Located in the scenic Finger Lakes region of upstate New York, Cayuga County turned to BofAML to modernize its approach to vendor payments. Leveraging the bank’s Virtual Payables program, county administrators switched from costly paper checks to electronic payments to reduce expenses, create new efficiencies and earn a cash incentive.
Reduced costs, increased revenue
Cayuga County, New York, is home to such notable places as historic Emerson Park and the home where Harriet Tubman settled after making numerous trips along the Underground Railroad. It features many attractions that draw visitors from around the country, including the Seward House, spectacular scenery and unique cultural opportunities. The county also boasts a thriving business community and is home to more than 80,000 residents. In Auburn, the county seat, more than 200 businesses can be found in the downtown business improvement district.
Despite its broad economic base, Cayuga County — like many municipalities, counties and states nationwide — experienced declining revenues in the aftermath of the 2008-2009 recession. To offset the decline, the county began examining its day-to-day processes with an eye towards reducing expenses — including costs that were embedded in some of its manual banking processes — and creating operational efficiencies. What really stood out was the cost associated with issuing checks. Although its revenues have since recovered along with the economy, the county continues to explore new ways to create operational efficiencies.
For Cayuga County, that meant implementing Virtual Payables — which automates the payment process for the vendors that accept card for payments — and corporate-purchasing cards for smaller purchases, both from BofAML. Since rolling out the program in late 2012, the county has reduced its paper-check costs by thousands of dollars and earned significant cash incentives.
How Virtual Payables works
- The bank identifies vendors that currently accept card and calls them using a client-approved script.
- A payment file is generated by your ERP system and transmitted using FTP protocols. After receiving the file, the bank increases the “available-to-charge” amounts on the vendor accounts.
- The bank notifies the vendor via our proprietary Works® software that the payment is available.
- Once the vendor accepts the payment, the “available-to-charge” amount returns to zero.
- The payment reconciles on an automated basis, and confirmation is sent to your ERP system or treasury workstation.
A longstanding relationship
Cayuga County’s relationship with BofAML dates back several decades. BofAML provides traditional banking services, such as deposit accounts, ACH payments and receipts, online account access via CashPro® Online, and electronic fraud solutions that include ACH Positive Pay. “We began considering Virtual Payables in 2011 after a conversation with our client manager,” says Michele Anthony, Cayuga County’s auditor. “She personally knows everyone in our department and helped us understand that Virtual Payables could be another great tool in our arsenal.”
The county’s client manager, Karyn Brownell of the public-sector team at BofAML, knew that the county was paying approximately $3 each time it issued a paper check to pay a supplier and that comparable electronic transactions typically cost around 67 cents. “Switching to electronic payments was a natural migration for Cayuga County,” Brownell notes. “Our early discussions focused on how Virtual Payables could enable the county to quickly issue payments to suppliers who accept card-based transactions. This solution increases float and optimizes working capital for the county while dramatically decreasing the costs associated with issuing paper checks.”
During 2011, Anthony and Brownell presented the potential benefits to Cayuga County’s treasurer’s office, administrator’s office and legislature. In 2012, the county received all the required approvals. Typically, counties in New York are required to initiate a formal request for proposal (RFP) process for new financial services. But given the county’s overall comfort level with BofAML, the fact there is no cost to the program and the bank’s leadership in Virtual Payables since originally launching the solution back in 2005, the RFP process was deemed unnecessary.
Debiaw and her peers in IT were on point for creating test files and performing validation, in close collaboration with the bank team. During the initial testing phase, the county was reluctant to connect its enterprise resource planning (ERP) system — MUNIS 7.3 — directly to the bank’s platform. So the county built an intermediate step that required its IT staff to enter a password prior to sending each file. But as the test files proved increasingly successful, Debiaw grew more comfortable that the extra step was unnecessary. Cayuga County connected its ERP system directly to the bank, which means the process is now fully automated from payment initiation to confirmation.
Robust vendor onboarding
“The success of a Virtual Payables program is directly proportional to the number of vendors that enroll,” says Brownell. “That’s why BofAML commits an abundance of resources to helping clients connect with vendors.”
The bank’s onboarding support began with identifying Cayuga County’s vendors that already accepted card payments. Next, the bank team conducted a calling campaign to engage vendors with whom the county typically spends more than $25,000 annually. The bank initially contacted 132 of the county’s vendors and successfully enrolled more than 30. In addition to these direct efforts, the bank team helped the county create a custom self-enrollment toolkit — which includes a letter and enrollment materials — for the county to send directly to vendors that fall below the $25,000 threshold or whom the bank was unable to reach during the initial calling campaigns.
In Cayuga’s case, the letters proved especially helpful — since county officials could frequently follow up personally with local recipients. The county now has 63 vendors who regularly receive payments via Virtual Payables.
The two-pronged outreach helped the county connect with national merchants, such as HP and Toshiba, in addition to local businesses. “Some of our biggest wins involved getting our technology providers enrolled,” Anthony recalls. “Cayuga County was the first buyer to get HP signed up for Virtual Payables, which shows that even smaller counties can have real bargaining power.”
Several of the county’s vendors were initially reluctant, but chose to enroll after gaining a fuller understanding of the benefits. “From a vendor’s perspective, there are two important things to remember,” Brownell summarizes. “First, vendors who are already operating a merchant platform have got the basic infrastructure in place. Accepting payments via Virtual Payables is an easy decision: they are already doing it. Second, vendors who enroll get paid more quickly and securely compared to paper checks — which is a key benefit for Cayuga County’s vendors.”
Taking a centralized view
“One of the best aspects of Virtual Payables is the increased visibility of our transactions,” says Anthony. “It’s easy to see who we’ve paid, along with the value of the payments and when they are processed. As the county’s auditor, that makes my job much easier.”
All Virtual Payables transactions are channeled into Works®, the bank’s online platform for managing electronic payments. “Works helps Cayuga County automate and streamline its payment administration while easily integrating with its existing processes for authorization and reconciliation,” says Brownell. Works also empowers the county’s administrators with new levels of real-time control. “Our users can instantly adjust purchasing-card spending limits and cancel cards that have been lost or stolen,” Anthony notes.
Just over a year after the launch, Cayuga County’s Virtual Payables program has already surpassed expectations. Throughout 2013, the county initiated nearly $5 million of vendor payments through the bank’s electronic channels while generating a new stream of revenue. Fifty-four vendors have enrolled — nearly doubling the estimates of the bank and the county.
“Costs are down, visibility is greater and we earn cash rewards each time we use the program,” Anthony says. “So next year, we’re looking to grow it further. We are reaching out to more vendors, which means we should be able to shift even more of our payments to Virtual Payables. I think other counties could easily benefit from this solution.”
Debiaw concurs: “I was skeptical of Virtual Payables at first, but the bank has really stepped up and delivered a program that meets our current needs and gives us room to grow. I wish we could pay everyone this way.”
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