Perspectives 2019 2020 Public Sector

Citi Perspectives 95 SCF has traditionally been underutilized in healthcare. However, with traditional debt forms of financing becoming more expensive and less accessible, SCF provides significant opportunities for both buyers and suppliers. Technology will play an increasingly important role in the delivery of effective SCF solutions, both to automate the exchange of information among buyers, sellers and financial institutions, and also to integrate the financial and physical supply chains. A final supply chain optimization step is to revisit the use of ACH payments to suppliers unable to accept card-based payments, or unsuitable for supplier financing. Studies have shown savings of over $3 per item by moving from check to ACH: 9 A shift to ACH for a healthcare company making 10,000 check payments can save over $350,000 in annual banking expenses. In addition, ACH vastly reduces fraud, as banks can track ACH items when they are deposited in bank accounts. Finally, payers can extend payment terms on ACH items thereby increasing days cash on-hand. Thad Garrison North America Public Sector, Citi 9 Association for Financial Professionals, “2015 AFP Cost Benchmarking Survey” 2015: 1-30. https://www.bottomline.com/application/files/ faster-cost-effective-afp-payments-cost-benchmark-survey-gen-us-srr-1510.pdf Conclusion Next generation payment tools offered by banks provide access to multiple payment methods, (such as Cards, ACH, and checks) offering the flexibility to select the mix of payment methods that best balance payables costs with beneficial supplier terms for added efficiency and cash optimization. These tools also address administrative challenges such as payee enrollment and data maintenance by taking a scientific and systematic approach to payee segmentation, targeting and subsequent enrollment. As a result of these continuous improvements, healthcare supply chain organizations can significantly improve working capital, shorten cash conversion cycles, and ultimately improve long-term organizational efficiency. Healthcare treasury organizations can manage both industry disruption and consolidation by leveraging next generation banking tools that optimize days cash on-hand, improve working capital efficiency, and reduce supply chain operating costs.