AIB Global Treasury Services Achieving greater efficiencies from

AIB Global Treasury Services Achieving greater efficiencies from your Accounts Payable processes John Hand, Senior Relationship Manager, Corporate Cash Management. 24 th February, 2009

Agenda n Cash Management n n n cash management environment n n challenges today n n benefits n n objectives n n definition what’s the best fit Best fit for an Accounts Payable Function? Working Example Benefits of a single bulk payments solution Benefits of centralising the payables function Summary AIB Global Treasury Services

AIB Global Treasury Services Definition of Cash Management “Effective Planning, Monitoring and Management of Liquid/ Near Liquid Resources” Includes: n n n Day to day cash control Money at the bank Receipts Payments Short term investments Short term borrowings

AIB Global Treasury Services Cash Management Objectives n n n Maximize value on incoming funds Maximize return on excess funds Integrate banking services with accounting and treasury functions Process information quickly and accurately Move it, manipulate it, report it and transmit it

AIB Global Treasury Services Cash Management Objectives n Centralised Administrative, Treasury and Accounting Functions for : n distribution n invoicing n receivables n payables - domestic and foreign n credit and collections n FX dealing and Investments n information processing n analysis and reporting Maintain optimum number of bank accounts n reduce number of banking relationships to optimum level n improve bargaining position and therefore pricing n reduce costs

AIB Global Treasury Services Benefits of Good Cash Management n n n Better control of financial risk Opportunity for profit Strengthened balance sheet Increased confidence with customers, suppliers, and shareholders. Achieve administrative savings and synergies for individual operations and group as a whole

AIB Global Treasury Services The Customer Challenges ? Funding ? Foreign Exchange ? Investments ? ABC Limited Bank Relations ? Risk Management ? Cash Management ?

AIB Global Treasury Services Cash Management Environment Collect Funds Disburse Funds Customer Account Track Transactions and Balances Manage Funds Excess/ Shortfall

AIB Global Treasury Services Cash Management Structures - What is Best Fit for a Company? Depends on n Industry e. g. Manufacturing / Retail / Service ? n Market e. g. Domestic and or International n Customer base e. g. 3 rd party, inter company n Product range n Receivables and Payables - domestic and or foreign currencies

Cash Management Structures - What is Best Fit for a Company? AIB Global Treasury Services Mix of payment options available n Method for handling Collections /Receivables n Cash n Cheque n Bank Draft n Credit Card n Direct Debit n Standing Order n EFT via local automated clearing system (EMTS) n Incoming International Payment in Euro or foreign currency n Method for handling Payables / Disbursements n Cash n Cheque n Bank Draft n Credit Card / Purchasing Card n Direct Debit n Standing Order n EFT via local clearing system (EMTS) n Outgoing International Payment in Euro or foreign currency

AIB Global Treasury Services Cash Management Structures - What’s the best fit for an Accounts Payable function with volumes of domestic and international payments ? n Ideal scenario? n All accounts payable activities for all areas/ entities are centralised through a single area within a company / or Group structure n Electronic payment becomes the norm for both domestic and international suppliers n Establish a single payments interface between a Company’s AP/ Enterprise Resource Planning (ERP) system and its bank - allowing the upload in a single file of all domestic and international vendor payments with remittance data.

AIB Global Treasury Services Example of ABC Limited - Pre introduction of AIB Credits A/C No 12345678 1. Cheques sent both locally & internationally 2. Direct Debits 3. Payroll via EFT Payroll Module Foreign Currency & Euro Drafts International Payments sent on paper Accounts Platform A/P Processes International Payments keyed individually via i. BB Receipts

AIB Global Treasury Services Example of ABC Limited - Position following introduction of AIB Credits A/C No 12345678 Payroll via EFT Payroll Package AIB Credits 1. Domestic Vendor payments 2. International Payments – paper 3. International Payments - keyed manually via i. BB 4. Foreign Currency Drafts 5. Euro Drafts Accounts Platform – Vendor Payments & Receipts Direct Debits Receipts

AIB Global Treasury Services Benefits of AIB Credits as a single bulk payments solution? n n n n Secure and controlled mechanism for the disbursements of funds with remittance data locally and overseas Enforces clear segregation of duties and employs latest Smartcard technology protecting authorisation and integrity of confidential data Minimises risk of transcription errors by uploading payment files directly form AP/ ERP system Internal capture of vendor data and up front payment validation ensures that supplier payments are delivered consistently on time Allows greater control over cash flows by allowing you to determine when payments are effected Warehousing of payments allows you to avail of full credit terms granted by suppliers Ultimately helps strengthen relationships with trading partners

Potential benefits of centralising the payables function 1. AIB Global Treasury Services Centralise all your domestic and international payables to build consistency and knowledge • “Intermittent” users of banking services in corporate accounts departments are the main drivers of errors and rework • Specialisation can help facilitate automated reconciliation on a national / pan-EU basis • There are other significant benefits e. g. remote units with an ability to disburse and reconcile company cash are never popular with auditors, SOX etc. • Many companies already pay the fixed overheads of running an ERP system without fully exploiting all its existing built-in capabilities

Potential benefits of centralising the payables function AIB Global Treasury Services 2. If you are centralising the processing of incoming invoices ensure you integrate the assembly of a bulk global payments file for your bank • Adopt electronic payment as your default method of payment • ERP systems (SAP, Oracle, Agresso, MS Navision etc. ) are often the route to the benefits of centralised invoice processing, such as supplier consolidation, full use of credit terms, payment warehousing etc. • ERP systems can also be used to drop enterprise-wide global payment batches into a bank’s bulk payables service to reduce labour costs and transcription errors

AIB Global Treasury Services Potential benefits of centralising the payables function Watch the hidden costs of inaccuracy and uncertainty 3. • We see some companies less focused on repairing consistently faulty data on their beneficiaries’ banking details. • This faulty data causes recurring queries and errors and can lead to weakened vendor relationships and possibly increased bank fees • If you are consistently accurate and efficient in instructing payments, you can consistently pay very close to the end of your agreed credit terms • Monitoring the number of payments that cause a subsequent query allows you challenge your bank to help you eliminate such queries

Summary AIB Global Treasury Services To cut your costs and achieve greater efficiencies in Accounts Payable processes 1. Centralise all your payables via a single bank and channel 2. Integrate payables with centralised invoice processing 3. Identify and eliminate any hidden costs 4. Aim for a single enterprise-wide operational account (s) 5. Benchmark your bank(s) current offerings versus industry standards

Contacts n AIB Global Treasury Services For further information please contact Corporate Cash Management John Hand Senior Relationship Manager Tel: 01 – 6417790 Dedicated Line for Corporate Cash Management Sales Team

AIB Global Treasury Services Thank you for listening! Any questions? AIB Global Treasury Services is a registered business name of Allied Irish Banks, p. l. c. is regulated by the Financial Regulator. Registered Office: Bankcentre, Ballsbridge, Dublin 4.