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Early Payment Discounts versus Charge Card Rebates

Greg Hamilton. Early Payment Discounts versus Charge Card Rebates. Greg Hamilton Ethan Carr John Haville MasterCard Worldwide, Public Sector Business Development. Current Landscape: Purchasing Cards. State Government and Public Sector in General.

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Early Payment Discounts versus Charge Card Rebates

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  1. Greg Hamilton Early Payment Discounts versus Charge Card Rebates Greg Hamilton Ethan Carr John Haville MasterCard Worldwide, Public Sector Business Development

  2. Current Landscape: Purchasing Cards • State Government and Public Sector in General • Purchasing Cards have been used widely for over 15 years for transactions <$2500 • Electronic Accounts Payable Solutions (EAP) first deployed in 2004 now making headway in public sector for transactions >$2500 • Most Regional and National Banks offer competitive solutions • Current Card Rebates for State Government can range from 120 to 180 bps depending upon annual spend, speed of payment, average transaction size (average 30% APR yield) • Qualifying Large Ticket transactions (level 3) 40 to 80 bps • Card spend is easily reported electronically and paid to Client • Up to 70% of suppliers accept cards

  3. Current Landscape: Early Payment Discounts • State Government and Public Sector • Early Payment Discounts have been used with preferred, strategic suppliers for over 40 years • Negotiation between Vendor and Purchasing Dept. • Typical arrangement: 2% 10 days, net 30 (36% APR yield on cash) • Discount period calculated from date that acceptable invoice is received by the Buyer • Most organizations have less than two to three percent of their spend with discount terms today • Low to no visibility into early payment opportunities • Manual process today due to lack of automation

  4. Potential Early Payment Discount Partners • Sample of Key Providers • Ariba-SAP • Oracle • Bottomline Technologies • PayStream • Check with your ERP provider • Invoice automation works hand in hand with Discount Capture • Usually pay vendor via ACH…Card possible as well

  5. Recommended Strategies • Maximize Card Payments First • PCard in conjunction with EAP, E-Payables • Leverage the MC/Visa networks of 36 million vendors worldwide • Work with your Bank Issuer to analyze your vendor file and maximize your Card spend • Where Card doesn’t make sense, look to Discount Technology partner to help eliminate remaining checks • Vendor recruitment and training is KEY to success! • Must find balance between speed of payment and Card fee/Discount to your suppliers • Must be something in it for the Supplier/Vendor…Faster Pay!

  6. Key Discounting Features Available • Automating Invoices and Discount Capture • Supports Fixed Discount Agreements: 2% 10 Net 30 • Supports sliding scale Discounts for longer payments: 1% 15 Net 30 • Dynamic Discounts: Real-time bids and offers • Involve your Treasury/Finance team, IT, Purchasing and AP to build successful programs • Provider vendor networks as high as 1.4 million participants

  7. Questions Comments?

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