The New World of Accounts Payable: When Invoices Process Themselves
Michael Cerda, SAP Ariba
May 2018
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▪ What’s Driving The New World of Accounts Payable
▪ Reimagined Accounts Payable – Driving Digital Transformation Initiatives
▪ 5 Innovative Strategies and Case Studies for Achieving Excellence in Accounts Payable
1. Invoice Automation
2. Close the Loop to Capture Value
3. Increase Strategic Value
4. Transform from Cost to Value Center
5. Modernize Payment for P2P Adoption
▪ Wrap-up
Agenda – What We’ll Cover
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What’s Driving the Digital Transformation?
World data doubles every
18 months
75 billion connected devices by 2020
1 billion people connected on
social networks
75% of IT spend will be cloud-based
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Reimagined Accounts Payable - Driving Digital Transformation Initiatives
Enabling the Digital Enterprise
“Optimized and Networked”
1Open
• Any Vendor
• Any System
• Any Protocol
2Comprehensive
• All Suppliers
• All Collaborative business
processes
• All geographies
3 Intelligent
• Automated
• Contextual
• Real-time
• Big Data driven
Digital Core
Internet of Things Suppliers
CustomersWorkforce
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Automation alone isn’t the answer.
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Direct & Indirect
SuppliersERP
Dynamic Discounts
B2B Payment
The Power of Accounts Payables
Improved DPO
Connected Compliance
Smart Invoicing
buyer supplier
Strategy #1
Invoice Automation
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Supplier Documents: Purchase Orders & Invoices & Payment Status
Invoice Automation – Digital Convergence of Accounts Payable Info
Business Network
Support, Innovation & Adoption
Technology & Systems
Source ContractOrder &
Invoice
Manage Information
Manage Vendors
Buying Portal
Integrated
Invoice Conversion
Service
Electronic
(option email or fax)
Electronic
T&E
HR
FI
MM
Global End User Community
Standardize
▪ Systems will look the same per country
▪ Consistent, streamlined workflow
▪ Global contract repository▪ Streamlined and reduced customizations
User Experience
▪ “Consumer-like” shopping experience
▪ Self-service reporting on centralized data
▪ Touch-less invoicing
Savings
▪ Drive greater price reduction
▪ Reduce supplier invoice errors
▪ Eliminate manual payments
▪ Reduce maverick buying
▪ Capture early pay discounts
▪ Lower cost of operation
Controls
▪ Build for trust, audit for fraud
▪ Prescriptive content and pricing▪ Tighter integration and transparency with suppliers
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buyer supplier
Smart Invoicing – When Invoices Process Themselves
Invoice
ERP
Buyer
98% touchless
processing
SuppliersGST/VAT
compliance
PO & PO-line match
Buyer match (non-PO)
UOM & SKU change
Currency match
Sub total & total amount
PO-line change
Line & total consumptionthresholds
Shipping & tax thresholds
Account
coding
Workflow
Compliance
Invoice
number
Bill to /
ship to
PO
number
Requestor
(non PO)
Invoice
date
VAT / GST
IDs
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Smart Invoicing in Pharma
Capturing Data & Automating Exceptions…
Strategy #2
Close the Loop to Capture Value
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Siloed Processes
Analyze Source Contract Order
FulfillShipNotifyInvoice
Invoice receipt
ManageMatch & approve
Pay
Sourcing &
Procurement
AP
Supplier
Fax
Scan
OCR
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Supplier Portals
Analyze Source Contract
ShipNotify
ManageMatch & approve
Pay
Sourcing &
Procurement
AP
Supplier
Order
Invoice receipt
Invoice FulfillInvoice receipt
& status
Send PO
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Business Network: Close the Loop to Capture Value
Ord
er
MatchManage/ approve
“Actual”
spend
data
Pay
Supplier
FulfillShipNotifyInvoice POAR
Perfect
PO
Defined & approved
catalogue content
Payment visibility,
execution &
remittance
Perfect invoice
Order acknowledgement &
ship notice
Source RequisitionContractAnalyze
Catalogues
Invoice receipt
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Close the Loop to Capture Value
How an Airline Company’s P2P Value Took Off…
Strategy #3
Increase Strategic Value
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Increase Strategic Value
Funding
Sources
SuppliersBuyers
Supplier Values
▪ Optimize Days Sales
Outstanding (DSO) and A/R
Management with Early
Payment or Financing Options
▪ Utilizing Dynamic Discounting
and Supply Chain Finance
▪ Lower costs and enhance
overall access to capital
▪ Payment visibility and access
to remittance information
▪ Visibility to Approved Invoice
and Payment Status
Payment
Processing
• Mitigate liquidity risks
• True multi-funding options
• Low rate funding
• Optimize the Payment
Process
• Electronic payments meeting
regulatory compliance
New capabilities to monetize trading collaboration
Buyer Values
▪ Extend Days Payable
Outstanding (DPO) –
unlocking Free Cash Flow
▪ Increase Return on
Investment (ROI) with
Dynamic Discounting
▪ Strengthen and tighten
relationships with strategic
suppliers
▪ Reduce risk with outsourced
supplier bank account info
and e-payments
▪ Increase A/P management
efficiency with visibility
through vendor business
network and outsourced
payment services
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Increase Strategic ValueDPO and Payment Terms Rationalization and Extension
▪ Ensures paying suppliers to term and enhancing Free Cash Flow
▪ Review multiple supplier segments for inconsistencies
▪ Drives consistent supplier payment experience
▪ Delivers Client DPO improvement & uplift adoption for early pay program
▪ Aligns DPO with Industry Peers
▪ Rationalized across all Suppliers
▪ Positions extended net terms to specific suppliers / categories
DPO Benchmark
* Based on sample results from customers
using SAP Ariba solutions. Results may vary.
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Increase Strategic ValueSupply Chain Finance – Strengthen your Payment Terms Strategy
Buyer electronically
transmits payables data to
the Business Network. No
change to existing invoice
approval process.
At invoice maturity date,
Buyer funds Buyer
controlled clearing
account. The system
executes payment
instructions to pay…
…the Supplier, if supplier
has not sold receivable
…the Funder, if supplier
has sold receivable
Supplier views receivables via
the Business Network. Has
option to sell receivables and
determine their collections
date or wait until maturity.
1 2
3 Funder(s) receives and
processes early payment
requests - provides
funding to Supplier.
4
Suppliers
Funders
Buyers
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Increase Strategic Value
A Home Building Materials Retailer keeps on building…
Strategy #4
Transform from Cost to Value Center
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Transform from Cost to Value CenterDynamic Discounting – Drive ROI while focusing on your Core Business
Current DPO
Automate to minimize
missed discounts1
Day 10
0%
0.5%
1.0%
1.5%
2.0%
2.5%
Day 30
$$
Pro-rate discount to cover
remaining missed opportunities2
$$
Ad Hoc captures “as needed” acceleration
for net term suppliers3
▪ Available to some or all suppliers
▪ Delivers client savings and improves ROI
▪ Improves EPS
▪ Dynamic / Pro-rated discounts to be
earned at any point up to the invoice
maturity date
▪ Buyer initiated
▪ Optional program suppliers can use to
manage their liquidity
▪ Applies to some or all invoices
Discounting Benchmark
* Based on sample results from customers
using SAP Ariba solutions. Results may vary.
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Transform from Cost to Value Center
How a National Retailer Grew AP into a Profit Center…
Strategy #5
Modernize Payment for P2P Adoption
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The Evolution of Payments – A Brief History
▪ Fast forward to the NOW………..
▪ In 1997, soft drink vending machines in Norway could be used with
a mobile phone
▪ EDIFACT standards began in 1985
▪ ACH was started in 1972 and adopted by banks in 1978
▪ Credit cards arrived in 1946
▪ Wire transfers were invented by Western Union in 1872 on their
telegraph lines
▪ Checks arrived circa 1700 AD
▪ Currency was invented by the Chinese circa 800 AD
▪ We all started with Shekels 3000 BC
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Buyer
Supplier
Buyer
Bank
Supplier
BankCredit
B2B Payments Past: 1970’s innovation
80-140
Characters 80-140
Characters
Connect Data to Payment
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Buyer
Payment
instructions
Rich remittance
Track and trace
payment status
Bank account
management
Invoice status
Purchase orders, invoices,
contracts, and receipts
Supplier
Buyer
Bank
Supplier
Bank
Debit Credit
Integrate Payment with Data
PO’s, Invoices,
Contracts,
Receipts
B2B Payments Future: Connecting the Credit Contextually
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Improving P2P Adoption with Payment
Why a Cell Phone Network Provider Spells P2P backwards…
Wrap-up
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Now What… “Playbook” to Getting Started…
Step1: Define Initial “Size of the Prize!” to educate and excite your Stakeholder Teams
▪ Estimate in “Outcomes” and “Financial Terms” i.e. Growth, Innovation, Efficiency, and Financial - Balance
Sheet, Income Statement, Cash Flow Impact of “$X”, etc.
Step 2: Governance: Who is the Executive Sponsor? “Day-to-Day” Lead?
▪ Bring together leads from Shared Services / Accounts Payables, Procurement, IT, Treasury, and Risk
Management
Step 3: Distribute Agenda for initial Cross-Functional Team Meeting
▪ Why is “our organization” thinking about Invoice Automation and Strategic Payables Working Capital?
▪ What is Invoice Automation and Strategic Payables Working Capital?
▪ How does Invoice Automation and Strategic Payables Working Capital impact / benefit “our organization?”
▪ Who is impacted and how? Shared Services / Accounts Payable, Procurement, IT, Treasury, Risk
Management, Operations Team, and Suppliers
▪ Alignment and Next Steps: Are People Supportive of Developing Invoice Automation and Payables Working
Capital Strategies?
▪ Next Steps: Defining the Invoice Automation and Strategic Payables Working Capital Priorities for “our
organization”
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