HOW TO MAKE THE PERFECT B2B PAYMENT

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1 WEXPAYABLES.COM 1 HOW TO MAKE THE PERFECT B2B PAYMENT

2 2 When organizations take in and pay out purchase orders and invoices, what does the perfect payment look like? Bob Sneed, vice president of payment solutions for the global corporate payment processing company WEX, said in a recent interview with Karen Webster, founder of business-to-business (B2B) marketing platform PYMNTS.com, that the payment profile looks different for every organization. Sneed claims that efforts to manage corporate payments strategically will fall short until organizations can answer the question of how to make the ideal B2B payment. However, many organizations 51 percent according to the 2016 AFP Electronic Payments Survey aren t addressing this critical question despite significant costs to their bottom line. According to the technology research giant Gartner, Inc., a five percent reduction in operating costs can have the same impact as a 30 percent increase in sales. As companies seek to reduce operating costs and unlock cash flow from day-to-day operations, the most successful organizations have discovered that focusing on payment optimization, or making the perfect B2B payment, is a means to uncover hidden value and added cost savings. Surprisingly, the majority of business executives haven t put in the time or effort to move away from manual payments processing and dive deeper into their financial supply chains in order to optimize the electronic payments process. Manually processing invoices can represent approximately 60 percent of labor costs. Few of these executives pay by check in their personal lives, so why are they willing, on the organizational level, to keep incurring the added costs of manual payments? They haven t seen the financial gains to be significant enough, Sneed theorizes. They re focused on what they believe to be larger initiatives. Webster notes that it feels strange to think of payments processing as a strategy. Rather, she said, payments seem like a simple function: an employee pushes the button and the payment goes out. And yet, for many 5% REDUCTION IN OPERATING COSTS can have the same impact as 30% INCREASE IN SALES

3 WEXPAYABLES.COM 3 According to the 2016 AFP Electronic Payments Survey, 51% of businesses aren t addressing the question of how to make the ideal B2B payment. organizations, there s no consistent method across the payments board, and before companies realize it, they are dealing with dozens of new terms and conditions as they try to meet the demands of their suppliers. A recent research report from BI Intelligence, Business Insider s premium research service, helps shed light on this digital divide. For starters, the B2B payments process is considerably more complex a top reason that more than half of organizations surveyed by the Association for Financial Professionals (AFP) are still mired in making analog B2B payments. Key takeaways from the BI Intelligence report are that the B2B payments market represents a vast opportunity: In the United States, B2B payments reached an estimated $18.5 trillion last year, vastly outstripping the consumer-to-consumer (C2C) and businessto-consumer (B2C) realms. The complexity of B2B payments is holding back innovation, states the BI report, but positive incremental change is occurring. Consumer payment innovation and a vast greenfield opportunity are making the space more accessible and more appealing to payment firms, which is translating to broader market availability for merchants. Nevertheless, until digitization permeates all stages of the complex B2B payments process and allows those disparate segments to work in tandem, Business Insider emphasizes that organizations won t see any major steps toward an industry standard. What follows are essential first steps on the road toward digitizing B2B payments as defined by an industry leader at helping organizations make the electronic payment transition: WEX Inc. If your organization is looking toward the greenfield opportunity of implementing an electronic accounts payable (AP) and payment optimization program creating significant cost savings and leading your company toward faster and smarter payments that can carry extensive, valuable remittance information begin by asking the right questions about what the transformation process may look like for your company. Next, consider partnering with an expert financial services company to fully transition to electronic payments across multiple tiers of suppliers, or even an entire supply chain. READY TO IMPLEMENT AN ELECTRONIC ACCOUNTS PAYABLE STRATEGY? 1. Ask the right questions about what the transformation process may look like for your company. 2. Consider partnering with an expert financial services company.

4 4 STEP 1: BEGIN BY ASKING THE RIGHT QUESTIONS The first step toward making a perfect payment begins with asking the right questions in order to analyze an organization s existing financial supply chain: how and when they receive and approve invoices, the setup for payment execution, and supplier details such as type, spend, invoice volume, payment method, and settlement terms. Getting payments in faster has become an industry holy grail. Most organizations will bend over backward to make faster payments if this is what their supplier wants. But a strategic company will always ask these questions first: What advantage can it get out of accelerating payments at the whim of a supplier? Is the supplier willing to offer a discount for payment received in 45 days instead of 60? If the answer to the latter question is yes, an organization would be remiss in not leveraging the cost savings of an early payment discount. Another critical question: Who is responsible for researching and implementing the strategic benefits of electronic payments? There s nothing in it for an hourly employee to take a closer look at the supplier terms, and no penalty if they do not. And chief financial officers, or CFOs, are busier than ever with tasks like new and stricter compliance and regulation policies putting increased pressure on business leaders at the executive level. Taking the time to go down and do an analysis in the midst of the day-to-day work grind is not something that s top of mind, says Sneed. But in these cases, with what it means to the bottom line of their organizations, they can t afford to let it go. So again, when organizations take in and pay out purchase orders and invoices, what does the perfect payment look like? Keep reading to learn how to effect systemic change by strategically transitioning to electronic payments in a way that will profit any organization willing to learn and adapt to the changing payments landscape. STEP 2: PERFORM AN OPERATIONAL OVERVIEW Today s financial professionals are increasingly aware of the cost-saving benefits of taking a strategic and disciplined approach to managing their The first step toward making a perfect payment begins with asking the right questions in order to analyze an organization s existing financial supply chain.

5 WEXPAYABLES.COM 5 own financial supply chain. So how does an organization go about rationalizing and understanding the financial value of electronic AP optimization? Businesses should commence by conducting a thorough analysis of their current procure-to-pay process. In order to truly understand how a strategic shift to electronic payments will profit their organization, time-pressed executives find it helpful to work with a consulting organization like WEX, says Bob Sneed, WEX s vice president of payment solutions. Why should a business hire a consulting organization to guide them through the process? For starters, it s important to leverage the knowledge and expertise of professionals who focus on the nuances of these process applications each and every day. Financial technology (FinTech) companies understand key aspects of the transformation process and are better positioned than traditional banks to respond quickly to an organization s needs once they ve decided to move forward. WEX begins each consultation with an operational overview of an organization s existing business processes and an in-depth analysis of their current payment practices in order to establish a baseline. This is a collaborative effort that is usually conducted at no charge. A smart operational overview should include a detailed review of an organization s financial supply chain as well as an analysis of active suppliers by type, annual spend volume by invoice and dollars, payment methods, settlement terms, and any associated prompt-payment discounts. Once the operational overview is completed, WEX provides the organization with a strategic plan, execution timetable, and The WEX Way Here is what you can expect from your WEX consultation Operational Overview Strategic Plan Execution Timetable Core Best Practices

6 6 core best practices. It is at this stage of the process that all members of the team should be included in order to have informed, unified support for the coming business transformation. Once the foundation has been laid through an expert overview, organizations can build a disciplined framework to ensure lowest-cost execution with maximum financial benefit based on their company s unique set of needs. Criteria for selecting the right financial services company for an operational overview: To begin, an organization should select a financial services company that is equipped to meet their consulting needs from a variety of perspectives. The success of any business transformation initiative begins with assigning a team of associates from both sides who are responsible and accountable for the desired outcome. Communication, collaboration, and connectivity are essential. Best in class service providers should be able to provide any organization with the following options: A cloud-based solution that delivers optimum flexibility for file-based AP integration. Ability to leverage a bank-agnostic platform to achieve flexibility across any number of treasury management relationships. The simplicity of working with a financial service provider that is also the card issuer, processor, and program management company. This all-under-one-tent solution avoids multi-level relationships designed to reduce an organization s overall benefits. The assurance that all payment types are supported with reconciliation for each one (virtual accounts, discounted EFT, ACH, global network, and checks). Complete supplier enablement services with transparent communication and accountability for results. Ability to provide an expert project management team with customer service and support assistance wherever and whenever it is needed. STEP 3: FIVE QUESTIONS EVERY CFO SHOULD ASK ABOUT THEIR AP PROCESS After profiling an organization s perfect payment for example, online, on time, and garnering the maximum discount Sneed advises executives to ask their organization the following five questions regarding their AP process: First, how does their organization currently manage its procurement process? Second, what can their organization do to automate the purchase order and invoice receipt and approval process?

7 WEXPAYABLES.COM 7 MAKE FASTER SMARTER 94% of finance professionals surveyed by the AFP indicate it is important that faster payments are smart or can carry extensive remittance information. Third, where can a commercial card program deliver sustainable value in the organization s overall payments equation? For instance, are there certain types of payments where a commercial card solution makes sense? If so, how can those be leveraged for maximum benefit? Fourth, what are the critical steps within the organization that will ensure its operational effectiveness to optimize payment execution? Fifth, how does an organization plan to benchmark against its concept of a perfect payment? Only by comparing an actual payment to an ideal payment can executives understand whether they are meeting their payment efficiency goals, and, if not, where they are falling short. STEP 4: TAKE ADVANTAGE OF COMMERCIAL CARD PROGRAMS It is impossible to parse the perfect B2B payment without mentioning the advantages of corporate card solutions. Corporate cards can help simplify business payments, turning manual processes into automated electronic payments; they also increase spending controls, giving businesses of all sizes greater control over expenses. Corporate card programs often generate a knee-jerk reaction, but they don t have to be expensive. When your business calls the shots instead of the issuer, the right corporate card helps your organization simplify payments and optimize the financial supply chain process by moving to electronic payments. Apropos of the perfect payment, the perfect corporate card should provide your business with everything it needs for total purchasing power, while expertly facilitating the transition to electronic payments. According to the to the most up-to-date AFP Electronic Payments Survey, a full 94 percent of finance professionals cite as important that faster payments are smart or can carry extensive remittance information, but payment standards continue to be an open issue. Smart card solutions such as the WEX Purchasing Card do the heavy data lifting for you, helping midsize to large companies streamline the procure-to-pay process and reduce the costs associated with authorizing, tracking, purchasing, and reconciling business purchases. Yet another advantage of corporate cards is transparency: dashboards and enhanced reporting tools show consolidated spend views and provide greater insight into purchasing patterns and trends. Other WEX cards also go a long way toward helping companies simplify their payments processes while providing enhanced spending controls. The WEX Ultimate Card represents an integrated card program combining the functionality of two or more commercial programs travel and entertainment, purchasing, and fleet into a single card or account. The WEX Corporate Travel Card is specially designed for organizations whose employees travel on business making trips easier to plan, more productive, and less expensive through enhanced spending controls for both the company and its travelers. Far from being an expensive add-on, commercial card solutions actually reduce costs by decreasing the need for paper and manual processes. Another benefit: enhanced supplier relationships. Your suppliers will benefit from cost reductions, faster payment

8 8 Benefits of Commercial Cards DECREASING THE NEED FOR PAPER AND MANUAL PROCESSES. ENHANCED SUPPLIER RELATIONSHIPS STREAMLINE THE PROCUREMENT PROCESS receipt, reduced days sales outstanding, improved cash flow, and potential for increased share of business with your company enhancing supplier relationships across your pipeline. Lastly, electronic payments streamline the procurement process through improved workflow automation. STEP 5: CHARTING THE COURSE CFOs know they need to talk about payment strategies, but what s discussed at planning meetings and what s executed in accounts payable often look very different. As WEX s Bob Sneed points out, whatever strategy is decided at the top must be executed through a disciplined approach to be worth its salt. Also, there must be a team responsible for managing buyer-supplier relationships in accordance with the new payments strategy. The first step is always an analysis of the existing financial supply chain: how and when invoices are received and approved; the setup for payment execution; and critical supplier details such as type, spend, invoice volume, payment method, and settlement terms. Next, an organization must know itself. Is working capital its main driver? If so, then discounts for faster payments may not be a priority. Nevertheless, for other organizations, optimizing payments will be a key point of their strategy, alongside mitigating fraud and risk. For organizations that are still processing payments manually, Sneed recommends a balanced approach through the transition to electronic payments. Push manual payments out to 60 days, Sneed advises, and let suppliers know that the company is willing to accelerate those payments if suppliers will consider electronic remittance. Agreeing on a solid strategy, charting the course, and then staying the course not only optimizes funds, time, and energy, but also fuels visibility into the electronic transition process and can help executives make key decisions early on, rather than delaying until the timing is difficult. The way forward: the importance of smart payments in the age of big data Just as you have to raise a little dust to clean a house, all businesses go through a transitional period when shifting to electronic payments. Unfortunately, too

9 WEXPAYABLES.COM 9 many organizations continue to throw good money after bad by clinging to paper checks as a way to avoid the temporary growing pains of making long-lasting, profitable changes to their payments infrastructure. Most businesses recognize that there are efficiencies and lower costs associated with electronic payment methods compared to checks, notes the 2016 AFP Electronic Payments Survey; there are so many solutions within the marketplace, however, that it often feels overwhelming for treasury and finance professionals to find the solution best suited to their needs. Another challenge, notes the AFP, is that changing an organization s internal legacy payments infrastructure may be more complex and costly than first anticipated. In a business environment that has been focused for years on controlling costs, obtaining the necessary allocation of funds for these kinds of structural changes can be difficult. In addition, infrastructure changes need to be long-lasting. The payments industry is an ever-changing environment, explains the AFP. As organizations examine new developments such as the Federal Reserve s Improvement of the U.S. Payments System and The Clearing House s Realtime Payments a wait-and-see approach may be the smartest decision for them. In addition, having standardized payments formats will be increasingly important for companies, particularly if they consider [straight-through processing]. Unfortunately, a wait-and-see approach can be truly deleterious to an organization s bottom line in the age of big data. We all know that companies like LinkedIn and Twitter provide free communication and networking platforms in exchange for that most valuable of assets: the user-generated data that flows across their networks and the intelligence that can be gained from understanding this data. The 94 percent of financial professionals who cite as important that faster payments are smart or can carry extensive remittance information know that data is one of the most prized pieces of information that exists within a payment: who is being paid, for what, when, and how, as well as what bank is housing the transaction and what bank account is being used. Minus the data-heavy remittance information that electronic payments afford, a payment is just a number, and in too many instances finance professionals spend an extraordinary amount of time trying to parse the important data elements from a manual payment. It s no wonder that individuals feel overwhelmed the analytics and intelligence that can be gleaned from an electronic payment are the purview of a digital process that connects businesses and suppliers as well as ERP systems and bank accounts all within a network of connected trading partners or even an entire supply chain. In the smart remittance race between manual entry and a fully automated digital network, the network always wins. CONCLUSION And all of this as the modern idiom goes is a lot to process. This is why WEX invests passionately in being the financial services company of record to help businesses make the full digital transition. For forward-looking organizations that understand how the financial benefits of long-lasting infrastructure change far outweigh any temporary growing pains, the benefits of partnering with a consulting organization ACCORDING TO THE AFP having standardized payment formats will be increasingly important for companies, particularly if they consider [straight-through processing].

10 10 The perfect B2B payment is executed on day one. It is electronic, on time, and offers an optimal discount. such as WEX far outstrip the finite stress of restructuring payment processes. As Bob Sneed of WEX emphasizes, the perfect B2B payment is executed on day one. It is electronic, on time, and offers an optimal discount. Companies who move toward electronic B2B payments can expect lower costs, streamlined business processes, effective risk mitigation, and direct bottom-line contribution from increased discount capture. In addition, companies benefit through electronic payment by minimizing the number of calls they must field from suppliers i.e., the obvious cost savings of electronic payments also add up to substantial time and human resource savings. And, as mentioned in the previous section, suppliers enjoy the benefit of enriched remittance data the most precious of commodities in today s digital marketplace. The result of understanding, implementing, and managing an optimized financial supply chain is that holiest of business grails: greater financial results and shareholder value for the company. At WEX, we are helping companies across the spectrum improve spend management, mitigate risk, and achieve bottom line profitability. We hope that by sharing our hard-earned industry knowledge, experience, and resources, we help organizations feel more empowered and less intimidated by the process of implementing electronic accounts payable and payment optimization programs. Explore WEX s approach to learn why more financial executives are turning to us every day. ABOUT WEX, INC. WEX Inc. (NYSE: WEX) is a leading provider of corporate payment solutions. From its roots in fleet card payments beginning in 1983, WEX has expanded the scope of its business into a multi-channel provider of corporate payment solutions representing approximately 10 million vehicles and offering exceptional payment security and control across a wide spectrum of business sectors. WEX serves a global set of customers and partners through its operations around the world, with offices in the United States, Australia, New Zealand, Brazil, the United Kingdom, Italy, France, Germany, Norway and Singapore. WEX and its subsidiaries employ more than 2,700 associates. The company has been publicly traded since 2005, and is listed on the New York Stock Exchange under the ticker symbol WEX. For more information, visit or and follow WEX on Twitter