Comprehensive Check to Electronic Payment ServicesTransforming Your Business from Paper to Electronic

Presented by:

Dawn Haddock Senior Vice Present, Senior Product Delivery Officer

Government Banking

&

David RandolphVice Present, Card Account Manager

Government Banking

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DAWN HADDOCKSenior Vice PresidentSenior Treasury Solutions Officer

Email: dawn.e.haddock@baml.comTelephone: 602.523.4113Fax: 972.728.4436

Bank of America201 E Washington StPhoenix, AZ 85004

DAVID RANDOLPHVice PresidentCard Account Manager

Email: david.a.randolph@baml.comTelephone: 602.523.6996Fax: 214.416.0772

Bank of America201 E Washington StPhoenix, AZ 85004

Why check to electronic?

Where can you use electronic payments?

What is next?

What are the options?

What project is the “best bang for the buck”?

Vendor Enrollment

Questions?

Agenda

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Agenda

Why check to electronic?

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Why check to electronic?

On July 14, 2010, Wachovia Bank won a $154,000 lawsuit over a customer that did not implement Payee Positive Pay when the bank made the service available.

A Pennsylvania judge's ruling in a recent check-fraud case could wind up coercing more small businesses into buying anti-fraud protection services from their banks. The case was Schultz Foods Co. vs. Wachovia Corp., which stemmed from Wachovia's decision in 2005 not to cover a nearly $154,000 loss Schultz incurred due to check fraud. After Wachovia covered its losses on three previous occasions, Schultz assumed Wachovia would have its back after a fourth time. But Wachovia balked, triggering the lawsuit. In August, a federal court sided with Wachovia and threw out the case, largely due to a specially crafted deposit agreement from Wachovia that required Schultz to pay for certain anti-fraud services in order to be covered for losses. - US Banker November 2010

Labor intensive

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Cost of paper is rising

Why check to electronic?

TIPRA: Tax Increase Prevention and Reconciliation Act of 2005

Who does it impact?

– Effective January 1, 2013

– Government entities

– $100 million AP budget

– Vendor payments via ACH, Wire and check/warrant

– Vendors you are paying $10,000 a transaction or more

– Remit 3% to the IRS to be claimed by vendors during their tax filing

– Card is exempt at this time

1099 Reporting

Check, ACH, Wire and check/warrant are 1099 reportable

Card payments are not subject to 1099 reporting as of January 1, 2011

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IRS Regulations

Where can you use electronic payments?

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Where can you use electronic payment?

Operational Expenses / Accounts Payables

Payroll – 10-12% of the work force will never have a bank account

Seasonal Workers

Jury Payments

Refunds

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What funds do you disburse?

What is next?

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Picking a project

Determine cost of processing a paper payment for your organization

Gather Bank Financial Benefit Models (see handout)

Rate from highest to lowest what payment options will benefit your organization and your vendors most today, and in the future

Set goals for each payment option Overall spend volume to transition Projected breakdown by spend commodity Spend by order mechanism Cost savings Vendor sourcing goals Discounts lost Financial incentives received

Obtain leadership support / designate project champion

Payment Analysis

Vendor Contact Campaign (if needed)10

What are the options?

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Option One – Purchase Card

Focus on departmental spending

Focus on commodity spending - Business services, Office supplies, Fleet, IT/Telecommunication, Courier services, etc

Increase number of cardholders

Increase spend limits

Review expense and reimburse data to identify employees that may benefit from a „travel card‟

Reoccurring Payments – Phone, Utility, Rental

Maintenance and Repair – Office Equipment, Furniture

Professional Services – Consulting, Legal

Periodically Review Purchase Orders12

Extracting greater value from your Purchase Card Program

Option One – Purchase Card

Mandate Card based off criteria type Commodity type Dollar size of transaction Frequency of transaction

Incorporate Card acceptance into supplier contracts

Incorporate Card into eProcurement application

AP Payment Analysis Total spend by payment method Cardable spend Vendors paid by multiple payment options Department/Cost Center spending Consultation on best practices and technology to maintain control

Evolve your Card program

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Extracting greater value from your Purchase Card Program

Option Two – Automated Card AP Payments

Paying with a ghost card:

Automated Card AP payment solutions allow organizations to convert paper AP payments to electronic payments utilizing the Card network

Partner with financial institutions to analyze paper based vendor payments to identify opportunities for conversion

Benefits to You -

Elimination of expenses associated with check i.e. printing, mailing, bank fees, fraud, etc

Opportunity to extend float on payments to suppliers without negatively impacting DPO

Precisely time disbursements and accurately forecast short term cash

Provides revenue share opportunities with your financial institution

Benefits to Your Vendors -

Converts the payment to electronic settlement thereby eliminating processing fees (internal and/or bank analysis charges) associated with accepting a check

Removes the mail float and funds availability factors from the collection process

Provides opportunity for Suppliers to reduce DSO without impacting your cash flow

Electronic delivery of the remittance information

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Option Three – Increase Electronic Vendor Payments

Paying with ACH:

After maximizing purchase card and automated card AP payments the next step is to look at the remainder of the paper.

Structure a conversion plan with bank partner:

Identify remaining paper payment vendors

Call vendors to collect their banking information for ACH payment

Benefits to You -

Displaces check costs associated with these payments

Reduces opportunity for fraud

Reduces time needed for reconciliation

Benefits to Your Vendors –

Options for no cost remittance information

Displaces check costs associated with these payments

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Option Four – Prepaid and Payroll Cards

Non-vendor related payments:

A card solution that helps government municipalities to integrate recurring electronic payments and further streamline disbursement administration

Targeted to underbanked recipients who do not have traditional bank accounts Deposit accounts are individually owned FDIC-insured accounts accessed by a

Visa-branded card Card Programs:

Visa Prepaid Debit Card– Accessed everywhere Visa debit cards are accepted, pinned point of sale

terminals and ATMs Visa Instant Issue

– Available for agencies with special needs for on-site card distribution Acceptance Point Options:

Visa Merchants – use at millions of locations worldwide Interlink® pinned point-of-sale – over 1 million locations Visa financial institutions for cash access via teller

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What project is the “best bang for the buck”?

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Options One – Purchase Card and Option Two Automated Card AP Payments!

Vendor analysis

Provide a vendor payment history file for the most recent 12-month period

– Include vendor name and address, total paid and number of payments per vendor

Provide data elements for robust cost savings analysis

Include your average cost of a check, direct check production costs and short term funds rate (float value)

Payment strategy

Bid limit

Mandate card

Card – Net 5 / ACH – Net 15 / Check-Net 30

Marketing strategy

Create a proposed marketing strategy for vendor enrollment

– Letter Campaign

Identify desired targets to begin campaign

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What does electronic payment automation look like?

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Vendor Enrollment

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Things to consider for vendor enrollment

Multiphase campaign accelerates enrollment of your vendors

Analysis

Vendor file is segmented and based on:

Most suitable payment method (card or ACH)

Vendor value (# transactions, logical payment groupings)

Facilitates a thorough review of proposed vendors/suppliers for each payment method

Execution

Approve a call script for calling campaign, assist with contact information for vendors in the card campaign

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Things to consider for vendor enrollment

Multiphase campaign accelerates enrollment of your vendors

Results: Vendor activation

You request card account, advise vendor of account number for use in their AR system

Vendors who decline card method become potential ACH recipients

Weekly report of new vendors method of payment selected

Vendors should be flagged appropriately in your AP system

Ongoing support

Electronic payments begin

New vendor welcome packet

Ongoing new vendor enrollment reporting

Specialized campaigns as requested

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Questions?

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