Turning AP into a Revenue Generator

Benefits of automated, card-based payments

June 20, 2013

Speakers Robert O’Conner, Senior Global Treasury Advisor, Silicon Valley Bank

Carmela Montes de Oca, Senior Product Advisor, Silicon Valley Bank (Moderator)

Mary Rountree, Vice President, Finance, Implantable Provider Group

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Agenda Review current payment trends

Evolution of payment cards

Targeting new spend via virtual accounts

Client conversation with IPG

Q&A

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Executive Summary

More organizations focusing on electronic payments

Payment costs are now key considerations

Organizations are looking to reduce cost and seek increased control

Commercial cards help in cutting operating costs, providing expanded control and more

Do you currently use credit cards for indirect payables such as system maintenance, general repair, marketing & operations expenditures?

A. Yes

B. No

Polling Question 1

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Factors Driving Electronic Payment Focus

25%

38%

44%

49%

65%

0% 10% 20% 30% 40% 50% 60% 70%

Reduce Procure-to-PayCycle Time

Improve EmployeeProductivity

Improve EmployeeConvenience

Maximize Rebates andIncentives

Reduce Procure-to-PayTransaction Costs

Source: PayStream Advisors, Electronic Payments and P-Cards Adoption Survey, Q3 2009

Payments Landscape: B2B Electronic Payments Continue To Grow

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Current annual B2B payments in the U.S.: Approximately $17.2 trillion

57% of B2B Payments

26% of B2B Payments

13% of B2B Payments

4% of B2B Payments

Payment Choices Have Evolved

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Existing Spend Capture Expanded Spend Capture

Technology drives automation of payments

Check/Wire/ACH Check/Wire/ACH

Pcard Pcard

T&E T&E

Virtual Account Numbers

What value do you perceive that purchasing cards can create for your company?

A. Earn points or revenue share (rebate)

B. Save time in AP process

C. Manage cash more effectively (e.g. extend DPO)

Polling Question 2

First – A Definition Electronic Accounts Payable (EAP) Cards

Electronic Accounts Payable (EAP) cards are “non-plastic card accounts used to pay for invoiced goods and services (whether set up as a rotating pool of card accounts, ghost card accounts funded only to pay invoices from specific suppliers, or another arrangement similar in purpose).” Source: RPMG Research

EAP Terms:

Virtual cards

Single-use accounts

Straight through processing

Buyer-initiated payments

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Defined Authorization Controls for Each VCN Number of transactions (single-or multi-use) Transaction amount limit (exact, maximum, or

min-max range) Validity period Suppliers and merchant category codes

Enhanced Client-Supplied Data Capture up to 30 client-specified data

elements with each VCN for enriched data analysis, reconciliation, and allocation

Two Interface Options Request website with customizable approval

workflows (Purchase Control) Batch file interface (transAct Gateway aka:

tAG)

Silicon Valley Bank Virtual Card - Overview

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Virtual Card Numbers (VCNs)

Unique, non-plastic account numbers used for secure purchasing �Increased transaction-level control

Sent via encrypted email to suppliers Secure VCN delivery to Suppliers

A Closer Look at Virtual Cards / EAP

Using Card in Accounts Payable Processing

VCN Enablers Exact Amount Control: Pay invoices to the penny,

avoiding short payments and reducing exception processing

Set Validity Period: Defined start and end dates to track and manage outstanding, unprocessed card payments

Single-Use: Reduced fraud and supplier misuse, improved transaction risk management

Batch File Interface: Automated method to generate card numbers from an ERP or AP system

Secure Delivery of Card Numbers: Encrypted email delivery from SVB to suppliers

Enhanced Reconciliation: Capture invoice numbers, payment reference numbers, etc. to streamline reconciliation and reduce reliance on merchant-provided data

Standard 16-digit account numbers: No additional enablement or training is required for card-accepting suppliers

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SVB transAct Gateway enables clients to seamlessly use card payments for Accounts Payable spend, helping to remove process inefficiencies and generate key financial benefits

Benefits

Controlled Payments, Reduced Fraud

Commercial Card Rebate Eligibility

Streamlined Processing

Working Capital Improvements

Virtual Card Numbers: Payable Process Flow

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Initiate • You receive

invoice from supplier

Authorize • You authorize

payment

Route • AP department

uploads payment file to card system

• Card system generates single-use account number for each transaction

Payment • Card system

emails supplier: payment is ready

• Supplier securely retrieves, processes payment

Reconcile • Your system

imports settlement file and reconciles

The virtual card numbers payment process flow mirrors your existing Accounts Payable setup

Supplier Benefits Hypothetical Example

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Virtual Card Number: 5563382407077635 Expiry Date (MM/YY): 07/13 CVC: 297 Cardholder Name: WestdaleWireless AP Cardholder Address: 516 Edgewater Drive Wakefield, MA 01880 Purchase Type: Office Supplier Transaction Amount: $5350.00 Supplier: ABC Supplier Supplier Email Address: AR1@abcsuppliers.com Email Sent: Yes Valid From: 6/20/13 Valid To: 7/31/13 Invoice ID: 9999000101 Invoice Description: Office supplies

Remittance Information:

Virtual Card Number: Reporting

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VCN offers additional reporting data to the standard suite of Commercial Cards transaction data, enriching and simplifying your analysis, allocation, and reconciliation processes

Reporting

For Each Transaction: •Rich Commercial Card Transaction Data •Virtual Card Number •Client Custom Data Fields

Combine standard Commercial Card transaction data with virtual card number and custom data fields Capture up to 30 custom data fields at time of card creation for later reporting Create custom reports tailored to your program

Data Analysis

Capture additional info to enrich data analysis

View trends, monitor spending patterns, and track goals of your card program Track requestor, reason for purchase, meeting ID, project ID, etc. to enrich data analysis Example Use: Track actual meeting spend vs. budget

Allocation

Use this data to automatically allocate to the proper GL

Allocate transactions to the correct accounting codes and cost centers With VCN, record accounting codes or requestor information at time of payment Automate or simplify expense allocation Sample custom data: GL code, cost center

Reconciliation

Easily track matched expired, and active Virtual cardsMatch transactions to payment instructions by invoice or ref #

Leverage invoice, payment reference, or order numbers to identify transactions Match transactions automatically with purchase/invoice documents to track payment status Sample custom data: invoice number, PO number

GL 1 IIII

GL 2 III III

GL 3 III II II

Virtual Card Number: Controlled Spending

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Purchase Control as a workflow purchase tool When an employee needs to make a business purchase but does not have authorized access to a purchasing card, Purchase Control is an ideal solution.

Step #1

Step #2

Step #3

Step #4

Step #5

Step 1: Company’s system administrator sets up spending limits for each employee - such as a $3,000 limit for a marketing manager, with purchases above that requiring approval by his or her supervisor.

Step 2: The marketing manager starts the process by going to the Purchase Control application and filling out a purchase request. A request that exceeded his or her limit—for example, a purchase of $4,000—would trigger an automatic e-mail notifying the supervisor for that approval.

Step 3: Logging in to the Purchase Control application, the supervisor can review and approve or decline the purchase request

Step 4: Once approved, Purchase Control will generate a virtual card number. Key transaction data that was entered when the purchase request was made—such as cost center and general ledger codes—is now attached to the virtual card number. The virtual card number can only be used within the parameters of its approval (transaction amount, date, and vendor) providing built-in transaction security.

Step 5: With the transaction completed, Purchase Control can facilitate a quick and easy reconciliation process, matching the virtual card number, which is unique to each transaction, in three important places: on the approved purchase request, online payment receipt, and the company’s monthly statement.

Is your organization leveraging single use accounts to extend the use of your purchasing card program and/or automating your Accounts Payable department?

A. Yes

B. No

Polling Question #3

A Conversation with IPG

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Implantable Provider Group (IPG) Fast Facts

Founded in 2004 Implantable Device Benefit Management Industry Leader Grown at a 218% compounded annual rate for the past three years Privately owned by its management team and Sequoia Capital , a Silicon Valley based financial partner Annual sales = approximately $50M Mission: To provide implantable Device Benefit Management (DBM) solutions that deliver tangible value to health plans, providers, physicians, manufacturers and patients, which improve quality, affordability and patient access to life saving and life enhancing implantable devices Annual purchasing spend = $20M and approximately $3M of that is indirect spend 5500 - B2B transactions 800+ - vendors

Implantable Provider Group: The Challenge

In order to ensure timely payments to its suppliers under the current setup, IPG needs to make a large number of payments to a variety of different vendors.

The company’s existing vendor set-up process for each payee is cumbersome and inefficient. IPG would prefer a payment tool that is both secure and more efficient as well as electronic.

The company would like to increase payments on cards, leading to fewer check payments, reduced paper processing, improved working capital and increased visibility into expenditures.

IPG has two major concerns about increasing its current purchasing card program: 1. Compliance/Fraud – IPG requires several approvals before releasing payments. 2. Lack of necessary data – Credit card data is missing certain key fields including

PO numbers and General Ledger information.

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Implantable Provider Group: A Focused Approach

Reduce cost through streamlined business processes

Gain greater control over discretionary expenses

Automate supplier payments

Leverage appropriate technology

Improve the company’s working capital position

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Implantable Provider Group: Execution Strategy

Reduce cost through streamlined business processes Expense management automation

Gain greater control over discretionary expenses with the SVB Multi Card payment solution

Purchasing Payables Ensure compliance to corporate policy

Automate supplier payments and reconciliation process Reduce check disbursements Generate cost savings through e-Payables

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Implantable Provider Group: Execution Strategy

Automate supplier payments and reconciliation process (continued)

Executive support for the program

Implementation team Define the execution strategy Policy and procedures

Integrate, enroll supplier, test, pay and reconcile

Supplier enrollment campaign

Benchmark

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Implantable Provider Group: The Value

In the first three months, we have successfully enrolled over 48 suppliers and have another 20 actively engaged, representing a total of more than $6M in annual payments

SVB provides proactive supplier enrollment support Solid methodology and execution based on best practices

An alternative payment type to check, completely automated with reconciliation features

Average cash flow improvement of 15+ days

Cost savings from reduced checks, bank fees, research, etc.

Triple-digit growth month-over-month

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Implantable Provider Group Lessons Learned

Ensure you have all the necessary controls and data in place to reconcile your transactions

Start small – enroll one vendor to ensure your processes and controls work prior to open enrollment

Consistently improve communication – often people do not fully read or understand letters and emails.

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Questions?

Next Steps:

1. Gain top management support for payment process transformation and partner with key players in the organization to ensure buy-in.

2. Implement strategies to reduce reliance on checks.

3. Demonstrate the benefits that preferred suppliers will receive from commercial card acceptance. (They can expect faster pay and efficiency savings while you will gain control and revenue.)

4. Incorporate commercial card acceptance language into preferred supplier contracts.

5. Institute a set of upfront spend controls (e.g., customized limits based on cardholder, supplier or transaction size) and back-end audits.

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Robert O’Conner

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Robert O’Connor is a Senior Advisor with Silicon Valley Bank’s Global Cash Management team. In this role, he focuses on developing credit card and payments solutions for clients. Prior to joining Silicon Valley Bank, Robert was Vice President of U.S. Commercial Product Sales at MasterCard Worldwide. During his seven years with MasterCard, Robert worked with many U.S. commercial card issuers on developing their commercial card strategies. Robert’s previous experience includes various business development roles with U.S. Bank’s Corporate Payment Solutions and Merrill Lynch.

Senior Global Treasury Advisor, Silicon Valley Bank 972.455.0959

Carmela Montes de Oca

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Senior Product Advisor, Silicon Valley Bank (404)264-8323

Carmela Montes de Oca is a Senior Global Treasury Advisor with Silicon Valley Bank serving corporate clients in the Southeast and is a sales manager for the East Coast. In this role, she is responsible for not only building relationships but providing domestic and international treasury management advice, products and services that contribute to clients' continued growth and success. Carmela joined Silicon Valley Bank in 2006, and is focused on delivering treasury solutions for payments & collections and information reporting. Before joining SVB, Carmela was responsible for treasury services at other large banking institutions.

Carmela has over 25 years of banking experience serving clients in the commercial and technology industries. She earned a Bachelor of Science Degree in accounting and is a Certified Treasury Professional, a certification granted by the Association of Financial Professionals.

Mary Rountree

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Vice President, Finance, Implantable Provider Group

Mary Rountree is the Vice President, Finance, for Implantable Provider Group. Mary has been with the company for two years. Prior to that, she was Director of Accounting for Foodbuy, LLC, a division of Compass Group in the food service industry. Mary resides in the Atlanta metro area with her family. She loves spending time with her family on their boat and her personal hobby is running.

This material, including without limitation the statistical information herein, is provided for informational purposes only. The material is based in part upon information from third-party sources that we believe to be reliable, but which has not been independently verified by us and, as such, we do not represent that the information is accurate or complete. The information should not be viewed as tax, investment, legal or other advice nor is it to be relied on in making an investment or other decision. You should obtain relevant and specific professional advice before making any investment decision. Nothing relating to the material should be construed as a solicitation or offer, or recommendation, to acquire or dispose of any investment or to engage in any other transaction.

©2013 SVB Financial Group. All rights reserved. Silicon Valley Bank is a member of FDIC and Federal Reserve System. SVB>, SVB>Find a way, SVB Financial Group, and Silicon Valley Bank are registered trademark. Silicon Valley Bank and IPG are not affiliated. 0613-0083

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Disclaimers