Leveraging technology from invoice to payment Jo Ellyn

Leveraging technology from invoice to payment Jo. Ellyn Powell Treasury Management Consultant Mary Johnston Treasury Management Consultant September 28, 2017 © 2017 Wells Fargo Bank, N. A. All rights reserved. For public use.

Procure to Pay

Typical procurement process – Inefficient and costly RPMG Research Corporation - 2014 Purchasing Card Benchmark Survey Results 2

The process starts WHERE Centralized | Decentralized HOW Electronic | Paper WHEN Timeliness WHO Multiple touchpoints RPMG Research Corporation - 2014 Purchasing Card Benchmark Survey Results 3

Receiving invoices 2015 USPS Fact Sheet 2015 Visa Benchmark Study 4

Invoices get into the AP system Gorilla Expense – April 2015 5

What if you could. . . achieve a 37% risk-free return on cash reduce invoice processing costs by 1 2 be best-inclass no questions asked

How does your AP shop stack up? Invoice processing time Invoice processing cost Early payment discount capture $9. 60 $4. 00 Best Average Bottom quartile In days $23. 30 From the Shadows to the Forefront: AP Automation and the Strategic Vision, Aberdeen, October 2013 7

Difference between Trailing and leading Trailing Leading Approval cycles Reactive Working capital management Proactive $$$ Costs to process $ Missed Early payment discounts Gained - Supplier relationships 8

Invoice Management Handling invoices, from arrival to payment

Market Analysis What’s Trending Leading Automation Goals Invoice Approval Workflow Electronic Invoicing 37% 17% Automated Payment Invoice Imaging 38% 8% Pay stream Advisors, Electronic Invoice Management: A Move to the Middle, Q 1, 2014 10

What is the net value of each solution? 11

Without Invoice Manager Suppliers Offices Accounts Payable Department 12 12

a simple vision connect clean capture 13

capture What it does § § § Makes workflow work Consolidates receiving stream Separates documents by type Allows for header and line detail Provides rules engine for validating, automating, and routing What it solves for Lost or missing invoices Excessive late payments Wrong or invalid vendor Miscellaneous charges 14

clean What it does § § § Routes invoices for approvals Supports GL coding Applies business rules Addresses exception handling Captures trends and patterns What it solves for § § Missing approvals Invalid GL codes Price and quantity mismatch Audit and reporting challenges 15

connect What it does Creates electronic invoices Maximizes discount capture Accelerates information exchange What it solves for § High storage and processing costs § Minimal discounts captured § Excessive status calls to AP 16

Consider the cost of not taking a discount 17

Consider the cost of not taking a discount 18

Consider the cost of not taking a discount 19

With Invoice Manager Suppliers Invoice Manager Accounts Capture | Clean | Connect Payable Department 20 20

Fully automated invoice-to-pay workflow 21

Supplier payments Commercial Cards ACH Wires Checks Remittance Supplier characteristics Terms Relationship Technology 22

Analyzing how you pay Average cost per transaction cost by payment type Payment method Paper Electronic Cost per transaction Paper checks $7. 15 Wire transfer $10. 33 ACH $4. 78 Commercial cards $3. 91 Potential savings with Card: $3. 24 per transaction Scott Pezza, William Jan, and Ankita Tyagi, "The E-Payables Solution Selection Report: A Buyer's Guide to Accounts Payable Optimization, " Aberdeen Group (October 2013). 23

Cost to the supplier Cost to Buyer? * Cost to Supplier** Value? Value Factors Check $7. 15 $33 ? ? ACH / DD $4. 78 $32 ? ? Wire / Electronic $10. 33 $43 ? ? Commercial Card $3. 91 $22 Vendor Reporting Spend Management Process Automation Compliance ? Expense Control Audit *Scott Pezza, William Jan, and Ankita Tyagi, "The E-Payables Solution Selection Report: A Buyer's Guide to Accounts Payable Optimization, " Aberdeen Group (October 2013). **Fully loaded cost per $500 Transaction Cash Back / Rebate? 24

Having a game plan - supplier analysis Collect vendor data Analyze data Define and deploy strategy Reduced payment issuance costs Working capital impact Payment discounts Card revenue share Supply chain finance Achieve results + + + 25

Once you determine method of payment, automate your payment process One file Your payables system Your bank Payee Major banks like Wells Fargo offer payment platforms such as Wells Fargo’s Payment Manager that can support multiple payment types in a single file. 26

Overview of the card industry Industry updates Payment trends Spend categories Hot topics Payment types Risk and fraud New technology RPMG Research Corporation - 2014 Purchasing Card Benchmark Survey Results RPMG Research Corporation - 2015 Electronic Accounts Payable Benchmark Survey Results 27

Virtual card benefits § Increased card spend § Reduction of cost § Improve working capital § Less risk of fraud § Streamlined reconciliation Savings can be as much as $22 2015 Electronic Accounts Payable Benchmark Survey Results; Market Trends and Best Practice Program Choices, RPMG Research Corporation, by Richard Palmer and Mahendra Gupta, Page 58. 28

Virtual card trends Average monthly spending on virtual cards has nearly tripled in the past 4 years The average virtual card transaction is more than Of the organizations currently not utilizing virtual cards, 30% plan to adopt virtual cards in the near future (1 – 3 years) Virtual card-using organizations expect spending to increase by 70% over the next 5 years $4, 700 (10 X the normal purchasing card transaction) 2015 Electronic Accounts Payable Benchmark Survey Results; Market Trends and Best Practice Program Choices, RPMG Research Corporation, by Richard Palmer and Mahendra Gupta, Pages 9 & 10. 29

Commercial cards are the fastest-growing Treasury Management service 66% Middle market companies have reported increased travel budgets from 2012 to 2016. Middle market purchasing card spending is expected to grow over 68% by 2018. Source: RPMG studies “Purchasing Card, EAP, & Travel Card Benchmarking Surveys” 2014, 2015, 2016 In 2015, only 39% of middle market companies are leveraging post invoice virtual cards. This leaves the remaining 61% with unrealized efficiencies. 30

Continue to evaluate your processes “Electronify” Payments Streamline Ordering Process Automate Receipt of Invoices Rationalize Suppliers Analyze Payment Methods 31

Impact to working capital Increase to Working Capital - based upon 12, 000 annual payments Payments converted to card Estimated rebate Payments converted to ACH Total 1, 000 $22, 000 $4, 700, 000 1. 25% $58, 750 5, 500 $2. 37 $13, 035 $93, 785 32

How we build your business case Efficiency Gains § Automated matching of PO invoices § Automated validation of approval controls § Integrated payment execution Error Rate Reduction § Automated data entry § Automated filing and archiving Visibility and Control § Reduce/eliminate disputes § Resolution with suppliers § Reduce/eliminate status inquiries from suppliers or internal partners Discount Capture § Early pay § Auto-sloping 33

Critical characteristics for success Effective Affordable Functionality that automates No cost supplier enablement No supplier fees Low implementation, monthly, and transaction fees Partner alignment, low risk No per user license fees No separate license for workflow, dynamic discounting 34

Success story Challenges – pre Invoice Manager 100% paper Inefficient, manual and decentralized processes Addressing resource demands of 20% CAGR Increased oversight and audit requirements Client Using Invoice Manager 35

Success story Outcomes – post Invoice Manager § 88% reduction in paper invoices § 75% reduction in AP time § Reduced keying errors and vendor inquiries § Streamlined and increased access to information (audit) “It was like hiring a body without…actually hiring a body. ” “I can’t think of a single company that could not benefit from doing this. ” 36

Thank you 37