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How to Maximize Discount Capture

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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

Published in: Business
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How to Maximize Discount Capture

  1. 1. HOW TO MAXIMIZE DISCOUNT CAPTURE Based on findings from the AP & Working Capital Increasing Revenues from Early Payments
  2. 2. Meet Your Experts HENRY IJAMS Managing Editor PayStream Advisors JOE HYLAND Chief Marketing Officer Taulia
  3. 3. 1 2 3 CURRENT STATE OF PAYABLES FINDINGS FROM THE REPORT 4 WHAT DOES “PERFECT” LOOK LIKE? Q & A Today’s Agenda
  4. 4. 1. CURRENT STATE OF PAYABLES
  5. 5. 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
  6. 6. Excess cash is earning a record LOW RETURNS
  7. 7. 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) 10% 8% 6% 4% 2% 0% 1990 1995 2000 2005 2010 $2.0 $1.5 $1.0 $0.5 $0.0 1990 1995 2000 2005 2010
  8. 8. Suppliers face a FINANCING GAP and predatory costs of CAPITAL
  9. 9. Suppliers have limited access to financing. Traditional supplier finance only serves the largest suppliers
  10. 10. Suppliers have limited access to financing. Traditional supplier finance only serves the largest suppliers Banks continue to enforce strict lending requirements
  11. 11. 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
  12. 12. Lack of connectivity DELAYS payments
  13. 13. 1 2 Inefficient buyer/supplier connections lead to no visibility into invoice process Average Time to Approve a Valid Invoice 55+ DAYS 3 Average U.S. Payment Terms 10 DAYS
  14. 14. And banks benefit from this INEFFICIENCY
  15. 15. BUYER Approves Invoice on Day 5 Invoice-Net 60 1
  16. 16. BUYER Approves Invoice on Day 5 Invoice-Net 60 BANK Buyer Earns 0.75% APR until Due Date 1 2
  17. 17. SUPPLIER Invoices Customer BUYER Approves Invoice on Day 5 Invoice-Net 60 BANK Buyer Earns 0.75% APR until Due Date Suppliers Borrow at 20+% APR 1 2 3
  18. 18. 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? !"# $%…
  19. 19. !" #$%&q'(%") W(* +f D,-+'$%&$.: Pay your invoice before day 10 or miss out on a discount. 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0% 2% 10 Net 30 0 10 Days 20 Days 30 Days
  20. 20. The New, Advanced Way: DYNAMIC DISCOUNTING
  21. 21. C(p%'r" ( ),-+'$% "v"$ (/"r 10 )(*0! 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0% $ $ 0 10 Days 20 Days 30 Days
  22. 22. 0 DAYS invoice U0" p(*(b12 3 ($ +pp+r%'$&%* f+r r"v"$'". AVERAGE PAYMENT TERMS (DAYS) 10-15 DAYS approval 60 DAYS due date OPPORTUNITY Anheuser-Busch Hertz Apple Industry Average 120 DAYS 60 DAYS 45 DAYS 56 DAYS
  23. 23. G"$"r(%" r"v"$'" w&%4 %4" w&$-w&$ 0+1'%&+$. Buyers save money and improve return on cash by paying suppliers early Suppliers access less expensive financing alternatives by accepting time-variable Dynamic Discounts
  24. 24. 2. FINDINGS FROM THE REPORT
  25. 25. What Paystream Advisors AP & Working Capital Survey When Q1 2014 Who More than 300 AP, treasury, and procurement professionals
  26. 26. | Company Size 26.2% 11.1% 9.5% 7.1% Job Title | 15.1% 5.6% 10.3% 15.1% Under $50M $50M-$100M $100-$250M $250-$500M $500M-$1B $1B-$2.5B $2.5B-$5B Over $5B Survey covered businesses of all sizes 49% 13% 13% 12% 10% 10% 8% 8% 7% AP Manager AP Clerk VP Finance Procurement AP Director Controller CFO/President/Chairman Treasurer Other Respondents were mostly in AP, Finance and Procurement
  27. 27. Dynamic Discounting Adoption &'()#$(* $+ ,-$.b$*/ "# 63% "**0"- /1(2#3 1"#4 15% 24% 3% 5% 8% 33% 82% 71% 59% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2012 2014 2014 Current Using Implementing in next 6 months Not Using
  28. 28. Top Reasons for Missed Discounts I*4ffi,$4*,$4+ $* )"6"b-4+ ,(.4 "# " ,7#! 15% 10% 26% 7% 7% 35% 0% 5% 10% 15% 20% 25% 30% 35% 40% Decentralized Invoice Receipt Lost Invoices Lengthy Approval Cycles Large Number of Exceptions Missing Information on Invoices Manual Routing of Invoices
  29. 29. Dynamic Discounting solutions ease the pain of missing early payment discounts through centralizing processes, handling exceptions, and streamlining the invoice delivery and approval process.
  30. 30. Primary Buyer Dynamic Discounting Concerns O1/"*$8"#$(*+ b4-$494 +0))-$41+ 2$-- 14+$+# D6*".$, D$+,(0*#$*/ 26% 15% 27% 7% 25% 30% 25% 20% 15% 10% 5% 0% Internal Resistance Security Concerns Supplier Resistance Banking Difficulty Integration Difficulty
  31. 31. Top Reasons For Using ePayments :0641+ "14 %(,0+4' (* ,7# "*' ,6,-4 #$.4 29% 25% 45% 30% 20% 49% 80% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Lower processing costs Reduction in P2P cycle times Reduction in fraudulent/lost checks Increased vendor satisfaction Increase in on-time payments Increased ability to capture early payment discounts Reduction in duplicate payments 4P"6.4*#+ ",# "+ "* 4*"b-41 %(1 D6*".$, D$+,(0*#$*/
  32. 32. When mov ing towards dynami c discounting, setting goals is a critical ingredient. PayStream has developed the Perfect Payment Index to help in this process.
  33. 33. Perfect Payment Index (PPI) PPI 0%r&v2 %+ b(1($-" p(*5"$% "ffi-&"$-* & w+r7&$. -(p&%(1 $"")0 % on time Ÿ % paid Ÿ % of discount potential electronically captured 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%
  34. 34. 3. WHAT DOES “PERFECT” LOOK LIKE?
  35. 35. 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
  36. 36. 95K eInvoices Payment Errors 178K 226K 312K 403K 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 2002 2005 2008 2011 2014 0.01200% 0.00500% 0.00400% 0.00008% 0.014% 0.012% 0.010% 0.008% 0.006% 0.004% 0.002% 0.000% 0.00008% 2002 2005 2008 2011 2013
  37. 37. 72% On Time Payments Discount Efficiency 78% 81% 94% 97% 120% 100% 80% 60% 40% 20% 0% 2002 2005 2008 2011 2014 73% 87% 90% 95% 95% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2002 2005 2008 2011 2014
  38. 38. Early Payment Discount Capture Dynamic Discounting was Implemented 1M 2M 4M 32M 46M 43M 42M 50,000,000 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 0 2002 2005 2008 2011 2012 2013 2014
  39. 39. Questions?

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