Is your supply chain at risk due to late payments and restricted supplier cash flow? Does your company have cash earning next to nothing in this low interest rate environment? In light of the recently effective European Union directive on late payments that mandates payment within a certain time frame, now is the perfect time to consider Dynamic Discounting which allows your suppliers to receive early payments and you to earn a good return on short term cash. In this session we will discuss some of the key implications of the Late Payments Directive that you need to consider in order to comply, as well as how you can utilize dynamic discounting as a tool not only for compliance, but to earn significant savings as well.

1. Dynamic Discounting and the EU Late
Payments Directive
Earn Savings & Reduce Risk By Paying Suppliers Early
June 4, 2013 – 13:30 – 14:30
Enrico Camerinelli, Sr. Analyst, Aite
Drew Hofler, Director – Solutions Marketing, Ariba
© 2013 Ariba, Inc. All rights reserved.

2. #AribaLIVE
Agenda
• Introductions
Drew Hofler – Sr. Solutions Marketing Manager - Ariba, An SAP
Company
Enrico Camerinelli – Senior Analyst, Aite Group
• Context – Payment Term Tension
• EU Late Payments Directive and its impact on companies
• Win-Win benefits of Accelerating Cash Flow to Suppliers
• Q&A
© 2012 Ariba, Inc. All rights reserved.2

3. #AribaLIVE
© 2012 Ariba, Inc. All rights reserved.3
“Many payments in commercial
transactions between businesses or
between businesses and public
authorities are made much later than
agreed. This is very costly for
businesses.”
DIRECTIVE 2000/35/EC
“This Government is determined to
back all those businesses who aspire
to get ahead and take on more
people. In the current climate, viable
businesses can struggle to get the
finance they need to grow… ”
David Cameron, UK PM (23 Oct ‘12)

4. #AribaLIVE
Working Capital Tension
Situation and Objectives of Buyers and Suppliers
© 2010 Ariba, Inc. All rights reserved.4
Working Capital Tension
• Buyers want to hold onto cash
• Buyers extending payment
terms!
• Need better return on cash
• Need to minimize liquidity risk
in supply chain
Buyers
• Suppliers want to be paid early
• Suppliers getting paid later
than ever!
• Need better access to cash
• Face significant liquidity risks
due to economic environment
Suppliers

5. ©2013 Aite Group LLC.
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Despite The Adoption And Application Of Directive
2000/35/EC, Late Payment Is Still A Common
Practice Across The EU
40 41
39 40
38
36
56 57
55 56
52
49
65
67
63
65 65
61
2008 2009 2010 2011 2012 2013e
Average Payment Duration in Days (pan-Europe)
Consumers Business Public sector
Source: Intrum Justitia, 2013

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Source: Intrum Justitia
Source: Intrum Justitia, 2013
Bad Debt Loss on Total Turnover (%)
Write-offs for Late Payments Severely Impact
European Businesses

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a. Public authorities will have to pay for the goods and services that they
procure within 30 days. Only in special circumstances and when expressly
agreed between the contracting parties, public authorities may extend
payment periods up to 60 days.
b. Member States may, on an optional basis, extend the general rule of 30 days
payment period up to a maximum of 60 days for public undertakings and
public entities providing healthcare.
c. Enterprises will have to pay their invoices within 60 days, unless they
expressly agree otherwise and if it is not grossly unfair to the creditor.
d. Enterprises will be automatically entitled to claim interest for late payment
and to obtain a minimum fixed amount of €40 as a compensation for
recovery costs and can claim compensation for all remaining reasonable
recovery costs.
e. Statutory Interest rate for late payment will be the reference rate plus at
least 8 percentage points. Public authorities are not allowed to fix an interest
rate for late payment below the statutory interest rate.
Main Dispositions of Directive
2011/7/EU

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Page 8
f. Member States will have to publish the interest rates for late payment so
that undertakings have easy access to these rates.
g. Member States may continue maintaining or bringing into force laws and
regulations which are more favorable to the creditor than the provisions of
the Directive.
h. To stop any abuse of negotiation power, companies have opportunities
under the Directive to challenge grossly unfair contractual terms
and practices.
Main Dispositions of Directive 2011/7/EU
(cont’d)

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Substantial legislative activity has been instilled
Country Number of
Major Legal
Acts issued
Belgium No Reference
Available
Bulgaria 5
Czech
Republic
11
Denmark 2
Germany No Reference
Available
Estonia 2
Ireland 1
Greece 1
Spain 1
France 4
Country Number of
Major Legal
Acts issued
Italy 1
Cyprus 1
Latvia No Reference
Available
Lithuania 4
Luxembourg 1
Hungary 10
Malta 1
Netherlands 1
Austria 1
Poland 1
Country Number of
Major Legal
Acts issued
Portugal 1
Romania 17
Slovenia 1
Slovakia 10
Finland 14
Sweden 3
United
Kingdom
4
Transposition of the Directive

10. ©2013 Aite Group LLC.
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• The Commission has recently (as of May 2013) received most of the national
transposition measures.
• DG Enterprise and Industry currently waiting for its official translations. (as of
May 2013).
• Next step is to analyze all national laws from a legal point of view in order to
see whether these national laws can be considered as correct and complete
transposition of Directive 2011/7/EU.
• Cyprus, Italy and Malta have been the first Member States to notify to the EC
its national transposition measure already in 2012.
Transposition of the Directive

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16 15
20
9 9 11
29 31
90
6 7 6
13
16 16
B2B B2C G2B
Average Payment Delays (days, 2013)
France Germany Italy Sweden UK
Bad term loss
(% of revenue)
2013
2.0
2.0
2.7
2.0
3.7
Source: Intrum Justitia, 2013
Transposition of the Directive - Country
Analysis

12. ©2013 Aite Group LLC.
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55
41
60
B2B B2C G2B
Average Payment Duration (days, 2013)
vs.
Directive Targets
France Germany Italy Sweden UK
Source: Intrum Justitia, 2013
France - Significant Provisions

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Payments deadlines
• 30 days for Public sector
• 50 days for health services
• 60 days for all the rest
Payment period
• Shall run from the date of receipt of the request for payment
Recovery Costs for Payments Delays
• No need for official notice
• Interest rate applied by the European Central Bank plus 8%
• Allowance for recovery costs: 40 euro
Provisions Relating To Overseas
• Contracts in New Caledonia, French Polynesia, Wallis and Futuna Islands
B2B Contracts
• 45 days end of month, to max 60 days
• Payment periods can be longer if agreed by parties (e.g., for seasonal goods)
France - Significant Provisions

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Germany
• Transposition deadline: No Reference Available
55
41
60
B2B B2C G2B
Average Payment Duration (days, 2013)
vs.
Directive Targets
France Germany Italy Sweden UK
Source: Intrum Justitia, 2013

15. ©2013 Aite Group LLC.
Page 15
Italy - Significant Provisions
55
41
60
B2B B2C G2B
Average Payment Duration (days, 2013)
vs.
Directive Targets
France Germany Italy Sweden UK
Source: Intrum Justitia, 2013

16. ©2013 Aite Group LLC.
Page 16
Italy - Significant Provisions
Payment terms
• G2B: 30 days
• Can be higher, but not more than 60 days (e.g., healthcare)
• B2B: Can be higher than 60 days if not grossly unfair to the creditor
• Extended terms must be written and signed by both parties
Interests on delayed payments
• Central European Bank reference rate plus 8%
• B2B partners can agree on different rate
• Applicable without explicit claim issued by creditor
Recovery Costs for Payments Delays
• The creditor is entitled without having to provide written notice
• Amount of allowance for recovery costs: 40 euro
• Debtor can oppose by proving that the delay in payment was determined
by the impossibility of performance resulting from causes not attributable
to him

17. ©2013 Aite Group LLC.
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Sweden - Significant Provisions
55
41
60
B2B B2C G2B
Average Payment Duration (days, 2013)
vs.
Directive Targets
France Germany Italy Sweden UK
Source: Intrum Justitia, 2013

18. ©2013 Aite Group LLC.
Page 18
Sweden - Significant Provisions
Recovery Costs for Payments Delays
• Written notice by creditor is required
• Compensation shall be paid (amounts vary as conditions apply)
• Compensation for lost interests shall be paid
Grossly unfair circumstances
• Act does not apply outside of Sweden
Interests on delayed payments
• With Public authority: 30 days
• With B2B partner: 30 days
• Debtor can defer payment up to 30 days to investigate request
• Reference rate: Riskbank interest rate plus 8%

19. ©2013 Aite Group LLC.
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UK- Significant Provisions
55
41
60
B2B B2C G2B
Average Payment Duration (days, 2013)
vs.
Directive Targets
France Germany Italy Sweden UK
Source: Intrum Justitia, 2013

20. ©2013 Aite Group LLC.
Page 20
UK- Significant Provisions
Extent and Application
• Regulations extend to England and Wales and Northern Ireland
Payment terms
• Public authority: 30 days
• B2B: max 60 days
• Supplier and buyer can expressly agree in the contract a later date not
grossly unfair (definition provided in the provisions) to the supplier
Recovery Costs for Payments Delays
• “The supplier shall be entitled to a fixed sum” (figures provided)

21. ©2013 Aite Group LLC.
Page 21
Revenue % of revenue 5,000,000 % of revenue 5,000,000
> to Public authorities 30% 1,500,000 30% 1,500,000
> to Large Companies 50% 2,500,000 50% 2,500,000
> to SMEs 20% 1,000,000 20% 1,000,000
Purchase (60% of revenues) 3,000,000 3,000,000
> from Large Companies 20% 600,000 20% 600,000
> from SMEs 80% 2,400,000 80% 2,400,000
payment terms
Receivables 2,500,000 1,166,667
> fom Public authorities 360 1,500,000 60 250,000
> from Large Companies 120 833,333 120 833,333
> from SMEs 60 166,667 30 83,333
Payables 550,000 250,000
> from Large Companies 90 150,000 30 50,000
> from SMEs 60 400,000 30 200,000
Working capital 1,950,000 916,667
Bank financing (80% of receivables) 2,000,000 933,333
Cost of financing 5.00% 100,000 5.00% 46,667
Working capital savings 53.0% 1,033,333
Cost of financing savings 53.3% 53,333
2012 2013
http://www.linkerblog.bizc
The False Expectations From The EU Directive On Late
Payments

22. ©2013 Aite Group LLC.
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Revenue % of revenue 5,000,000 % of revenue 5,000,000
> to Public authorities 0% - 0% -
> to Large Companies 80% 4,000,000 80% 4,000,000
> to SMEs 20% 1,000,000 20% 1,000,000
Purchase (60% of revenues) 3,000,000 3,000,000
> from Large Companies 20% 600,000 20% 600,000
> from SMEs 80% 2,400,000 80% 2,400,000
payment terms
Receivables 1,500,000 1,416,667
> fom Public authorities 360 - 60 -
> from Large Companies 120 1,333,333 120 1,333,333
> from SMEs 60 166,667 30 83,333
Payables 550,000 250,000
> from Large Companies 90 150,000 30 50,000
> from SMEs 60 400,000 30 200,000
Working capital 950,000 1,166,667
Bank financing (80% of receivables) 1,200,000 1,133,333
Cost of financing 5.00% 60,000 5.00% 56,667
Working capital savings -22.8% 216,667-
Cost of financing savings 5.6% 3,333
2012 2013
http://www.linkerblog.biz
The False Expectations From The EU Directive On Late
Payments

23. ©2013 Aite Group LLC.
Page 23
What Can Corporates Do?
• The Directive is not retrospective
• For contracts enacted before the legislation has become active, the
payment term can still be in excess of 60 days
Source: Intrum Justitia, 2013
Risk Index- Europe

24. ©2013 Aite Group LLC.
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What Can Corporates Do?
Strategy Financial Instruments Technical Instruments
Increase DPO Supply Chain Finance E-Invoicing
Reduce DSO Scaling discount rates Dynamic Discounting

25. ©2013 Aite Group LLC.
Page 25
What Can Corporates Do?
• E-Invoicing: Widening the window of opportunity
Week 1 Week 2 Week 3 Week 4
Buyer
Supplier
Invoice approval
Early
Payment
Opportunity
Pay at due date
Get money based on approved invoice
Window of opportunity

26. ©2013 Aite Group LLC.
Page 26
What Can Corporates Do?
• Dynamic Discounts: Leveraging available cash

27. ©2013 Aite Group LLC.
Page 27
Aite Group: Partner, Advisor, Catalyst
Aite (pronounced “eye-tay”) Group is an independent research and
advisory firm focused on business, technology, and regulatory issues
and their impact on the financial services industry.
Enrico Camerinelli
Sr. Analyst
ecamerinelli@aitegroup.com
+39.039.21.00.137
www.aitegroup.com

28. #AribaLIVE
Opportunity: Process Efficiency Is Key
e-Invoicing -- the First Step to Maximizing Discount Capture
1%
DiscountRate
Days of Invoice Approval and
Payment
2%
2010 30
PaperInvoice
Approvals
60
3% e-Invoice
Approvals
Reduce invoice approval cycle time to:
 Drive out cost while improving efficiency
 Increase visibility into payment timing
 Maximize early payment discount savings
 Mitigate supply chain liquidity risk
Reduce
Cycle Time
Example discount term:
2%10 Net 30

29. #AribaLIVE
© 2012 Ariba, Inc. All rights reserved.29
Buyer Offers
Early
Payment?
Supplier
Needs
Cash?
Supplier Response
Dynamic Discount
Type
Yes No
Wait for payment at maturity
date.
-
Yes Yes
“I want to get paid early
every time!” Automatic
Yes Yes
“I want to pick the
invoice(s) I want paid
early, and choose when
to be paid.”
Ad hoc
Yes Yes
“I want to be paid early,
but I want to make a
counter-offer to the
rate my Buyer has
offered!”
Ad hoc
(Supplier-
initiated)
No Yes
“I want to offer up an
early payment
discount.”
“Your invoice is
approved.
It will be paid at
this date in the
future.”
Technology: Discount Pro
Dynamic Discounting: Flexible, Pro-Rated, Self-service

30. #AribaLIVE
1) Capturing missed discounts through Ariba’s smart invoicing approach
2) Rapidly enabling more suppliers to increase the amount of spend under discount
3) Introducing sliding scale dynamic discounts.
4) Giving Visibility into Opportunity to right audience and providing Technology to
act on it.
Example:
2% 10 Net 30
2%
1%
0%
2.5%
Best Practices for Dynamic Discounting
Supercharge Savings with Ariba Discount Management

31. #AribaLIVE
Suppliers Benefit from Early Pay
Why many suppliers are eager to participate
© 2012 Ariba, Inc. All rights reserved.31
• ATM for Receivables
• Automatic and Ad-Hoc Early
Payment
• Early Payment on Demand
• Opt-in/out at Any Time
• Control over Timing and Amount
• Non-Debt Cash Flow
• Reduces DSO
“When we submit paper invoices, it can
take a long time to get our invoices
approved. With Ariba, we get paid as
quickly as four days, and the visibility
into payment status is like gold. I love
the Ariba service.”
Joy Stoelting, Studio Manager, Big-Giant
“By submitting invoices over the Ariba
Network, we have improved our cash
forecasting and seen a dramatic
increase in prompt payments. The
substantial DSO improvement is a
huge advantage in this difficult
economy. ”
Trish Jackson, AR Mgr, Photo Craft

32. #AribaLIVE
© 2012 Ariba, Inc. All rights reserved.32
Dynamic Discount Benchmarks
Ariba Network Average Discount Performance

33. Questions?
© 2013 Ariba, Inc. All rights reserved.
33

34. #AribaLIVE
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© 2013 Ariba, Inc. All rights reserved.34
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