staff member’s workload,Crowther says.

Transplace’s carriers are also happier. “We probablyhave tripled our enrollment from our previous pro-gram,” Crowther says. American Express has managedthe carrier enrollment program for Transplace, savingthe company time and hassle. “It was nice that we didn’thave to manage the campaign program,” says Crowther,who with American Express’ help, expects to enlistmore carriers into the BIP program soon.



11 http://www.transplace.com

Instead of carriers pulling the money from us,we’re pushing the money out to them.

Steve Crowther, executive vice president and CFOTransplace

“ ”

Case Study: Knox Community Hospital Uses BIP to Minimize Costs

As stewards of a community-owned, not-for-profit organization, executives at Knox Community Hospital12

in Mount Vernon, Ohio, know that any money theysave benefits their community.

at’s why, in 2009, executives at the 115-bed facilityjumped at the chance to use American Express®Corporate Cards for routine purchases. “ere reallywasn’t any downside,” says Danielle O’Brien, a certifiedpublic accountant and the hospital’s controller.

e Card was an ideal payment method for vendors whodidn't require purchase orders or generate invoices forpayment like office supplies bought online, maintenanceitems purchased at local home improvement centers,and gas purchased for hospital vehicles.

For more strategic purchases that did require purchaseorder and/or invoice approval prior to payment, O’Brien

arranged for the hospital to use Buyer InitiatedPayments (BIP) within PAYVE, American Express’corporate payment service. e electronic paymentmethod enables organizations automate payments

to suppliers without revamping their existing procure-ment processes. Instead, they send an electronic filewith payment instruction file to American Express,which sends payments to each vendor’s bank accountalong with detailed remittance information. BIP reduces manual accounts payable processes, freeing department personnel to tackle higher-value work andminimizing opportunities for errors.

“BIP has definitely freed up my staff’s time to concen-trate on other activities that provide more value to thehospital,” O’Brien says. “It’s automated a great deal ofwhat we do.”

Many of the hospital’s vendors have begun acceptingpayment through the Corporate Card or BIP. Some ap-preciate the convenience, and many enjoy getting paidin 15 days instead of the 30 to 45 days the hospital takesto pay through traditional accounts payable processes.In fiscal 2011, Knox spent roughly 10 percent of its $251million annual revenue on supplies and capital expendi-tures. In the 12 months ending April 30, 2012, just over$10 million of that went through the Corporate Card orBIP program.



12 http://www.knoxcommhosp.org


In fiscal 2011, Knox spent roughly 10 percent of its $251 million annual revenueon supplies and capital expenditures. In the 12 months ending April 30, 2012, just over $10 million of that went through its Procurement Card or BIP program.

BIP has definitely freed up my staff’s time so they may concentrate on other activitiesthat provide more value to the hospital. It’s automated a great deal of what we do.

Danielle O’Brien, controllerKnox Community Hospital

“”

Case Study: Knox Community Hospital Uses BIP to Save (cont.)

“e Card is ideal when we’re dealing with vendors thatexpect payment at the point of sale,” O’Brien says. “Wereally like BIP. We wish all vendors would enroll in thatprogram. It would allow us to automate more of ourpayments.”

For Knox, using American Express electronic paymentplans reduced some of the time and money associatedwith traditional, paper-check-based payables, andearned rebates. at’s a win-win that any not-for-profitorganization would happily take.





Learn how American Express Global Corporate Payments can streamline processes, increase visibility, leverage data and help generate savings for your company. Additional information canbe found at: http://business.americanexpress.com/us/payment-services

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Centralizing Your Automated Payments