Cash & Liquidity ManagementPaymentsE-payments improve the bottom line

E-payments improve the bottom line

Payment Schemes explained: gtnews invited MasterCard to describe their structured products and processes. Though it may be contrary to what MBA candidates at prestigious business schools are taught, the best way to manage a company’s finances is without cash. In fact, cash, checks, wire-transfers, automated clearing houses (ACH), barter and other “old-school” payment methods are rightfully being overtaken by new, sophisticated options that offer greater transparency, security and control. The mantra “cash is king” is quickly being replaced by the notion that “data is king”, especially when it comes to how companies and employees pay for things.

In the era of e-business, where rich data and low-cost electronic transactions abound, companies need new ways to electronically capture and use detailed transaction information, also known as Level 3 data. MasterCard payment and financial management solutions, for example, now allow automated, electronic tracking of global sales, expenses, inventory and all the related payment details once buried under mountains of paper. These solutions eliminate the need for invoices, receipts, purchase orders, expense reports and cancelled checks. The savings and productivity improvements accrue directly to a company’s bottom line.

Purchasing Cards: A Powerful Tool

Corporate purchasing card programs are a simple, but powerful, solution for managing business expenses, and can have an immediate, positive impact on operations and financial results. Corporate purchasing cards have given large companies, multi-national corporations, federal government and other public-sector agencies unsurpassed control over how funds are spent and by whom. Organizations simply decide which employees receive the cards, how much they can spend, and at what types of merchants.

What was bought, by whom, when and for how much, is captured electronically and transmitted back to the purchasing manager, who can then make better buying decisions, negotiate smarter deals with suppliers and ensure tighter financial and accounting compliance with corporate policies.

The immense benefits of corporate purchasing cards are only constrained by a company’s willingness to wean itself off paper checks, which still account for the majority of US corporate payments, compared to a small fraction for purchasing cards.

There are, however, signs that companies are beginning to recognize the benefits of purchasing cards. In the United States alone, according to a January 2005 market research report from Packaged Facts, a division of, purchasing cards in the US boasted a compound annual growth rate of 33 per cent for the 2000-2004 period. At these rates, purchasing card transaction volume surged from $60.3bn to nearly $289bn.

The financial benefits of switching to purchasing cards are equally impressive. According to the 2003 Purchasing Card Benchmark Survey published by RPMG Research Corp, companies switching to purchasing cards from paper-based systems are seeing measurable and substantial results – saving $23bn annually. By 2007, that savings number is expected to be closer to $40bn.

Integrating the Financial and Information Supply Chains

The key to unlocking these savings and streamlining payment processing is integrating the financial information and supply chains. For instance, new MasterCard Corporate Payment Solutions enable the integration of corporate purchasing card programs and procurement information with most leading enterprise resource planning (ERP) systems and accounting packages. By using these tools, companies enjoy unprecedented control over their business finances.

MasterCard currently partners with leading business service providers to offer corporations smart, effective and efficient tools that can have a positive bottom line impact. Its recent partnerships with premiere hotel brands to implement a hotel expense data management solution provides a good example. The solution gives business travelers who use a MasterCard corporate payment card the ability to access highly detailed transaction information such as hotel room rates, telephone charges, business center fees and taxes. This hotel folio data is captured electronically and may be incorporated into a company’s expense analysis and management reporting system.

As a result, the accounts payable process is streamlined and business travelers are free from having to manually input hotel-related travel expenses, which can be tedious, time-consuming and subject to error. In addition, the hotel data management system integrates with MasterCard ExpenSys, an electronic expense reporting solution, created in tandem with leading expense management system providers, which offers a range of fully-electronic solutions for managing travel expenses. For financial executives, these services provide a greater degree of analysis and oversight in terms of corporate travel spending.

MasterCard ExpenSys is just one illustration of MasterCard’s Corporate Payment Solutions that easily integrate payment data within companies’ existing back-end technology systems. MasterCard e-P3 is another interesting application. It is a new electronic payment and information management service that integrates MasterCard settlement solutions in electronic invoice presentment and payment systems to provide businesses with paperless end-to-end e-commerce. The service allows buyers and sellers to collaborate within a single environment, streamline their respective processes and use the MasterCard Corporate Purchasing Card for payment. MasterCard e-P3 is easily deployed and supports a variety of ERP and accounting systems, including Oracle, PeopleSoft and SAP.

Embracing the Cashless Concept

Companies that embrace the cashless concept and integrate related technologies are optimizing their expense monitoring, reporting and auditing functions, reducing costs and improving productivity. Paper-based payments, petty cash vouchers and advances, expense reports, payroll checks and medical claim forms, like the manual typewriter, will soon be just relics of the past. They are being replaced by payment options and systems that are better suited to the realities of today’s highly competitive business environment that requires organizations to be agile, responsive and able to track and control expenses around the world in any currency, as well as integrate related data and generate reports at a moment’s notice.

With cash no longer a necessity, organizations that continue to rely on it could well be placing themselves at a competitive disadvantage. Cashless businesses are at a distinct advantage, as they are empowered to gather the critical data they need to compete effectively and profitably.

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