increasingcashreturnsfrom … settlement receivables finance ... 7 dpoimprovement* &*...

Increasing Cash Returns from Dynamic Discoun5ng

Presented By

Drew Hofler, Sr. Solu5ons Manager, Ariba

© 2011 Ariba, Inc. All rights reserved. 2

Ariba Overview •  Ariba’s Mission: Be the world’s

business commerce network

•  Help nearly 1 million global companies buy, sell, and manage cash

•  Process annually nearly $300 billion in spend, over 25 million PO’s, and over 60 million invoices

•  Network growth through expanding community of buyers and sellers, acquisitions (include Quadrem and b-process) and a growing Partner Ecosystem including: ScanOne, TrustWeaver, Receivables Exchange, Oracle, HubSpan

Collaborative Commerce: Helping Companies Buy, Sell and Manage Cash better

3

BUY MANAGE CASH SELL

Sales & Marketing

Finance

Sellers

IT

Accounts Receivable

Buyers

Sourcing & Procurement

Finance

IT

Accounts Payable

Improve spend control and performance with reduced costs, lower risk, improved

and enhanced compliance.

The discipline of using collaborative solutions to

make your money work for you and your trading

partners

Accelerate sales through efficient processes fostering stronger

relationships with new and existing customers.

Collaborative Finance

Working Capital Management

Electronic Invoicing

Payment Automation

Matching & Compliance

Scanning & Workflow

Discount Professional

P-Card Settlement

Receivables Finance

Supply Chain Financing

Collaborative Procurement

PO Automation

Supplier Enablement

Supplier Portal

Connectivity Services


Working Capital Tension Situation and Objectives of Buyers and Suppliers

Working Capital Tension Historic Cash Reserves: $1.9T+*

Low Interest Rates: 0% - 0.3%

Investor pressures for greater returns

Supply Chain Risk

Buyers Suppliers

Payment Terms Stretched

Limited bank credit

Low visibility into cash flows

Cash flow is critical

Manage Cash better and achieve millions in savings

Best Practices Commonalities among the most successful companies

6

Top 5 Best Practices 1.  Formalize a Program to Align objectives of AP, Treasury, Finance

and Suppliers

2.  Define a Payment Terms Strategy: Optimize & Rationalize

3.  Capture missed pre-negotiated savings through electronic invoicing.

4.  Offer Automatic Dynamic Discounts through supplier outreach and cash flow portal

5.  Introduce Ad-Hoc Dynamic Discounting to meet periodic cash flow needs.


DPO Improvement &

Greater Dynamic Discount

Opportunity

Best Practice #2: Include Terms Strategy Top Quartile Results from Combined Approach

•  Ra;onalize terms within group/commodity

•  Align consistency

Payment Terms

Ra5onaliza5on

•  Align DPO with industry

•  Posi;on extended Net terms

Payment Terms

Extension


< 50% currently captured

< Capture missed discounts through Smart Invoicing

Include net term invoices

Enroll suppliers at enablement

Introduce sliding scale discount

Engage right supplier audience

Ariba solutions drive early payment discount adoption

Best Practice #3/4/5: Increase Discount Capture Capture Missed Discounts & Increase New Discounts

Recent Aberdeen study shows 50% of pre-negotiated

discounts are never captured

Process Efficiency is the Key to Success e-Invoicing -- the First Step to Maximizing Discount Capture

1% Dis

coun

t Rat

e

Days of Invoice Approval and Payment

2%

20 10 30

Pap

er In

voic

e A

ppro

vals

60

3% e-

Invo

ice

A

ppro

vals

Reduce invoice approval cycle time to: ü  Drive out cost while improving efficiency ü  Increase visibility into payment timing ü  Maximize early payment discount savings ü  Mitigate supply chain liquidity risk

Example discount term: 2%10 Net 30

Reduce Cycle Time

‘Smart’ e-Invoicing

Level 2

Level 1

Level 3

Invoice

98% Touchless

Account Coding

Contract & Receipt Match

Price & Tax Compliance

GST/VAT Compliance

PO & PO-Line Match

Buyer Match (non PO)

UOM & SKU Change

Currency Match

Sub Total & Total Amount

PO-Line Change

Line & Total Consumption Thresholds

Shipping & Tax

Thresholds

Invoice Number

Bill To / Ship To

PO Number

Requestor (Non PO)

Invoice Date

VAT / GST IDs

Level 1 – basic field-level existence

Level 2 – intermediate field-level

Level 3 – advanced optimized matching and compliance

ERP

Immediate, “Smart”

Feedback to Suppliers

dramatically reduces time to clean

invoice

Faster cycle benefits buyers & suppliers

Ariba’s ‘Smart’ e-Invoicing drives touchless processing and delivers “auto post” rates of 98% +


< 50% currently captured

< Capture missed discounts through Smart Invoicing

Include net term invoices

Enroll suppliers at enablement

Introduce sliding scale discount

Engage right supplier audience

Ariba solutions drive early payment discount adoption

Best Practice #3/4/5: Increase Discount Capture Capture Missed Discounts & Increase New Discounts

Recent Aberdeen study shows 50% of pre-negotiated

discounts are never captured


•  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

Suppliers Benefit from Early Pay Why many suppliers are eager to participate

Waste & Disposal Services

Collaborate with Treasury, AP, Procurement

Align with Supplier Enablement

Robust Supplier Training and

Communica5on

Assign to P&L to drive behavior

Define a clear targets & segmenta5on strategy

Align with Supplier Enablement

Robust Supplier Communica5on & Customer Service

Assign to P&L to drive behavior

Energy/Oil & Gas

Centralized AP in 2012

Use Early Payment as incen5ve to eInvoice Supplier Enablement

Target Right Suppliers in Waves

Ariba Rapid Ramp™ services


Dynamic Discount Case Studies Best Practices

Retail

Waste & Disposal Services

500% Increase in Supplier Adop5on

(2011)

27% Month/Month savings growth

~$2 Million annual Savings (<$1B Spend)

24% Avg. APR

Retail

900 Indirect + 600 Merch. Suppliers on AN

92% transac5ng in 12 months

>$1M annual savings (14% -‐ 36% APR)

Paid for P2P investment in <1 Year

Energy/Oil & Gas

Wave 1: 500 Suppliers

$1.1M discounts in 3 months

Paid for eInvoice ini5a5ve before system

went live

Transformed AP “From Cost Center to Profit

Center”


Dynamic Discount Case Studies Results

© 2012 Ariba, Inc. All rights reserved. 15 © 2012 Ariba, Inc. All rights reserved. 15

Technology •  Cash Op;mizer •  Flexible Integra;on to ERP

•  Dynamic Discoun;ng

Community •  Largest B2B network

•  Ac;ve Resource •  Ac;ve Community

Services •  Diagnos;cs & Strategy

•  Rapid Ramp •  Program Management

Pillars of Success Technology, Community and Services combine to deliver value

Q&A

© 2012 Ariba, Inc. All rights reserved.

Drew Hofler Solu;ons Marke;ng Ariba Network & Finance Solu;ons +1.412.297.8194 [email protected]

Ariba LIVE 2012 – Customer Presenta5ons and Stories:

Ø hZp://www.youtube.com/watch?v=vpD1h8eiNbo

Ø hZp://www.youtube.com/watch?v=YtDLrR9rgUo

Ø Ariba Live 2012 Customer Dynamic Discoun;ng Panel: hZp://www.slideshare.net/Ariba/dynamic-‐discoun;ng-‐new-‐opportuni;es-‐for-‐norisk-‐highyield-‐cash-‐returns

DriveDiscount Growth

2 Net Positive DPO

3

Illustrative only – results will vary depending on spend, levels of automation, visibility and control

Current State

Future state

Invoice Compliance

Terms Ra5onaliza5on/ Extension

Discount Program

DPO = 30

-5 days

+10 days DPO = 35

+

+

-

25

40

35

30

DP

O

. . .

Net positive impact

FAQ: Balancing DPO & Discounts Discount Savings with Net Positive DPO Impact

Terms Rationalization/ Extension

1

18

Challenges for Finance What do we do with all our short term cash?

Historic low Interest Rates

Pressures for greater returns

© 2012 Ariba, Inc. All rights reserved.

Historic Cash Reserves

Supply Chain Risk

increasing*cash*returns*from* … settlement receivables finance ... 7 dpoimprovement* &*...

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increasingcashreturnsfrom … settlement receivables finance ... 7 dpoimprovement* &*...