Welcome

Susie West

Founder and CEO

sharedserviceslink

Leela Gill

VP Operations

Direct Commerce

Tom Glassanos

President

Bavelos Group

Questions

• Send me your question early

• Use this opportunity to get the answers/info you seek

• The sooner you send me the question, the more likely it will

be asked

• Remember to stay on for Q&A in the last 10 minutes of the

show

Agenda

• Context and overview

• 10 secrets

• Conclusion

• Questions

Context

• Enterprises continue to ignore an easy way to ‘make

money’

• Companies like The Coca-Cola Company, Lowes, Costco

and Pacific Gas and Electric are saving 0.5% back on all

spend… $ millions in savings per year

• Rule of thumb: You should be achieving $5M in savings and

$250M of cash per billion of spend

• These companies are actively doing supply chain financing,

and they’re doing it well. Let’s find out how they’re doing it

Overview

• Supply Chain Finance – allows you to extend net terms with

suppliers to increase cash

• Early Pay Programs – uses your cash to capture early pay

discounts from suppliers. Two common strategies:

– Terms Optimization

– Dynamic Discounting

• Buyer Initiated Purchase Cards (BIP) – A method for paying

supplier invoices via card to earn rebates and gain 30 days

DPO

Build consensus with the three amigos

• This refers to the buy-in that’s needed to get from

concept, to implementation, to project success

– Accounts Payables

– Procurement or Sourcing

– Treasury

• Early engagement is critical

• Then you need your senior champion

Extend payment terms first but watch your corporate philosophy

• It’s advisable to look at extending your terms with your

suppliers first

• Now is a good time to introduce a ‘payment term

strategy’

• Stay fair and stretch ethically

Know your cash appetite

• Do you have sufficient cash to capture discounts?

• What rate of return would make this attractive?

• Your own money or third party money?

Poll 1 Poll 1

Bake program terms into your new contract

• Bake the details of your early pay program into the

terms and conditions of your contract as standard

• ‘Start the clock’ on the sliding discount from the date

of invoice receipt

Get your enablers right

• Your purchase to pay process needs to be streamlined, efficient,

and supporting a high percentage of first time match rates

• You need a platform of enabling technology that can automate

the flow of transactions from invoice receipt to invoice payment.

And this means implementing tools like:

– Supplier portals

– Electronic invoicing

– OCR/Data Capture/Hosted images

– Auto-matching technology

– Workflow

Poll 2

Apply discounts to as much spend as possible

• It’s better to go for 100% of your spend and

capture 50%, than negotiate on 10% of spend

and capture 100%

Poll 3

Think about having ad-hoc offers

• It is good practice to have ad-hoc offers in your

program, which can be applied at certain points of the

year when cash is more desirable

• For example, end of year

• When analysing your suppliers, be sure to familiarize

yourself with their financial year

Micro-target your suppliers

• Beginning an early pay program is a good opportunity to evaluate

your vendor database

• Whilst managing this process, there is a great opportunity to look

forensically into the financial health of each supplier, and

segment them according to their credit rating, days paid

outstanding, balance sheet and other factors

• From this data-gathering exercise you will be able to determine:

– a) how you will initiate each supplier onto your early pay program

and

– b) what level of discount will be set for each supplier

• Make sure your rates remain comfortable – suppliers have other

financing alternatives - don’t ‘price yourself out of the market’

Get your measures in place

• Your discounting rates or early pay rates need to be captured,

assessed, measured, interpreted, and reported on

• If a month is low on negotiated discounts captured, find out why

• If there was an excess in discounts applied for, or taken, find out

why

• If one supplier continues to take high rates, find out why

• Measuring negotiated discounts captured is so vital, as un-

captured discounts can represent lost savings for your program

– What % of your spend have you negotiated discounts on?

– What % of negotiated discounts are you capturing?

– What is your average discount rate?

– What is your average cost of capital?

– What is your average DPO

Your ERP doesn’t provide the solution

• SCF functionality is not included in your standard ERP

package. This means you need to look outside your

ERP (SAP, Oracle or other ERPs) for this functionality

• All leading early pay tools are system agnostic, and

install-light, only requiring a limited number of IT man-

days to implement

• Most of these tools are SaaS based, and the training

event is brief, as the tools are so intuitive

Conclusion

• Should you apply all these best practices, you

have every reason to reach:

$5 million

savings for every billion USD of spend

Questions

Contacts

For more information contact:

• Tom Glassanos: tglassanos@bavelos.com

• Leela Gill: lgill@directcommerce.com

Dynamic Discounting Summit

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Conclusion

• xxx