The Big Finance Payoff - Top Performance Metrics and How to Achieve Them

MC The Big Finance
Payoff: Top
Performance
Metrics and How to
Achieve Them
James Tucker, Global Solution Marketing Director
Peter Beyeler, Global eProcurement Mgr, Clariant
Peter Sowrey, VP, Procurement and Payment, Genpact

© 2012 Ariba, Inc. All rights reserved.

Challenges in Europe

Source: The Hackett Group/REL, 2011 Europe Working Capital Survey

• Shared metrics for purchasing and accounts payable
45% US
55% Western EU

2 © 2012 Ariba, Inc. All rights reserved.

Process Automation AND
Performance Measurement
• Process automation gives top performing organizations a
92% cost savings advantage

• However, technology alone is not a silver bullet…

“If you do not re-engineer and measure your
processes you will fail to gain the full benefits of
the technology.”
– Pierre Mitchell, The Hackett Group

3 Ariba, Inc. 2012 All rights reserved.

Performance Measurement
A process for collecting and reporting
information and assessing results
against target objectives.


"What you measure
affects what you do. If
you don’t measure the
right thing, you don’t do
the right thing."
-- Joseph Stiglitz, US Economist

Source: Quoted in the New York Times (October 4, 2009)

Four Performance Pillars for Finance
$15 Million for every $1 Billion in Spend

CHALLENGE OPPORTUNITY “
Process “ 1-for-1
60-80% cost take out – or about $1 million for average to large
Payables organizations “
Discount “ 2-for-1
$2 Million in discount savings for
“
every $1 Billion in discountable spend

Compliance “ 9-for-1
$9 Million in contract leakage savings for
“
every $1 Billion in spend under contract

Working
Capital “ 3-for-1
$2.74 Million in working capital impact for 1 days of payables
extension (DPO) on every $1 Billion in spend
Source: The Hackett Group 2011 P2P Benchmark Report and Ariba Results
6 Ariba, Inc. 2012 All rights reserved.

“
Process Benchmarks “ 1-for-1

60-80% cost take out – or about $1 million for
PROCESS average to large Payables organizations (B)

Key Performance Indicator (KPI) Laggards Average Innovators
Invoice cycle time receipt-to-approve (P) 45 days 21 days 5 days
(13 days EU)

Invoices per FTE (H) 6,797 11,364 32,830
(8463 EU)

Percentage of invoices with exceptions (A) 30% 17% 12%
First pass match rate (H) 65% 70% 85%
(59% EU)

Percent of electronic invoices (H) 7% 25% 67%
(9% EU)

Inquiries per 10,000 Invoices (H) n/a 756 n/a
(1091 EU)
(P) PayStream Advisors
(H) The Hackett Group
(A) Aberdeen
(B) Billentis

28% Invoice Exception and Error
Rates
• On average 11% of invoices
have errors
• On average 17% of invoices
have exceptions
~ AND ~
• 37% of AP staff time spent
responding to inquiries


Best Practice: Ariba Smart Invoicing
 The best invoice solution is the one that is TOUCHLESS  Lower AP/AR Costs
 Ariba Smart Invoicing drives auto post rates of 98% compared to  Faster Cycles
less than 60% with other solutions  Lower Risk

Supplier Portal provides real-time
Procure-to-Pay access to invoice and payment
status eliminating inquiries to AP
Invoice
Number
PO
GST/VAT Invoice
Acct Compliance
Date
Coding Commerce
Price Qty
Compliance Network
Threshold Ship to Invoice
Contract Address
Match Unit Amt
Threshold
Pay
Bill-To
Address • 37% of AP staff time spent
• 11% of invoices have errors responding to inquiries
• 17% of invoices have exceptions

Over 70 configurable rules that Order-to-Cash
capture errors and exceptions
before they reach AP

Invoice Cycle Time
The average invoice cycle time (from receipt to approval) is 21 days, with
best-in-class companies completing this cycle in only 5 days.

Paper Invoice
Approvals

Approvals
Reduce
e-Invoice

http://www.ariba.com/resourcelibrary/views/res
Cycle Time ource_library_asset_brief.cfm?asset_id=867

10 30 60
20
Days of Invoice Receipt-to-Approve


“
Discount Benchmarks
“ 2-for-1

$2 Million in discount savings for
DISCOUNTS
every $1 Billion in discountable spend

Discountable spend 10% 20% 30%
Discount Rate (eg. 2% 10 Net 30) 1% 2% 2.5%
Annualized Percentage Rate (APR) 36% 36% 36%
Percentage of discounts captured (A) 15% 24% 31%

(A) Aberdeen


Lagging Discount Strategy in Europe

Source: The Hackett Group 2011 P2P Metric Comparison of NAMER and EMEA

Opportunities to Maximize Discount
Capture Success
3%
Our goal last year was to achieve

Example discount term:
“ 60 percent of addressable invoices
for early payment discounts with
“
2%10 Net 30 Ariba and we surpassed that.
Discount Rate

2% Erin Chumbley
ePro Manager
Reduce Invoice

Approval Process
Republic Services

Paper Invoice
Cycle Time
Approvals
e-Invoice

1%

http://youtu.be/GKXkXYaXNSM

10 30 60
20
Days

Source: Dynamic Discount Management: Finding the “Treasure” in Treasury, PayStream Advisors, 2012

Correlation between Supplier
Collaboration with e-Invoicing
and Discount Capture
$1M 1,000
Vendors Enrolled in Early900
Payment
Program
Vendors Enrolled in Early Payment
800

Program 700

600
Vendors Participating
$0.5M

300

200 Vendors Participating
100

$0M 0

Vendor participation increased by nearly 500%
Discount savings reached $1M

Best Practice: Increase Discount Capture
Capture Missed Discounts & Increase New Discounts

5x Ariba solutions capture 2-5x
discount savings
Enroll suppliers at enablement

Engage right supplier audience
Recent Aberdeen study
shows 50% of pre-negotiated 3x Introduce sliding scale discount
discounts are
never captured
Include net term invoices
2x


“
Compliance Benchmarks “ 9-for-1

Increasing compliance rates can drive
COMPLIANCE over $9 million in value per $ billion in spend

Regulatory Contracts / PO’s

Price
VAT/Tax

Preferred Vendors


Compliance
If compliance is defined as buying from the right vendor at the right price, what
percentage of your purchases are fully compliant?

Over 90%

70% - 90%

50% - 70%

Under 50%

Don’t know

Source: Defining and expanding the value proposition of P2P survey, ISM, Forrester, Ariba; February
2011; relative population sample.

Process Efficiency Drives
Contract Compliance
Compliance to Indirect Preferred Supplier Lost Savings per $ Billion of Indirect
Contract Spend due to Contract Non-Compliance

Increasing compliance rates by 16% can drive
over $9 million in value per $ billion in spend
Source: Hackett Group Contract Management Survey, 2009

“
Working Capital Benchmarks
“ 3-for-1

$2.74 Million in working capital impact for each day of
WORKING CAPITAL payables extension (DPO) or inventory (DIO) or
receivables reduction (DSO) on every $1 Billion of spend

Source: The Hackett Group / REL: US Working Capital Survey 2011

Working Capital Benchmarks -
Europe


The CFO Focus: Managing Cash

% of Firms Citing Strategies as Critical and Major Priorities

Improving Working Capital and
Manage Cash 67%
optimizing cash flow

Implementing enabling technologies to
Efficiency & Effectiveness 60%
improve efficiency and effectivness

Improving agility as revenues and costs
Agility 57%
fluctuate

Aligning strategy with that of the
Aligning Strategies 54%
enterprise

Source: The Hackett Group 2010 Key Issues Study


E-Invoicing Identified as The
Primary Enabler for Working Capital


E-Invoicing: THE Business Driver for
Strategic Savings

E-Invoice considered THE document regarding
working capital optimization (3-for-1)
E-Invoice considered THE document
regarding VAT reclaim (7-for-1)

E-Invoice considered THE
document regarding contract
compliance (9-for-1)

E-Invoice considered THE document
to maximize discount capture (2-for-1)


Peter Beyeler
Group Procurement Services
10.05.2012

The Big Finance Payoff
Peter Beyeler | Global eProcurement and Automation Manager

Clariant – Key Facts

■ Clariant is a world leader in colors,
surface effects and performance
chemicals

■ Annual sales of CHF 7.4 billion
in 2011

■ HQ in Muttenz near Basel,
Switzerland

■ World-wide operations, with more
than 100 group companies in over
70 countries

■ Approximately 22,100 employees
■ Products and services of 11 BUs
are based on innovative
specialty chemicals

Peter Beyeler, Group Procurement Services (Copyright Clariant. All rights reserved.) Slide 25

Procurement Evolution @ Clariant

Procurement management for strategy growth
 Source of innovation
Shareholder Value

 Faster introduction of new markets
 Manage Cash
 Exclusive knowledge capture and leverage
Impact to Clariant

 Procurement is a strategic key activity
 Long term securing of price, volumes, service

Traditional “Purchasing Mindset” Supplier consolidation / Global lead buyer
 Service to the Company concepts

 Fragmented supplier base  Reduce complexity (PRAGMATISM and
SIMPLICITY)
Cost

 Negotiate case by case
 Global view and global negotiation
 Local view
 Supplier consolidation
 etc.
 Tool Standardization

Operational Strategic
Scope
Peter Beyeler, Group Procurement Services (Copyright Clariant. All rights reserved.) 10.05.2012 Slide 26

P2P Transformation Project

Organizational Structure

EC
EC CFO
Operations

Cash Performance Team / NWC

Finance
GPS Services

GPS Region
Process &
Performance

AP SSC

11 Business Units


P2P Fact Sheet

• Globally 18 Countries with eProcurement
• 368 Active Relationships on the Ariba Network
• Total 698 eProcurement Suppliers (Ariba, OCI, SAP)
• 50% of all Indirect Spend PO line items are eProcurement
• 50 % or 200`000 PO Line Items are eProcurement within
Indirect Spend (no eProc for Direct Materials today)

• Worldwide about 1 Mio. Invoices processed.
• Direct Spend 100% PO coverage
• Indirect Spend 92% PO coverage Target 95%


P2P enablement Targets

• Reduction of NWC
• Cash Flow Savings
• Reduction of Invoice ageing
• P2P Process Speed up
• AP Process Optimization
• Realizing more cash discount
• Process compliance
• Back Log reduction
• Failure Rate Reduction


Net Working Capital Effects
The Cash GAP

You purchase inventories You sell goods
(as soon as invoice has been (as soon as invoice has been
booked, payables increase) issued, receivables increase)

INVENTORY

NWC
PAYABLES RECEIVABLES
Effect

Depending on
CASH GAP
invoice booking date
payables period
10 later 20
starts 30 40 50 60 70 80 90 100
110 120
You pay for your purchased You receive payments for
inventories your sold goods
(CASH OUT) (CASH IN)


Agreed vs. Effective Term Days

Purchase Goods Invoice Invoice
Payment
Order Receipt Receipt posting

Term Term
invoicing Due
date date
60 days 45 days
invoicing invoicing
date date
AGREED Baseline Date EFFECTI
VE

1. 05.01. 15.01. 20.01. 25.01. 31.01. 05.02. 10.02 05.03. 01.03.

agreed

effective

If posting is done before month end => Payable at end of January
If posting is done after month end => No Payable at end of January

Stalder Frédéric, Group Procurement Services, Performance and Process Management (Copyright Clariant. All rights reserved.) 10.08.2011 Slide 31

P2P Metrics to be considered

Payables

Goods Invoice
Order Invoice Posting Payment
Receipt Receipt

Actual, late posting,
non aligned terms,
1 early payment 3
2
10.05.2012

NWC Savings

Agreed vs. Effective Days
If effective < agreed (most likely) Effect 1: Early(er) posting

• 1
Posting performance Effect 2: Pay Term alignment
Effects (today FI 5 days shorter than MM)
• FI is not equal to MM
2 Effect 3: On due date payment
pay term, (FI Shorter)
• (as today early = later payment)
Early Payment 3

Peter Beyeler, Group Procurement Services (Copyright Clariant. All rights reserved.) Slide 32

Past P2P Process

Enduser is creating his Procurement issues the PO
Material request in SAP According the first in first out
To send it to the responsible principle.
Procurement Person

Payables Manual Handling and plausibility check

OCR
Approval Cockpit Transfer Interpret Verifier
Scanning


P2P Process optimization

Invoice Cockpit and the approval workflow
are the only process steps which are
unchanged. The Procurement process for
Payables Indirect Materials will be also changed into
a eProcurement process if possible. Approvals
Approval Cockpit
in case of quantity and value mismatch only.

End-user accesses one of the
over 250 catalogs and selects
eInvoice GR the needed Products and orders
immediately


eInvoice Process design

Supplier
Invoice Status
Invoice
Failed

Invoice
PO #
Compli
ance

entity

Business Rule Check
Digital Signing on Digital Signature Validation
behalf of the Supplier on behalf of Clariant

Open Text Archive
Original Document

Sphere segregation


Project Setup and Lessons Learned

Schedule and Next Steps
Q3 / Q4 2012 Q1 / Q2 2013 Q3 / Q4 2013 Q1 / Q2 2014

CH

GER

FR, SP, IT, UK, B, AT, Nordics

NAFTA

LATAM

APAC

MEA

Learning Lessons

• Corporate Initiative (Top Management Support)
• Procurement is responsible to monitor accounts payable (Purchase to Pay Leverage)
• Clear dedicated Responsible within key departments (Cross Functional)
• Advanced Guard organizational concept
• Process verification Region / Country wise (Tax and Legal Compliance)  Time Consuming
• “Slice the Elephant” detail roll out plan necessary including Region / Country specific regulations / requirements


Source To Pay SEPSM – Ariba Live

SEPSM Is a Unique Scientific Approach that Delivers Impact on 38

Business Outcomes

SEPSM: Provides a Holistic, Very Granular Framework for Managing Business Processes

6

Solution
implementation
Offers solutions
to deliver
Identifies drivers including
business
of performance process,
Links business outcomes
variability and analytics
outcomes and through process
Maps every core roadmap for reengineering
benchmarks to efficiency,
business improvement by and focused IT
Identifies the key performance transformation
key business process at a leveraging projects, Point IT
granular level measures and
outcomes for key performance ‘insights’ and / analytics
the company drivers ‘best practices’ solutions

© 2009 Copyright Genpact. All Rights Reserved.

Dependencies within S2P process and value leakages… 39

Business Impact
Symptom

Failure to link
Incomplete market procurement Delayed or inaccurate
Inadequate spend
assessment to contracts receipt transactions
visibility

Hindered actionable Wrong negotiation Savings leakages
category strategy Manual accruals
strategy

Spend Category Negotiation &
Procurement Payment
Management Strategy Contracting

Inadequate Contract non- Inadequate negotiation
spend compliance leverage
visibility

Delayed payments

Non PO invoices

Value leakages and how they can impact Total Cost of Ownership (TCO)


40
Sample S2P SEPSM Schema - Procurement Process Framework
Indirect Source-to-Pay Business Outcomes
Level 1
SEPSM
1. Reduction in TCO 2. Working capital optimization 3. Availability of material

Sourcing Procurement Payment

Level 2 Negotiation Master Invoice
Sub-Process Spend Category Planning Material Invoice Release Filings and
& Data Receipt &
Analysis Strategy & PO Issue Receipt ProcessingPayments Compliance
Contracting Mgmt Capture

• % spend • % spend • % reduction • % reduction • Accuracy of forecast • Receiving TAT •Cycle time for • Cycle time • Payment release • On time filing
data visible controlled by in price • % spend through • No. of capture (from (3-way match TAT
in price • Accuracy of
accurately purchasing preferred & contracted stockouts
Key • % of suppliers
contracted contracted
vendors
invoice date to to ready-to-pay) • Cost of making filings
• % early • % early • % late deliverycapture into • Cost of processing payments • % exceptions
Performance for 80% spend payment payment • Req to PO TAT workflow • % invoices ready to• Invoices paid on
Drivers • % vendors discount discount • Cost of PO processing • Cost of capture pay on time time
replaced YoY contracted contracted • • Accuracy
Average days of • % duplicate • Discount capture %
• % reduction in • Average • Average inventory of capture (DPU) payments
TCO targeted payment days payment days • First call query
contracted contracted resolution
Divide
Procurement Follow up Update
• TAT for query Transmit
Identify need order Receive
Plan: Reqmts, Create for delivery resolution in
receipt Return receipt
Level 3 from
Forecasts & Purchase
Approve among
and
goods
system and goods if
business requisition suppliers delivery details to
Activities Inventory requisition provide 2-way required AP
stake-holders and create and inspect
Levels information match
PO

• % spend • % spend with • Req creation • Req • % spend through • % electronic • % critical good • % of receipt • % good • % interface
with formalized formalized cycle time approval catalogues and PO acknow- delivered on txns returned errors
cross budgeting and • % req created TAT preferred / contracted ledgements time and completed on • % goods • % of invoices
functional forecasting online by end supplier (at right price • Turn around accurately time scrapped requiring PO
planning process users and specs, right time for query • GRN accuracy • % spend with at no cost to reconciliations
sessions • Forecast • Percent req volumes) % increase resolution • % receipt manual vendors
Key • % spend accuracy created over budgeted/ • % queries orders with accruals
needs • Inventory accurately as per planned volume accurately rejections
Performance correctly accuracy policy • PO Issue TAT resolved
Drivers identified • % of catalog reqs • % Pos issued
• % spend on P- correctly
cards • % POs without buyer
processing
• % POs transmitted
electronically
• PO amendment TAT


Linkages between business outcomes, performance measures 41

and drivers of that outcome …
% spend negotiated
<5% 20%
25% with e Auctions
% Spend under < 5% 40%
E-RFx
Contract Closure
8 Wk 4 Wk
Cycle Time

% Spend under
82% 15% 81%
contracts
% spend under 20 98%
management
Early Engagement 15% NA
Sourcing
Effectiveness
3%
% savings achieved 10%
3%
YOY

7%
% active suppliers 17 3.4%
for 80% spend
% spend accurately
extracted and 90% 100%
categorized
% Vendors
introduced by 5 NA
Sourcing

Note: Savings achieved YOY is basis Savings realized on Total
Sourcing spend

Customer Median Best-in-Class

We Partner with our Clients in their Transformation Journey through 42
P2P Process Maturity models…
Best-in-Class
Strategic
Proactive
Client positioning
Reactive
• Spend Visibility is low • Spend data is extracted • Spend analytics platform • >90% spend visibility
– reports from and cleansed offline in place with periodic with UNSPSC
Sourcing & Spend transaction systems feeds from ERP categorization
used
Analytics

• Need to implement e- • E-Procurement system • Req-PO penetration of • >40% by transaction
Procurement system with Req-PO – SRM >90% with >20% volume with catalogs
with workflows functionality in place transaction volume with and >25% touch-less
• PO penetration <50% • PO penetration of >70% catalogs buying
• <10% catalog buying • Up to > 10% catalog • 2000-5000 vendors per
Requisition and PO • No check on contract buying Bn • Approval matrix and
Processing compliance – limited • Preferred suppliers in place • Services procurement in budgets checks online
visibility to preferred • ~5000 vendors per Bn place in workflow
vendors
• > 8000 vendors per
Bn

• <10 days cycle time • <7 days cycle time
• > 60 days cycle time • <30 days cycle time • >50% e-Invoicing • >70% e-Invoicing,
• < 25% vendors paid • <25% e-Invoicing, • 60-85% paid on time • >85% paid on time
on time • 25-50% paid on time • <90% PO penetration • >25% discounts
Accounts Payables • <50% PO penetration • <80% PO penetration • <10% discounts (NA) • >70% FPY
• <10% FPY • <5% discounts • 40-70% FPY
• 10-30% FPY


Source-To-Pay SEPSM Success Stories 43

$5b software company based in bay area, US
• $1b spend flowing though non-compliant buying channels – early engagement of sourcing absent
• Genpact solution focused on increasing spend under effective management - $30m+ savings opportunity

$40b global pharma company

• Emerging markets which are rapidly growing does not have sourcing function and spend visibility
• Sourcing “SWAT” projects completed in ANZ, Taiwan, India – identified $5m savings opportunity

$4.5b pharma company based in Europe

• Fragmented processes with lack of integration between upstream and downstream functions in S2P
• Structured (currently implementing) 2 year transformation plan - $35m savings, $300m cash flow

$5b services company based in Europe

• Absence of critical business effectiveness metrics and adequate process visibility across P2P
• Identified key initiatives to be implemented in 2011 with programs benefits of $22m cost savings
$18b global auto ancillary company

• Bottlenecks in AP process, lack of metrics, low effectiveness (payment on time, discount capture)
• Cash flow impact of $110m with costs savings of $11m due to process optimization

12 source-to-pay diagnostics project completed with impact of > $100m

~ $38-40 MM TCO reduction through enhanced S2P effectiveness for a global 44
Bio-Pharmaceutical major…

Solution:
Business Context End-to-End SEP diagnostics of Sourcing, Procurement and
Payables

• Client struggling with declining revenue s and cost pressures
because expiry of patents on key drugs
Account
Sourcing Procurement
• Limited buy in from US and Sourcing departments, diverse Payables
agenda scope creep pressures
• Increasing sourcing • E-Procurement with • Low-value transaction
• Diverse and large number of stakeholders- 100+ process effectiveness Catalogs – Preferred spend management
stakeholders: leadership, sourcing, finance & business – Increase SUM to Vendors (Spend amount <
across 4 countries 80% $1300)
• Implement ERP frame
• Organization still grappling with integration of an acquisition • Increased penetration schedules and manual • E-Invoicing + OCR with
of E-Sourcing -– gate-keeping of a penetration of around
• Disparate Systems and Practices. Siloed processes and Increase Early agreements 60%
inconsistent behaviors across geographies Engagement from
• Policy Review • Automation of catalogs
current 20%
• Transactional process compliance Contract coverage, Programs to curb ATF & PDF Invoicing –
visibility and compliance • Managing tail-end POs and vendor Increase current FPY of
spend (10%) with creation (11% ATF 33%
• Need for improving budget and spend visibility tactical buying currently)

Business Impact Potential
• $16-17 Mn - Increasing Spend Under Management, Tactical Buying and deploying E-Sourcing Platforms and E-Auctions
• $8-12 Mn - Robust Contract Management Systems and increasing Contract coverage and visibility
• $7-8 Mn - Increasing Procurement Transactional efficiencies
• $6-7 Mn - Improving Payables Operational Efficiencies, Payment Term rationalization and discount penetration


Source to Pay Process Optimization for a Global Hi-tech Major ~$28- 45

40 MM TCO Reduction

Solution
Business Context Identifying effectiveness and efficiency opportunities in Source-to-Pay
process

• To establish an Identification of metrics and
effective and implementation of To measure “early engagement “ and
measurement system & “spend under management” by building
efficient source-
reporting to drive increased a robust metrics framework to measure
to-pay framework
Spend under Mgt Client’s program effectiveness

• To put in place a robust measurement Streamlining of client’s retained
system to drive transformation and Realignment of Client
organization, to achieve higher-
reduce TCO organization for further cost
productivity in operations and
savings
effectiveness in sourcing
• Some of the Client needs and Pain areas
which SEP addressed… Roadmap for integration of Review of procurement policies and
• High operations cost sourcing & procurement implement contract visibility and gate-
• Organization alignment issues processes to drive PO and keeping in procure-to-pay to drive
contract compliance contract, vendor and policy compliance
• Siloed thinking
• Low spend under management
Implement ion of Contract-authoring, e-
• Low utilization of technology Deployment of technology
Sourcing and automation in
tools
procurement and payables

Business Impact through TCO reduction by…
• Price benchmarking (Previously contracted savings: • Compliance ($ 5-10 MM)
$165MM over 7 years on a base of $1.3BB)
• Payables ($ 5-6 MM)
• Sourcing Effectiveness ($ 10-14 MM)
• Operational efficiency ($ 8-10 MM)


46
~ £ 16 – 18 MM TCO reduction program for a Global Services Major…

Business Impact
Business Context Identified

• £3-4 MM through Process
• Establish an effective procure-to-pay enterprise process management compliance and enforcing
framework with metrics and transformational roadmap to improve process business discipline on operating
efficiency while optimizing Total cost of ownership procedures

• Recommended ways of institutionalizing a host of P2P
Metrics • £ 5-6 MM through increased
effectiveness metrics and drilldowns to augment
Framework and business performance with increased visibility to P2P
contract visibility, compliance
interlinkages and effective control checks on
processes through dashboards
price leakages

Cross Industrial • Benchmark client business processes with industry
benchmarking medians and Best In Class companies coupled with • £ 3-4 MM through Strategic AP
and key process detailed root cause analysis of key process gaps initiatives and Working Capital
observed Optimization
gaps

• £ 3.5-4 MM through increasing
Transformation • List of transformational initiatives, categorization in Operational Efficiency
terms of focus areas, quantification of expected (Automation, Right Shoring and
Roadmap reduced process cycle times
benefits (RoI) and Risks of non-implementation


47
~ $135 MM Working Capital Optimization for Global CPG Giant

Business Context
Solution
AP Process health check, identification of working
Identifying effectiveness and efficiency opportunities in AP process
capital optimization & cost out opportunities
Procurement Payables
• Freeing up of working capital & Master Planning Invoice
Material Invoice Release Filings &
reduction of cost to serve of the Data and PO
Receipt
Receipt
Processing Payments Compliance
Mgmt Issue &Capture
Payables Process
Policy Standardization
• Low discount capture Payment terms
rationalization Due date Optimization
• No P-card usage AP & AR Terms
Harmonization
Process Improvements
• Non-deployment of e-invoicing /
Vendor Master Reduction in One Destination
ERS modes of Invoice receipt Cleanup Post Facto POs Invoice Receipt

P Card
• Sub optimal usage of SAP
workflow/ OCR engine during IT Interventions
invoice processing
E – invoicing OCR Accuracy improvements

Escalation matrix based Work Flow routing
workflow for Inv approval to approvers

Business Impact Potential: $135 MM

• Due Date optimization • AP-AR Harmonization

• Payments term rationalization • Payment terms compliance


What this new Smart Invoicing
Q&A Ariba
infographic has to say
may surprise you. Take a look.
Network http://www.ariba.com/pdf/SmartInvoicing-Ariba.pdf

Manage Cash Better Order-to-Cash
Procure-to-Pay

http://www.ariba.com/solutions/manage-cash.cfm
Manage Cash
Wednesday, May 30 (14:30-15:45)
Mare Nostrum F

Smart Invoicing: Move Beyond Scanning to Achieve Paperless Invoice
Processing
James Tucker
Wednesday, May 30 (16:00-17:15)
Mare Nostrum F Global Director Solution Marketing
The Big Finance Payoff: Top Performance Metrics and How to Achieve Ariba Network & Finance Management
Them
+1.650.390.1702
Wednesday, May 30 (17:30-18:45) jtucker@ariba.com
Mare Nostrum F

e-Invoicing VAT Compliance Workshop: A Legislative Framework for
Electronic Invoices
http://www.linkedin.com/in/jbtucker3
Thursday, May 31 (10:00-11:15)
Llevant

Managing Cash Better in an Era of Limited Growth jbtucker3
Thursday, May 31 (11:45-1:00)
Llevant

Streamlining Your Accounts Receivables with Outbound Invoicing


Benchmarking
Payables Performance Measures
Invoice cycle time receipt-to-approve (P) 45 days 21 days 5 days
Invoices per FTE (H) 6,797 11,364 32,830
Percentage of invoices with exceptions (A) 30% 17% 12%
First pass match rate (H) 65% 70% 85%
Percent of electronic invoices (H) 7% 25% 67%
Days Payables Outstanding (REL) 30 33 36
Percent of spend under Discounts (H) 0% 0.018% 0.133%
Percentage of discounts captured (A) 15% 24% 31%
Number of e-enabled suppliers (AN) 20 400 3000

(P) PayStream Advisors
(H) The Hackett Group
(A) Aberdeen
(REL) The Hackett Group/REL
(AN) Ariba Network
50

Sources
• Paystream Advisors
eInvoicing Adoption Benchmarking Report, 2011
Dynamic Discount Management: Finding the “Treasure” in Treasury, 2012
• Aberdeen
Invoicing and Workflow: Integrating Process Automation to Enhance Operational
Performance, 2011
Understanding Your Cost to Pay: Effective Measurement in Accounts Payable, 2011
Liquidity Management: Leveraging Technology to Improve Cash Forecasting, 2011
• The Hackett Group
Build Your Business Case for Procure-to-Pay Automation -- webinar
http://www.ariba.com/resourcelibrary/views/resource_library_asset_brief.cfm?asset_id=834
• The Hackett Group/REL
REL 2011 Working Capital Survey
• Ariba Network
Network Insight – aggregate performance measurement from over $300 billion in
spend transacted between nearly 1 million trading partners


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