Contract invoicing – Gaining Control of non-PO Invoices

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Processing invoices without purchase orders presents challenges for all organization. In this session, you will learn how you and your suppliers can create contract invoices with the Ariba Network off of approved contracts and catalogs. Join this session to see a demo of Ariba's latest contract invoicing features and to hear how a world-class organization manages compliance performance to drive millions of dollars in contract leakage savings from rogue and errant spend.

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  • Processing invoices without purchase orders presents challenges for any organization. In this session, you will learn how contract invoicing with Ariba allows you to build invoices off contracts to improve compliance and prevent tens of millions of dollars in contract leakage from rogue spend.
  • According to a recent survey 59% of finance leaders think that the AP function could become more strategic, and that an improved AP performance can have a positive impact on profitability. There is a clear need for automation of the P2Pfunction. But we must think different. In 2005 Apple launched an ad campaign called “Think Different”. It’s commercial played a pivotal role in helping Apple achieve one of the greatest corporate turnarounds in business history.
  • The supplier creates contract invoices on the Ariba Network so the invoices are subject to the buyer’s rules and can be electronically signed.Supplier users punch into the buyer’s procurement system to create an invoice from selected contract line items.Buyer rules will be enforced also for contract invoicesContract invoices can be digitally signed so the Ariba Contract Invoicing solution can be used in EuropeThe new architecture made it possible to address many customer enhancement requests on the Ariba Contract Invoicing solution
  • We discussed the innovative tools Ariba offers for optimizing working capital; ; another area that can help move the Net Income needle in the right direction is by capturing the savings of spend under contract. This Hackett Group study reveals the potential significant savings that will directly impact profitability by reducing spend by over $9 million per $ billion in spend under contract by increasing compliance rates by just 10%!!
  • Add info to quantify scope of AP$18Billion spend annually12M invoices annuallyAP staff of 30
  • Quantify the cost estimates? All LPO’s Local PO’s without pricing terms required manual matching – estimated volume? Number of FTE’s? Over 100,000 invoices per month – OutsourcedAdd bullet “Lack of Visibility – lost contract savings, etc.”LPO – local PO processDifficult to maintain in OracleChange Management – agree that this is difficult; getting stakeholders engaged; silo’d mentality (automative, ); do their job b/c told to, but don’t often think about better ways to do it. People do NOT like change. Users in the field get e-Invoice will not pay them until get the paper. We could use Workbooks from Ariba Implementation team – primary focus is to get up and running quickly. They fire questions at us that we hadn’t fully thought through.
  • One centralized repositorySupply Chain solutions have some SAP for logistics – so customer focused and fast paced. PO’s issued, get approved. But with some suppliers they may get a call from UPS logistics customer that needs something NOW! They call someone on the phone and get it delivered. So to resolve this, UPS is invoicing against contract.Financials is all OracleAriba solutions and Network layer on top of OracleIn the process of adding Automotive Warehouse (IDC) loading PO’s for invoicing matching. Pushed across the Network. Supplier may use PO-Flip. Huge spend. Large suppliers. May use EDI, cXML, CSV or PO-Flip. Today it is manual, so many will be e-enabled.The primary focus on local PO customization on ERP. Looking to replace this. Spend manually keyed. With contracts in system, we can do invoice against contract so spend logged against contract and we get the correct rates.Example: logistics group using the LTO process. Transitioning to invoice against contract. Segmented supply base. Divided into facilities, automotive, and other spend categories – housekeeping; towing; etc.Identified large suppliers in a specific geographical area.A large portion of users now exposed to the process.Opening up to commodity rather than regionally specificGets easier as managers get more experience and more volume.As we add suppliers to users that already have suppliers on makes it easier.We’re passed the “nobody has heard of Ariba” scenario. Suppliers are experienced. Some small suppliers that have Quickbook, no easy way to get their invoice into the Ariba system to match.Get very little help from Ariba to help these suppliers. Suppliers can pay for higher level SMP program to get support, but many of these suppliers do not have enough spend/volume to justify (eg. $100K per year). The top service level of $2500 - $7499. The mechanic is NOT going to do this.I don’t see a $500K business wanting to pay this price for one customer.How map Ariba contract terms (item# and description) to Quickbooks. No supplier doing this today. We have many suppliers that want to do it. G&K does uniform cleaning services. Prior to Ariba enablement, G&K sent invoices around the country using the LPO process. UPS built a catalog of their products, cleaning mechanics uniforms; and provide towels, mats, etc. G&K shows up weekly, without orders, and takes care of business. Then sends invoices through the Network.The amount of AR outstanding prior to moving to Ariba. Today have $1K waiting for resolution locally because invoice rejected by UPS. Using EDI to get invoices to Network. 700 invoices per week. Have their own IT guy, Mark Reinich, who worked on the integration. The integration was NOT easy. Ariba said one thing, yet system worked another way. Huge challenge getting through it. Became “easier” with other because the format is stable now. All suppliers still have challenges meeting the format (eg. taxes); special rules; UPS resale certificate; Had to wait for a lot of customizations from Ariba to get this to work.
  • Quantify # of invoices? Avg invoice amount. Spend under contract?# of exceptions found? Leads to estimated savingsSupplier training to ensure not surprised by cost and complexity.Many don’t participate b/c: don’t think they have to, don’t wait to, don’t know about it.If attend the training does it help? Yes. But not dealing with supplier enablement. [have meeting later with this person as part of preparation for Ariba LIVE].Target is 6000 suppliers for contract invoicing. Overall target for Ariba Network is about 10K US. So 60% of suppliers is contract invoicing.At 1000. 2013 will target suppliers with higher volumes (ex. 900 invoices per week).Chevron, Shell, Exxon – lubricants and oils for fleet.Local service suppliers – 98% of suppliersCorporate suppliers – (require much more on integration, setup,) – 2%2K buildings in the US.Roofing, paving, builders200K vehicles in fleet; towing, tires, repairs, body work, 60% of suppliers are contract suppliers80% of spend is contract spendOnce exception hits our ERP it becomes very costly to manageFull visibility in our supply chain from a compliance stand pointNow can see PO confirmation, shipment notices, calculate time for suppliers to fulfill ordersI know what’s on backorderI can be proactive to supplier problems where I was reactive before.
  • Procurable Spend Under Management Implementation 2009: Achieved 20%Implemented Catalogs and PO solutions (low hanging fruit)Set Up Procurement team2010: Achieved 45%Deeper Integration of New Sourcing Projects into Procurement to ensure Ariba Set Up for all New DealsDeeper Integration of Finance and having shared goals for the Spend Management strategyGreater buy-in from LOB on Commodity Implementations and timelinesStronger Compliance Reporting & User/Supplier Adoption Processes2011: Achieved 80%Procurement Processes Improved – greater understanding of methods of procurementDeeper Awareness & Campaigning of the Ariba tool being the Financial System of Record for Spend ManagementAP Processes Enhanced to Standardize all Suppliers on Ariba processes
  • Controls: Houses Supplier Information that Supports Financial Controls related to transactions with the Supply BaseManagement: Provides Management Information that is Fundamental to Managing the Supply BaseSupplier Visibility: Electronic Linkage to Suppliers through the Ariba Network ensures efficient and effective transactional relationship among buyers and sellers
  • The ultimate goal of enabling a spend management tool is to strengthen the position of the organization through the process of:Reducing Maverick SpendLeveraging Spend DataOptimizing Cash FlowHowever, depending on an organizations culture and where they are in the spend management maturity lifecycle, the organization may face several challenges to this goalHave Senior Leadership involved and supportive of a spend management strategyNo ensure no one thinks there is an opt-out optionEnsure you have Executive Buy-in to your company’s P2P policyCreate a No PO or C, No Pay policy to let suppliers know you will not pay them without a PO# or C# in advanceCreate a Category onboarding planTo create direction with a plan with milestones and results oriented. Review often. Set achievable spend optimization target (companies that have no direction randomly enable spend)Cease accepting paper invoices for suppliers where you have an Ariba relationshipCreate a stop gap for suppliers you know are set up to process invoices in Ariba to prevent them from circumventing the system and your processUnderstand what commodities work best with each Procurement solution (Catalog, Non-Catalog, Contract Compliance, Services Procurement)Important to create a strong connection/line of communication between sourcing, procurement, APIntegrate P2P solutions into contract strategies Establish an exception handling process for times invoices don’t match contractsDeeper integration of new sourcing projects into procurement to ensure Ariba set up for all new deals (in RFxs and Contract language)Realize P2P strategies for services likely requires a phased approach with a solution that matures in cycles of process improvement Realize…the VIEW IS WORTH THE CLIMB! It may not feel like it while you are climbing
  • Contract invoicing – Gaining Control of non-PO Invoices

    1. 1. Contract InvoicingGaining Control of Non-PO InvoicesModerator:James Tucker, AribaGuest Speakers:Jeff Phillips, UPSAshley Miller, SunTrust© 2013 Ariba, Inc. All rights reserved.
    2. 2. There are people who see the world differently.They see things in new ways.They invent, create, imagine.We make tools for these kinds of people.Because while some might see them as the crazy ones,we see genius.
    3. 3. #AribaLIVEThe Strategic Weapon: Business NetworkLeading the Networked Economy Transformation“ Networked enterprisesare 50% more likely to bea market leader. ”
    4. 4. © 2013 Ariba, Inc. All rights reserved.
    5. 5. #AribaLIVEProcess Efficiency Drives ContractInvoice Savings of $4M / $1B© 2013 Ariba, Inc. All rights reserved.5Lost Savings per $ Billion of IndirectSpend due to Contract Non-ComplianceCompliance to Indirect PreferredSupplier ContractIncreasing compliance rates by 10% can drive $5 millionin savings per $ billion in contract spendSource: The Hackett Group
    6. 6. Jeff Phillips, UPS© 2013 Ariba, Inc. All rights reserved.
    7. 7. #AribaLIVEUPS – Overview• Founded in 1907• Corporate Headquarters: Atlanta, GA• Primary Business Units: Small Package, Supply ChainSolutions and UPS Freight• 2012 Delivery Volume: 4.1 Billion packages/documents• 2012 Total Revenue: $54.1 Billion• Employees: 397,100• 2,915 Operating Facilities Worldwide© 2013 Ariba, Inc. All rights reserved.7
    8. 8. #AribaLIVEP2P Scope• $18Billion spend annually• 12M invoices annually• AP staff of 31• 60% of suppliers are contract suppliers• 80% of spend is contract spend© 2013 Ariba, Inc. All rights reserved.8
    9. 9. #AribaLIVEChallenges• No Centralized Repository• Elimination of Local Purchase Order (LPO)process and ERP customization to this process• Change Management• Manually reviewing Invoicing to ensure negotiatedrates are billed• Chasing Paper• Lack of Visibility – lost contract savings© 2013 Ariba, Inc. All rights reserved.9
    10. 10. #AribaLIVESolutions• Ariba Contract Management System• Ariba Contract Invoicing• Ariba Procurement Content• Ariba customizes approval and invoice exceptioncontrols• UPS designed Transaction ComplianceApplication• Oracle R12 E-Business Suite
    11. 11. #AribaLIVETransactional Compliance© 2013 Ariba, Inc. All rights reserved.11
    12. 12. #AribaLIVEBenefits• Visibility of all UPS contracts in one system• Platform to provide electronic invoicing withlimits to items billed• Lock down of billable items by supplier contract• Invoice rules more flexible & customization thanexisting ERP• Validation of contract pricing with approval rules• Collaboration between UPS & supplier
    13. 13. #AribaLIVECompliance – Multiple Layers• Transactional ComplianceTransaction Sets– PO / PO Confirmation– Advanced Shipping Notice– Invoice / Invoice StatusSupplier invoicing matches our Contracts– Cannot exceed our Pricing Terms set on Contract0% Tolerance on PO Match InvoicesWe utilize over 12 Invoice Groups in the Ariba Network tomanage multiple types of Invoice Compliance RulesCustom Transaction Compliance Application© 2013 Ariba, Inc. All rights reserved.13
    14. 14. #AribaLIVENext Steps• Supplier Rationalization• Supplier Segmentation• Update Contract Clauses to include Aribaprocesses• Gather/Load all existing contracts in Ariba• Build Contract Terms to support contract invoicing• E-Enable (i.e. EDI, XML, CSV, Supplier Portal)Suppliers to Ariba Network
    15. 15. Ashley MillerGroup Vice President, Strategic Supply ManagementSunTrust Bank
    16. 16. #AribaLIVESunTrust Bank At A Glance© 2013 Ariba, Inc. All rights reserved.16• The most direct corporate ancestor, the Trust Company ofGeorgia, was founded in 1891, and merged with SunBanks,Inc of Florida in 1985 to form SunTrust Banks, Inc• Having total assets of $173.4 billion it is one of the nationslargest and strongest financial holding companies• Employs approximately 30,000 teammatesDiversified Business andProduct MixRetail &CommercialCorporate &InvestmentBankingHouseholdLendingWealth &InvestmentManagementSunTrustFootprintMore than1,600Branches2,900 ATMs800+RelationshipManagersNationalFull line ofinvestmentbankingproductsand servicesNationalResidentialmortgages, commerciallendingMortgageservicingportfolio of$163BNationalFull array ofprivate wealthmanagement andinstitutionalsolutions includingpersonal andinstitutionalinvestmentmanagement
    17. 17. #AribaLIVESSM LayoutStrategic Supply ManagementSourcingSourcing ProjectsContract NegotiationProcurement and SupplierPerformance ManagementContract CompliancePR/PO ProcessingSupplier GovernanceRisk MitigationOptimizationToolsProcess ImprovementChange ManagementSox ComplianceReporting© 2013 Ariba, Inc. All rights reserved.17Accounts PayableLegal InformationSecurityBusinessContinuityBusiness Partners
    18. 18. #AribaLIVEBusiness Challenges Circa 2009• Lack of Robust Spend VisibilityLimited Product / Line Item VisibilityImperfect Visibility into What Was Being Purchased and at What Price• No Formal Means for Spend / Contract ComplianceContracts were Negotiated, but Limited Ability to Match Invoices to ContractTermsNo Automation to Match Compliance• No Centralized Contract RepositoryContracts were All Over the Bank, and No Visibility into How Many There wereand What they were for• No Place to Store Sourcing Project Documents and DeliverablesDocuments were Not Retained - Contract, Supplier and Commodity Strategieswere Lost© 2013 Ariba, Inc. All rights reserved.18
    19. 19. #AribaLIVESpend Profile for a FinancialServices Organization• $2.1 Billionof procurable spendwith over 13,000 suppliers• 80% of spend concentrated with400 suppliers• Critical suppliers accountfor approximately40% of total spend© 2013 Ariba, Inc. All rights reserved.19
    20. 20. #AribaLIVEGoals of a Successful SpendManagement Program• Contract ComplianceEnsures financial stewardship & expense management of Supplier SpendInvoices are matched to negotiated Contract Rates with preferred suppliers• Increase Spend VisibilityImplement processes and reporting that ensures detailed information on ourSpend (What was bought, How much was paid, How many received, Whoconsumed, Supplier utilized)© 2013 Ariba, Inc. All rights reserved.20• The Path To SuccessIdentify and Solution CommoditiesEnable Suppliers ElectronicallyTransact Electronically via AribaImplement Continuous ImprovementsProcurable SpendUnder Management05001000150020002009 2010 2011 201220%45%80%87%
    21. 21. #AribaLIVEHow Did We Get Started withInvoice to Contract• As part of our Commodity Onboarding effort, weassembled team who would be responsible fordetermining method of Procurement(Catalog, Non-Catalog, ContractCompliance, Services Procurement) and teamimplemented designs on how to get the contractand spend into Ariba© 2013 Ariba, Inc. All rights reserved.21• Majority of our spend is services• Services does not always work well withPO solution so Contract Compliance orInvoice to Contract solution is thesolution for the bulk of our contracts andspend
    22. 22. #AribaLIVEProcure-to-Pay OverviewSUNTRUST SUPPLIERSSM ClientIdentifiesNeedOrderFulfillmentandInvoicingOutbound POs / ContractsInbound eInvoicesInvoices electronically “matched” toPO/ContractValidated for price, quantity, etc.Requisition POContractRequestContractInvoice matchingand approvalrouting (whereapplicable)Accounts PayableOracle Supplier MasterApproved InvoicesDaily ExportBenefits• Controls: Supplier Information, FinancialControls• Management: Supply Base• Visibility: Suppliers and transactionsSupplier DataDaily ImportSuppliersAribaProcure-to-Pay“SunMart”
    23. 23. #AribaLIVEBest Practices & Key Learnings• Have Senior Leadership involved and supportive of a spend management strategy• Create a No PO or No Contract, No Pay policy to let suppliers know you will notpay them without a PO# or Contract # in advance• Create a Category Onboarding plan• Cease accepting paper invoices for suppliers where you have an Ariba relationship• Understand what commodities work best with each Procurement solution(Catalog, Non-Catalog, Contract Compliance, Services Procurement)• Important to create a strong collaborative relationship betweenSourcing, Procurement, Accounts Payable, a dedicated Ariba Team on our side• Realize P2P strategies for services likely requires a phased approach with asolution that matures in cycles of process improvement• Realize…the VIEW IS WORTH THE CLIMB!23
    24. 24. #AribaLIVENext Steps for SunTrust Bank• Continue to strive to achieve more spend undermanagementWe are currently at 85% spend undermanagement but we want more• Continuous Improvement, ContinuousImprovement, Continuous ImprovementWork on continuing to tweak Ariba to make it workbetter for us so that we can be more efficient andeffectiveNever be satisfied© 2013 Ariba, Inc. All rights reserved.24
    25. 25. #AribaLIVEQuestions?© 2013 Ariba, Inc. All rights reserved.25
    26. 26. #AribaLIVEPlease Complete Session SurveyGo to Surveys© 2013 Ariba, Inc. All rights reserved.26Select SessionClickChoose oneRate SessionThank you for joining us

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