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Leverage Your Buying Power With Electronic Payments, e-Invoicing, and Supply Chain Finance

Presenter/Moderator: Rebecca O’Connell- Working Capital Advisor – Bank of America Merrill Lynch Co-Presenters: Jodie Rocco- Director, Treasury– Veeco Instruments Inc. Alicia Lazarto- Manager, Treasury Operations, Veeco Instruments Inc.

May 2014

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Introductions

Migrating from Paper to Electronic: Trends, benefits & barriers

Defining Electronic Solutions: How to leverage your buying power

A practitioner view: Veeco Instrument’s strategic transformation

Agenda

Migrating from paper to electronic Trends, Benefits & Barriers

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Managing the Global Supply Chain as a Strategic Asset Key drivers to payables optimization

Since, on average, roughly 50% of companies’ working capital is tied up in the supply chain, there are very significant benefits to taking a more holistic

view of the supply chain*.

“

“

Healthier balance sheet

Increased revenue

Lower costs

Improved controls

Effective supply chain

Better supplier relationships & performance

Increase/extend DPO

Improve working capital

Optimize cash flow

Increase automation

Improve operational efficiency & control costs

Strengthen supplier relationships

Gain visibility into the payments cycle

Improve compliance

Enable straight-through processing

Goals

Healthier balance sheet

Increased revenue

Lower costs

Improved controls

Effective supply chain

Better supplier relationships & performance

Increase / extend DPO

Improve working capital

Optimize cash flow

Increase automation

Improve operational efficiency & control costs

Strengthen supplier relationships

Gain visibility into the payments cycle

Improve compliance

Enable straight-through processing

Payables

*Ernst & Young insight: Getting the most from your supply chain (March 12, 2012) found on http://business.financialpost.com/2012/03/12/getting-the-most-from-your-supply-chain. Sept. 2013

higher performance is achieved by companies acknowledging supply chain as a strategic asset 70%

Source: PwC Global Supply Chain Survey 2013, “Next-generation supply chains – efficient, fast and tailored” .

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Migrating from paper to electronic

Today, the typical organization makes 61 percent of its B2B payments by check. Organizations are finding that “electronifying” payments is a key driver for improving supplier relations, increasing productivity, and achieving cost savings.

APQC, “The Impending Death of the Paper Check”, Accounts Payable Automation Survey, December 10, 2010

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Migrating from paper to electronic

Benefits

Among the varied benefits of electronic payments, the most compelling are cost savings, productivity enhancements and improved cash flow Barriers

The greatest barrier to the increase of electronic payments is the perception that suppliers are unwilling or unable to accept and/or receive these payments. Another major hurdle is the internal cost and/or capability to manage the transition to electronic payments within the accounts payable and/or purchasing group itself.

APQC, “The Impending Death of the Paper Check”, Accounts Payable Automation Survey, December 10, 2010

Benefits & Barriers

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More than 75 percent of organizations expect that supplier organizations currently only accepting paper checks will be able to receive electronic payments within three years.

The growing popularity of electronic payments may address and minimize most of the perceived issues, especially as organizations achieve quantifiable, bottom-line savings as a result of electronic payment adoption. While moving payments from paper to electronic methods provides immediate efficiency gains and cost takeout, a long-term payables strategy can help an organization achieve results that are more significant.

Migrating from paper to electronic

APQC, “The Impending Death of the Paper Check”, Accounts Payable Automation Survey, December 10, 2010

Overcoming barriers

Defining electronic solutions How to leverage your buying power

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Examining options

Electronic solutions for every type of spend…

These solutions work effectively together to help improve working capital

Purchasing Card

Virtual/Ghost & Comm. Card s Settlement Networks (ACH)

Traditional ACH, Wire Transfer -

Supply Chain Finance (SCF)

$ Working Capital Improvement $$$

Type of spend

Strategic international and domestic suppliers

Invoiced spend for U.S. and Canada

Non - invoiced spend/ lower dollar

Employee and Customer

programs

Benefit

DPO extension/ COGS reduction

DPO extension/ Financial incentive/ Dynamic discounting

Financial incentive/DPO Extension/reduced processing Costs/data consolidation

Control and data capture/ Financial incentive

Travel Card U.S. and Global Prepaid Cards

Spend and Supplier Categories Drive Solutions

Electronic Invoice Presentment

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Overview of Supply Chain Finance

Purpose Provides the buyer with a means to:

Extend payment terms and provide an alternative financing solution to suppliers

Increase operational efficiencies

Generate additional cash flow

Overall cost reduction

Create a “value exchange” that can improve working capital for both you and your suppliers

Program Suppliers can tap into funds earlier

in their receivable cycle by allowing them to secure discounted funds against those receivables

Integrates well with ERP technology to provide a seamless solution with minimal disruption

Available to both domestic and international suppliers

Capable of participation structure, multiple banks

Pricing Suppliers bear the ongoing program

costs, at a cost of funds aligned with the buyer, set as a per annum rate, fixed spread over the relevant LIBOR for the period of the discount

Program discount rate charged to vendors incorporates the credit spread, as well as the administrative costs of running the program

Cost of program is often lower than cost of funds at many suppliers’ local banks and usually well below their WACC or IRR

SCF

A win-win situation Increased DPO for the buyer

Accelerated cash/better financing for suppliers

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Electronic invoicing

Payment Trends

Invoice efficiency through automation #1

perceived challenges in

adopting invoice automation:

supplier reticence, IT

resource shortage and

system integration

▪ Need to automate PO

presentment, matching to

receipts, routing, invoice

approvals and more

▪ Need to clearly identify and

communicate the tangible

benefits

▪ Need onboarding assistance to

obtain internal/external buy-in

…and yield great

benefits

▪ Improved efficiencies

▪ Lower operating costs

▪ Stronger control

▪ Competitive advantage

▪ Offer greater efficiencies for

processing invoices

▪ Require changing the way

buyers/suppliers traditionally

conduct business

▪ Face considerable resistance

—both internally and from

suppliers

Electronic invoice solutions…

…can address many needs…

Source: Electronic Supplier Payments PayStream Advisors Q2 2012

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The value of an e-Invoice solution

Capture and offer invoice discounts

Purchase orders

Invoices

Matching, workflow, and approval

Payments

eRemittances

Early payment discounts

Electronic Purchase Orders & Invoices

Electronic Payments

Invoice & purchase order processing

Avoid late payments

Mitigate risk of duplicate payments

Improve visibility & control

Automation Standardization

Centralization

Veeco Instruments Inc. A practitioner view

Copyright ©2012 Veeco Instruments Inc. 14

Our Technology aligns with three mega

trends: energy efficiency,

personal mobility and

advancing thin film

technologies

We Make Thin Film

Process Equipment Growing, depositing,

etching and processing

thin films is our core

competency

Veeco At A Glance Presented by Jodie Rocco and Alicia Lazarto

High Growth

Market Focus Our equipment enables the

manufacture of:

• LEDs

• Power devices

• MEMS

• Hard disk drives

• OLEDs

Strategic locations near our customers in

the US, Europe & the JAPAC regions

Market-Leading

Positions in: • MOCVD & MBE

• IBE/IBD/PVD

Copyright ©2012 Veeco Instruments Inc. 15

Glimpse Into the Future with OLED Display Technology Presented by Jodie Rocco and Alicia Lazarto

Rigid Unbreakable Curved Bendable Foldable

Flexible Product Introductions Have Begun

Copyright ©2012 Veeco Instruments Inc.

CONFIDENTIAL

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Veeco Payment environment Presented by Jodie Rocco and Alicia Lazarto

Prior State In 2010, Veeco consolidated domestic A/P and

outsourced all A/P processing.

In conjunction with the consolidation process,

Veeco completed an analysis of all costs related to

disbursements: The company was originating a large volume of

checks.

Multiple programs with various providers.

P card program was underutilized.

Voluminous amounts of T&E cards, no ownership to

ensure timely payments, no policing/procedures in

place to ensure adequate tracking.

Ultimately rebate incentives were compromised.

Monthly labor intensive manual processes

Post Implementation Initiated an action plan to maximize incentives and

efficiencies.

Worked with our banking partners to identify qualified

programs with robust incentives/rebates.

Implemented Best Practice for commercial cards: Consolidated “One” consolidated card program with global

capabilities

Improved cash flow through active payables disbursement

management

Customized approval workflows in alignment with company

policies and instituted control guidelines

Automated reporting and GL postings

Cost reduction achieved through reducing volume of

checks and streamlining spending habits.

Payment Type

No. of

Transactions

Checks ($1.87 per chk) 12,225

Virtual Card A/P

payments -

T&E 140 cards

Travel, Group event

& T&E Card spending 6,658,000$

LOST REBATES 33,290$

Pre-implementation

Payment Type

No. of

Transactions

Checks 5,000

Virtual Card A/P

payments 445

T&E 8 cards

P Card & Ghost

Travel Card 5,000,000

REBATE 56,000$

Post Implementation - Phase I

Copyright ©2012 Veeco Instruments Inc.

CONFIDENTIAL

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Veeco Project Plan Presented by Jodie Rocco and Alicia Lazarto

Compile a complete vendor master and ensure consistencies for payment method across company codes

Send final file to Bofa for them to supply the vendor match against vendors who were already accepting virtual cards

Coordinate with A/P to offer incentives for vendor to accept virtual cards – reduced payment terms from n60 to n30, offer discounts to offset the interchange fees

Communicate to vendors – prompt consistent payments no delays, improve their cash flow, enhance company DSO

Coordinated with marketing & credit & collection departments to remove payment by check as an option and add virtual cards as a preferred payment method on new vendor setup forms along with ACH.

Phased approach – vendors that we had the most leverage with were targeted first at Phase I

Dismantled prior card programs and consolidated all card programs under one provider to ensure optimal rebate.

Worked with Bofa implementation team and coordinated with Finance to automate & reconcile GL postings into ERP system

Mirrored the company’s limits of authority policy thresholds for payment approvals within the virtual card online system

Establish controls over unauthorized transactions by customizing eligible purchases by MCC codes.

Established & created one point of contract internally as admin to oversee the entire program.

Targeting Automation, Controls, & Working Capital Management

Copyright ©2012 Veeco Instruments Inc.

CONFIDENTIAL

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Veeco Next Steps Presented by Jodie Rocco and Alicia Lazarto

Phase II –

Continued engagement with vendors to encourage additional participation in the program.

Align with Procurement:

• Take a strategic approach to procurement; using “spend analysis” to develop a better picture of what we’re spending, identify opportunities to leverage buying, save money, improve performance.

• Expand P card program – increase single limit transaction

• Explore opportunities to target strategic overseas suppliers: spend >$10M annually

Evaluate Supply Chain Finance opportunities

Conduct a cost benefit analysis to determine if current AP outsourcing process is effectively reducing costs vs. outsourcing the entire process through our banking partners.

Maximize Working Capital

Integrate Evaluate

Audience Q & A

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“The Impending Death of the Paper Check”, Accounts Payable Automation Survey, December 10, 2010

Published by APQC

http://www.apqc.org/knowledge-base/download/223662/K02521_FM_AP%20Automation%20US%20Bank.pdf

Bibliography

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