Innovation, Efficiency, Simplicity. | 2015 Commercial Cards Conference | May 18 - 20, 2015
Helping to drive working capital benefits, process improvement and key
challenges across Treasury, Procurement and Accounts Payable
Rodrigo Sanchez, North America Commercial Cards B2B Product Manager
Citi® Integrated Payables Solutions
Treasury and Trade Solutions | Citi Commercial Cards
1
Innovation, Efficiency, Simplicity.
Table of Contents
1. Market Trends
2. Citi Integrated Payables Solutions
3. Best Practices
What Citi is hearing from clients
Key Themes
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Innovation, Efficiency, Simplicity.
Key Market Trends
Many organizations continue to focus on opportunities to drive operating efficiencies and
reduce working capital needs across their organizations.
Prolonged period of low interest rates
Liquidity Management
• Optimize liquidity structures, In House Banking
• Fee offset programs (ECR)
• Diverse investment options
Working Capital
• Automation & standardization of transaction workflow
• Supplier and Receivables finance
• Cards solutions
• Digitization of Order To Cash and payment processing
• Paper to electronic
• Tablet/Connectivity
• Data analytics
• Citi® Treasury Diagnostics
• Interactive Solutions
• Proactive support to mitigate risk
• Driver of working capital solutions
• Global coordination
• Country information (banking systems, regulation, etc.)
• Reporting tools
Increased operating efficiency Shift toward digitization
Leverage data and analytics to drive change
Increased regulation of the Banking sector Centralized operations / Global
coordination
Emergence of Digital/Mobile
Data Management Regulatory Reform Regional Treasury Centers/IHB
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Innovation, Efficiency, Simplicity.
Increasing Influence of the Corporate Treasurer
1947 1970 2015 2007
Treasury 1.0
Fragmented or informal function
Manual processes
Treasury 2.0
Centralization, SSCs, process outsourcing
Increased focus on transparency, control, automation
Increased technology and computing power
More sophisticated financial risk mgmt
Treasury 3.0
Strategic advisor more closely tied to business
Globalization and efficiency
Trading Partner / Supply Chain integration
Greater sophistication in risk / return optimization
Treasury influence
& ‘Value Add’
Source: The New Role of the Corporate Treasurer: Emerging Trends in Response to the Financial Crisis, International Research Journal of Finance and Economics, Issue 78 (2011)
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Innovation, Efficiency, Simplicity.
Pressures on Treasury to Deliver Supply Chain Improvements
75% 67%
29%
25% 33%
71%
A/P paymentprocesses
Supplier paymentterms
Supplier financingprograms
Current Focus Focus for Next 12-18 Mos
Sources: Survey of Treasurers’ Group of Thirty 2, Citi and The 2NeuGroup, September 2014
How focused are you on the following aspects of
supply chain and risk management?
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Innovation, Efficiency, Simplicity.
Physical and Financial Supply Chain Convergence
Within many firms, these trends are driving increased convergence of the physical and financial
supply chains – and creating a need for better cross-functional organization
Financial Supply chain
Procurement Treasury
Accounts
Payable
Payments
Physical Supply Chain
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Innovation, Efficiency, Simplicity.
Financial Supply Chain: Organizational Goals
Treasury & Finance
Accounts Payable
Strategic Sourcing & Procurement
Audit & Compliance
Technology
Key Stakeholders Typical Client Goals
Capital • Minimize capital
required to operate
business Working Capital
DPO
Process • Create efficiencies
and strengthen
governance Operational Expenses
Control
Cost • Reduce costs Net Expense
Net Income
COGS
Rebate
Risk • Manage business
risk
Supply Chain Stability
Sustainability
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Innovation, Efficiency, Simplicity.
Financial Supply Chain: Adoption Trends for Key Solutions
13% 11%
30%
22%
DynamicDiscounting
Supply ChainFinance
Planned for Next 12-24 Mo
Currently Use
1. Palmer and Gupta, Purchasing Card Benchmark Survey Results 2014, use of solution among Fortune 500 companies ;
2. Ardent Partners, ePayables 2014: The Quest
24%
37%
56%
2013A 2014E 2016F
Virtual Cards / ePayables1 Supplier Finance / Dynamic Discounting 2
Current & Expected Use of Solutions Focused on Payment or Discount Optimization
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Innovation, Efficiency, Simplicity.
Building Bridges across Functional Silos
Sources: National Association of Purchasing Card Professionals, online survey : “How Does Your Organization Pay for Larger Transactions?”, Sept. 19-Oct 10, 2014; EuroFinance,
Corporate treasury and commercial cards 5-click survey, October 2014
55%
46%
40%
21%
12%
Procurement A/P Pcard Admin Other Treasury
Procurement / A/P View Treasury View
62%
20% 18%
Owns or part ofdecision-making
Consulted No Influence
“How Does Your Organization Pay for Larger
Transactions?”
“What influence does Treasury have
on selection of commercial card
programs?”
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Innovation, Efficiency, Simplicity.
Food for Thought: Procure to Pay as Competitive Weapon
The level and quality of Procurement and AP convergence varies dramatically among
enterprises in the marketplace today, which means
that more agile organizations are effectively
using their P2P operations as a competitive weapon to gain advantage
over their rivals.
“
” - Ardent Partners, ePayables 2014: The Quest
Introduction
Citi Integrated Payables Solutions
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Innovation, Efficiency, Simplicity.
Citi® Integrated Payables Solutions - Overview
Citi’s holistic suite of payment services, leading-edge analytics and other capabilities can help
optimize working capital and process efficiencies across a client’s end-to-end supply chain.
Citi Integrated Payables Solutions
Cost
Channel and
Connectivity
Services
Innovative
Payment
Services
Working Capital Analytics
Advisory,
Partnership
and Servicing
Supplier
Enrollment
Services
Generate
Returns
Increase
Free Cash Flow
Reduce
Costs
Support
Suppliers
Minimize
Risk
Client Benefits
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Innovation, Efficiency, Simplicity.
Citi Working Capital Analytics: Building the Business Case
Total Client Benefit = $23.5MM - $26.5MM annually
Increased
Rebate
Working
Capital
Operational
Efficiencies
Payment Terms Extension
Payment Digitization:
Savings per Transaction: $2
Checks converted: 182K - 237K
Estimated Savings: $364-$474K
Supplier Finance:
Freed Working Capital: $180MM (30-day DPO extension)
Financial Benefits: $17.8MM
Cards:
Total volume: $226 - $349MM
(based on DPO 40 days)
Financial Benefit: $2.5-$3.8MM
$20.3MM-$21.6MM $0.4MM-$0.5MM
Recurring Recurring
Card Rebate
Opportunity
Cards:
Total Volume: $226-$349 MM
Rebate share: 125 bps
Financial Benefit: $2.8-$4.4MM
$2.8MM-$4.4MM
Recurring
Key Driver:
Spend on Commercial Cards Key Driver:
Check replacement Key Driver:
Sample Data for Indicative Purposes Only
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Innovation, Efficiency, Simplicity.
Strategic Approach to Payables Optimization
A one-size-fits-all rarely works. Treasury, Procurement and Accounts Payables most align to
deploy the appropriate solution for specific segments of the organization’s supply chain.
0
10
20
30
40
50
60
70
80
90
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36
Supplier Finance
Emerging Solution:
Dynamic Discounting
B2B Commercial Cards &
Payment Digitization:
• Virtual Cards for Accounts Payable
• Purchasing Card
Supplier access to capital
Spen
d
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Innovation, Efficiency, Simplicity.
Payables Optimization – Potential Solutions
Clients should consider deploying a variety of payment services to drive working capital benefits,
reduce costs and improve back-end processes
Overview of Potential Payment Services
Dynamic Discounting Supplier Finance B2B Commercial Cards
Overview: Citi buys buyer-approved
invoices at a pre-determined rate to
accelerate payment to participating
suppliers; buyer makes payment to
Citi based on extended terms
Solution Target: Strategic
suppliers of direct materials and
services, typically with large spend
Benefits to Buyer: Working capital
reduction via term extension
leveraging Citi’s balance sheet
Benefits to Suppliers: Reduced
Days Sales Outstanding
Cost to Supplier: 1% to 3% APR
Overview: Supplier can select to
receive early payment for specific
invoices at a sliding discount
based on time to invoice due date
and hurdle rate required by buyer
xxxxxxxxx
Solution Target: Suppliers seeking
early payment, typically for suppliers
of direct material and services
Benefits to Buyer: Reduced Cost
of Goods Sold via discounts,
leveraging the buyer’s balance
sheet
Benefits to Suppliers: Reduced
Days Sales Outstanding
Cost to Supplier: 8% to 10% APR
Overview: Elimination of checks
and ACH by migrating payments
card based payments
xx
Solution Target: Typically suppliers
of indirect materials and services,
often paid via check
XXXXXXXXX
Benefits to Buyer: Rebate
opportunity, working capital,
process improvement from check
elimination
Benefits to Suppliers: Reduced
Days Sales Outstanding, process
improvements
Cost to Supplier: 24% to 36% APR
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Innovation, Efficiency, Simplicity.
Supply Chain Finance – How it works
Supplier Finance enables clients to extend payment terms and improve Days Payable
Outstanding while leveraging the bank’s balance sheet to accelerate payment to key suppliers.
Day 1* Day 1* Day 60* (Maturity)
Supplier
Approves
Invoice
Sends Invoice/
Payment
Instructions
Notification and
commitment
To pay
Supplier
Sells
Receivables
Remits
Funds
Disbursement
of payment to
settle the
invoice
Citi
Client
The client captures value – unlocking working capital - while suppliers can
get paid sooner, leveraging an attractive financing rate
Citi
Client
*Actual timing will be determined based on a client’s specific processes and objectives
17
Innovation, Efficiency, Simplicity.
Dynamic Discounting – How it works
Dynamic Discounting allows clients to increase discounts captured while offering suppliers the
opportunity to be paid more quickly by leveraging the cash on its own balance sheet.
Supplier
Approves
Invoice
Sends Invoice/
Early Discount
Offered
Notification of
available early
payment
opportunity
Disbursement of
payment less
discount to settle
the invoice
*Actual timing will be determined based on a client’s specific processes and objectives
Citi
Client
The client can drive reduced Cost of Goods Sold (COGS) while suppliers
gain quicker access to funds at financing rate typically below their own
borrowing costs
DD
Portal
Supplier
Notifies
discount has
been
accepted
Views /
accepts
offered
discount
Citi
Client
DD
Portal
Citi
Client
Supplier
Day 1* Day 1* Day 2*
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Innovation, Efficiency, Simplicity.
Virtual Card for Accounts Payable– How it works
Virtual Cards allows clients to benefit from rebate generation and working capital extension while
eliminating costly check processes.
Day 1 Day 1* Day 30* (Maturity)
Supplier
Approves
Invoice
Sends
Payment
Instructions
Supplier
Disbursement
of Card
payment
Disbursement
of payment to
settle the
statement
Citi
Client
The client captures value – unlocking working capital, financial rebates
and digitizing payments while suppliers can get paid sooner
Citi
Client
*Actual timing will be determined based on a client’s specific terms and payment processes
Key considerations for developing a strategic approach to payables
optimization
Best Practices
20
Innovation, Efficiency, Simplicity.
Best Practices for Developing A Payables Optimization Strategy
Organizations considering embarking on a broad payables-optimization strategy should take into
account the following best practices
2. Align the Organization
4. Continued Monitoring &
Optimization
Develop payment strategy to address your organizational goals
Analyze A/P spend to quantify benefits and determine ROI
Determine KPIs and other internal success metrics
1. Identify Strategy &
Build Business Case
Identify senior executive to champion solution
Solidify goals and align team with cross organizational resources
Measure and report payment metrics vs. pre-implementation goals
Benchmark against the original business case on a periodic basis
Conduct follow-up AP analysis and campaigns to optimize growth
3. Execute on holistic
supply chain strategy
Develop plan for supplier segmentation and adoption
Contact suppliers for enrollment
5. Engage Citi
Understanding of your global and domestic flows
Market best practices
Resources and expertise to help with scalability
Innovation, Efficiency, Simplicity. | 2015 Commercial Cards Conference | May 18 - 20, 2015
IR S C irc u la r 2 3 0 D is c lo s u re : C it ig ro u p In c . a n d its a f f i lia te s d o n o t p ro v id e ta x o r le g a l a d v ic e . A n y d is c u s s io n o f ta x m a tte rs in th e s e m a te r ia ls (i) is n o t in te n d e d o r w r it te n to b e u s e d , a n d c a n n o t b e u s e d o r
re l ie d u p o n , b y y o u fo r th e p u r p o s e o f a v o id in g a n y ta x p e n a lt ie s a n d ( ii) m a y h a v e b e e n w r itte n in c o n n e c t io n w ith th e " p ro m o tio n o r m a rk e tin g " o f a n y tra n s a c tio n c o n te m p la te d h e re b y (" T ra n s a c tio n " ) .
A c c o rd in g ly , y o u s h o u ld s e e k a d v ic e b a s e d o n y o u r p a r tic u la r c irc u m s ta n c e s fro m a n in d e p e n d e n t ta x a d v is o r .
A n y te rm s s e t fo r th h e re in a re in te n d e d fo r d is c u s s io n p u rp o s e s o n ly a n d a re s u b je c t to th e fin a l te rm s a s s e t fo r th in s e p a ra te d e fin it iv e w rit te n a g re e m e n ts . T h is p re s e n ta tio n is n o t a c o m m itm e n t o r firm o f fe r a n d d o e s n o t
o b lig a te u s to e n te r in to s u c h a c o m m itm e n t , n o r a re w e a c tin g a s a fid u c ia r y to yo u . B y a c c e p tin g th is p re s e n ta tio n , s u b je c t to a p p lic a b le la w o r re g u la tio n , yo u a g re e to k e e p c o n fid e n tia l th e in fo rm a tio n c o n ta in e d h e re in a n d
th e e x is te n c e o f a n d p ro p o s e d te rm s fo r a n y T ra n s a c tio n .
W e a re re q u ire d to o b ta in , v e r ify a n d re c o rd c e r ta in in fo rm a tio n th a t id e n tif ie s e a c h e n ti ty th a t e n te rs in to a fo rm a l b u s in e s s re la tio n s h ip w ith u s . W e w ill a s k fo r yo u r c o m p le te n a m e , s t re e t a d d re s s , a n d ta x p a ye r ID n u m b e r .
W e m a y a ls o re q u e s t c o rp o ra te fo rm a tio n d o c u m e n ts , o r o th e r fo rm s o f id e n tif ic a tio n , to v e r ify in fo rm a tio n p ro v id e d .
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