1. 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

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
March 13, 2014

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
March 13, 2014

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
March 13, 2014

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!
March 13, 2014

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
March 13, 2014

7. Questions Comments?
March 13, 2014