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e-Invoicing: Don't let your business case embarrass you, the Delhaize Story

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This session was presented at '15 Secrets to Shared Services Success" conference organised by sharedserviceslink.com. …

This session was presented at '15 Secrets to Shared Services Success" conference organised by sharedserviceslink.com.

To find out more about forthcoming conferences check http://www.sharedserviceslink.com

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  • 1. E-InvoicingDon’t Let your Business Case Embarrass YouThe Delhaize Belgium StoryThierry ClaesStF Consulting
  • 2. Introduction Delhaize Belgium Delhaize Group is a Belgian food retailer present in 8 countries on three continents with a sales network consisting of 2,673 stores (2008); Delhaize Group posted EUR 19.0 billion in revenues (2008) and EUR 410.1 million (USD 562.1 million) in net profit for 2007. At the end of 2007, Delhaize Group employed approximately 138,000 people. Delhaize Group’s stock is listed on Euronext Brussels (DELB) and the New York Stock Exchange (DEG). As part of Delhaize Group, Delhaize Belgium’s sales network consisted of 775 stores (730 in Belgium, 40 in Luxembourg, 4 in Germany and 1 in France). In 2008, Delhaize Belgium posted EUR 4.4 billion in revenue, presented a market share of 25,7%* and employed approximately 18.000 people More than 3.000 suppliers Around 650.000 vendor invoices per year * Source AC Nielsen16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 2
  • 3. What will be covered in this presentation ?• Real questions for Real project ! – What’s e-invoicing ? – Why should you go for e-invoicing ? – What are the benefits AND the costs of an e-invoicing project ? – What are the key elements for your RFP ?• Sharing of experience from on real case !16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 3
  • 4. Agenda 1. Define Vision 2. Business Case 3. Solution 1. E-invoicing Model Selection 2. Service Provider(s) Selection (RFP & Contract) 3. Selected Solution 4. Critical Success Factors16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 4
  • 5. Vision Definition Understand E-Background • As in every projects, you will have to start by Defining your Vision • You will be confronted with the “e-vocab” E-Billing Scanning OCR E-Invoicing Digital Mail Room • Let’s put some conventions …16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 5
  • 6. Vision Definition Understand E-Background – E-invoicing E-invoicing• What’s e-invoicing ? – E-invoicing is used in a “buyer centric” model to describe the vendor’s invoice. VENDOR BUYER – Vendor’s paper invoice is replaced by an electronic message => replacing the legal paper vendor invoice – The electronic message is seamlessly recorded in the AP system … – Sending a PDF invoice by mail is NOT e-invoicing ! – Vendor’s paper invoice was never created => never received by buyer – When using the term e-invoicing, we usually consider the AP process 16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 6
  • 7. Vision Definition Understand E-Background – E-invoicing• Scanning/OCR is NOT e-invoicing ! – Digital Mail Room, OCR, Scanning are “just” a way to encode paper into your (AP) system – Vendor’s paper invoice still exists and (most of the time) remains the legal invoice – Manual and low added value tasks are still present in the process, so are the handling costs ! => it will not be part of this presentation AP Delivery Isolate Open Scan OCR Validate Integrate Workflows Paper Archiving Low Added Value tasks 16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 7
  • 8. Vision Definition Understand E-Background – E-invoicing• What’s E-Billing then ? E-Billing – E-Billing is used in a “biller centric” model to describe the bills/invoices sent to the customers. VENDOR Customers – Same characteristics as e-invoicing – When using the term e-billing, we usually consider the AR process• Today, we will talk about e-invoicing ! 16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 8
  • 9. Vision Definition Starting point - Does it look familiar ? 1 Manual encoding and poor productivity 2 Mislaid and lost invoices 3 Unnecessary duplicates 4 Poor control of approvals 5 A/P people chasing approvers 6 Missed supplier discounts or Missed due dates 7 Managers spending time on invoice handling 8 Painful Compliance Processes (SOX,…)16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 9
  • 10. Vision Definition Drivers & Objectives Direct cost savings of XFTE by eliminating manual encoding, paper Direct cost savings copies/image scan, archiving and decrease volume of disputes Payment on time From a daily challenge to an usual & easy procedure & Better Service Working Capital From blocking factor to enabler for increasing cash discounts Management and cashflow management initiatives (eg. reverse factoring) Compliance & Visibility From lost in banana box to perfect audit trail Eliminate non value added tasks Upgrade and valorise AP people and activities Corporate Responsibility Paperless strengthen Company’s “green” image Enabler for sourcing or centralize AP Provide necessary flexibility for Future operations16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 10
  • 11. Vision Definition Why should you implement E-invoicing ? Today’s competitive environment requires optimal cost structure E-invoicing will help you to achieve your objectives by reducing the timing of transactional processing16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 11
  • 12. Vision Definition Scope of e-invoicing INVOICE RECEIPT & ENCODING MATCHING BOOKING PAYMENT (WORKFLOWS) (WORKFLOWS) HANDLINGSUPPLIERS LEGAL PAPER ARCHIVE “NON LEGAL” E-ARCHIVING 16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 12
  • 13. Vision Definition E-invoicing Solutions ModelsBuyer Centric (direct model) – Buyer driven supplier – Order-to-Payment Buyer – A/P and Procurement optimization supplier – B2B custom features – Extendable to other message streams (logistics,..)Consolidator – Roll-out efficiency : Community, Translation, on-boarding services, interoperability Company Company – Legal Compliance Conso – Cost- and time-efficient roll-out if standardized way is OK Company lidator Company – Works for Buyer and Sender centric models (mostly)16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 13
  • 14. Vision Definition Models - Direct vs Consolidator Direct – Point2Point + - • “legacy” EDI communication hub • Roll-out dynamic • Buyer Centric • Compliance management for • Customization capabilities dematerialized invoices • Other business transactions supported (logistics, procurement,..) Consolidator + - • “New” but emerging • Degree of standardization vs customer • Works for multiple inbound- and features required, outbound invoicing • Contractual guarantees on compliance • Compliance certifications16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 14
  • 15. Vision Definition Inhouse vs Outsourced ONBOARDING RESOURCES • Telesales & community care centers • Functionality to cope with various supplier/customer segmentations MITIGATING THE COMPLIANCE RISK DECISION : • Know how • Investment in Audit certificates – Insurance – Dialogue with OUTSOURCING ! Tax administration • Capability to monitor and adapt if any regulatory change ADVISORY ROLE • IT Resources (not) available16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 15
  • 16. Vision Definition Ultimate Project Objective Replace 90% of our paper supplier invoices by e-invoices within the next 3 years. Outsource the Compliance “headache” and the onboarding management to a service provider Increasing our productivity and decreasing our operational costs by …16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 16
  • 17. Agenda 1. Define Vision 2. Business Case 3. Solution 1. E-invoicing Model Selection 2. Service Provider(s) Selection (RFP & Contract) 3. Selected Solution 4. Critical Success Factors16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 17
  • 18. Business Case What are the elements to consider • Benefits – Costs Reduction Opportunities – Tasks elimination – Productivity Gain – Storage costs reduction – Working Capital Improvement • Project and Process Costs – Training and Communication Costs – IT and Business Change Requirements – E-invoicing processing costs – E-Archiving costs – On-boarding costs (resources,…) • Timing – Timing for your business case will depend on your on-boarding timing • Volume of invoices converted16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 18
  • 19. Business Case - Benefits Where will be the cost savings ? Outbound – Supplier: A/R process Draw up Follow-up Solve Manage Financial Prepare Send Archive Reconcile invoice unpaid issues disputes impact Inbound –Buyer: A/P process Process Make Manage Handling Matching approval Archive (key-in) payment disputes Source Isabel paper 1,2 € 2€ 5,6 € 3€ 1,4€ 1,8 € =15 *€ *average AP cost according Billentis/Certipost “The average cost for a customer bill is 5 USD, of a dispute is 20 USD” – Gartner (Research Note, B2B invoicing, Cash is King) Methis study: “substituting all paper bills into epaper, contributes 0,7% of Kyoto norm for Belgium”16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 19
  • 20. Business Case Where will be the cost savings ? Outbound – Supplier: A/R process Draw up Follow-up Solve Manage Financial Prepare Send Archive Reconcile invoice unpaid issues disputes impact Inbound –Buyer: A/P process Process Make Manage Handling Matching Approval Archive (key-in) payment disputes Source Isabel •A/P Aberdeen Group estimates that digital invoice processing at A/P side saves up to 80% of encoding, archiving and dispute costs •A/R: Gartner estimates that typical saving is 3,35 USD per invoice and 10 USD per dispute – Gartner Research Note, B2B Invoicing, Cash is King16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 20
  • 21. Business Case Complexity - How hard can it be ? • 1 Company with low maturity AP processes : lots of manual transactions, paper based, non efficient workflows, low visibility on process performance … BUSINESS CASE IS EASYAP Maturity 2 2 • Company with high maturity AP processes : already using EDI (eg) or digital mail room and OCR, approval/exception workflows are efficent, payment are made on time BUSINESS CASE IS CHALLENGING 1 Complexity 16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 21
  • 22. Business Case Elements to consider based on AP maturity Optimization of Working Capital : Capture of discount, decrease of late payment penalties, early VAT claims, Dynamic discounting, Enabler for other projects (eg Reverse factoring initiatives …)AP Maturity Optimization of Exception Processing and Supplier Services Mail Room Staffing, Data entry Staffing, Reduced costs of storage, Reduced costs of managing paper Complexity 16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 22
  • 23. Business Case – Project and Process Costs Business Requirements & Developments• Data Capture of E-invoicing – Where should the e-invoice message be integrated ? – Initial process started with the paper receipt (also for EDI invoices) – How to make the difference between non legal EDI invoice and legal EDI invoice ?• Pre-Controls on e-invoicing plateform – Where controls should be performed ? In E-invoicing platform or in company’s processes – What about the master data exchanges ? – When E-invoice is created, it may not be cancelled => credit notes is to be created if changes are required16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 23
  • 24. Business Case – Project and Process Costs Business Requirements & Developments• Archiving – Where do you need to have the invoice image and for which task? – Visualisation versus Hyperlink – Connection or Copy-pasting the database – You always can have 2 archiving databases but there is always only one “legal”• Vendor Portal (legacy) – status of invoice – Do you already have a “vendor Portal” ? – Build or outsource – New functionalities16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 24
  • 25. Business Case – Project and Process Costs Training and Internal/External Communication• Focus on External Communication – Rely on communication package provided by service providers but “one size does not fit all” – Your communication needs to be aligned with your suppliers segmentation and has to : – Be Enriched with your company’s style – Be in phase with your ambitions and project steps – Combination of targeted mailings, workshops and personalized communication through Procurement department• Do not underestimate the Internal Communication and Training – Every people in contact with suppliers needs to be aware of the project basics – Training depending on audience – Do not underestimate the profile shift needed and the education required to go along with this shift16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 25
  • 26. Business Case – Project and Process Costs What does e-invoicing cost ?• The cost per invoice is depending on the service providers and the volume of invoice• A quick market review showed for a volume of 500.000 invoices an average between 0,5 eur and 1 eur• These costs will indeed depend on the additional services to be included such as : – The onboarding activities – The archiving – The technical assistance – Etc16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 26
  • 27. Business Case Onboarding Timing100% Y3 Average 90% 90% 76% 80% Y2 Average 70% 46% 60% 50% 40% Y1 Average 16% 30% 20% 10% 0%16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 27
  • 28. Business Case Delhaize specifics • Assumption : Delhaize is outsourcing the e-invoice generation => For our business case we took a conservative approach of 1 eur (including legal archiving) => Onboarding was to be done by Service provider • Our business case has been firstly build on the very conservative approach of only considering the direct payroll cost on : – Mail Room – Data Entry (manual & scanning) – Storage and data retrieval in case of Supplier enquiry • The option of outsourcing the scanning of all the remaining paper invoice as from day 1 has been rejected during the vision definition but is still an option to consider when drafting your business case16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 28
  • 29. Business Case The preliminary results P/L Impact without outsourcing remaining paper invoice 600.000 1.600.000,00 € 1.400.000,00 € 500.000 1.200.000,00 € 400.000 1.000.000,00 € #Invoices 300.000 800.000,00 € 600.000,00 € 200.000 400.000,00 € 100.000 200.000,00 € 0 0,00 € Y1 Y2 Y3 Y4 Y5 Volume DEMAT Salary Cost Savings Cost (Transactional +OTC) Profit16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 29
  • 30. Agenda 1. Define Vision 2. Business Case 3. Solution 1. E-invoicing Model Selection 2. Service Provider(s) Selection (RFP & Contract) 3. Selected Solution 4. Critical Success Factors16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 30
  • 31. Solution 1. E-invoicing Model Selection – The Drivers DIRECT GOODS Point2Point - EDI • Standard for Retail Industry is EDI (PO, DESADV, RECADV, INV, …) • Already more than 30% of our invoice through EDI (but still with paper) •Strategic Decision to select • Strategic Decision to select an EDI solution for Direct an EDI solution for Direct Goods Goods Any2Any Format INDIRECT PROCUREMENT • No existing standard •Strategic Decision to have 1 • Roll out complexity specific solution for each • Mitigating Compliance risk channel • Suppliers segregation – specific approach & tools are •Consolidator Model – required relying on the Any2Any business model16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 31
  • 32. Solution 2. Selection of Service Providers – The RFP• Service Provider’s profile and shareholder structure• Technical aspects (interfaces used, supported format, …)• Compliance : – Authorized E-invoicing Method used (EDI, AES, Other) – Certifications obtained – SAS 70 & Other comfort letters – Ruling with local tax administrations• Liability cap (if any)• Onboarding : – Method and guarantees – Languages capabilities – Interoperability16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 32
  • 33. Solution 2. Selection of Service Providers – The RFP• SLA’s towards the client AND the supplier• Setup and maintenance costs• Pricing• Optional Services : Scanning, dynamic discounting, portal …..• YELLOW PAGES (% match between the supplier community and the suppliers on the plateform)16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 33
  • 34. Solution 2. Selection of Service Providers – The ContractGeneral Attention Points• Do not underestimate the time you will take to validate the contract and convince people internally• Complex versus “New and Unknown”• Have your Tax and Legal Department on board• Set your objectives straight and have clear Risk Assessment : – Do we already have this risk ? – Do we want to keep the same risk level as today or do we want to decrease the risk ? (eg VAT rate validation)• Conceptually, e-invoicing implementation means “replacing the Postal Service” : – But do you want to outsource/add some more controls ? – Do you just want to replace the “mail guy” ?16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 34
  • 35. Solution 2. Selection of Service Providers – The ContractCompliance Roadmap1. Be careful : Technical Compliance versus full coverage of the compliance – Does the Service provider fulfill only the “e-invoicing” law (European Directive)? – Does the Service Provider warrant that the e-invoicing that you will receive fulfills any “Any applicable laws” : EU Directives, laws, binding rules, or regulations issued by a governmental authority of the relevant country” (VAT – Commercial Tax) – Cross Border Compliance – outside Europe/ Intra-Europe/ Local2. Have the SAS 70 and read it ! – What’s the timing for deficiency resolution ? – What type of deficiency is for you critical ? (eg Compliance, Archiving,…)3. Certifications/Comfort Letter – From a reputed auditor … – As always, be careful on the wording of the comfort letters16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 35
  • 36. Solution 2. Selection of Service Providers – The ContractCompliance Roadmap4. Insurance – Warranties are nothing without any insurance – What’s the content of the insurance policy – Is it only for you ? – What’s the covered amount ? What do you want as coverage ? What is reasonable ? – VAT penalty amount (10% of total yearly expenses)5. Right to perform your own audit – Do not limit the scope of the authorized audit – What’s the guaranteed support of Service provider during this audit ? Is it free of charge ?16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 36
  • 37. Solution 2. Selection of Service Providers – The ContractWorst Case Scenario• SLA’s – SLA for service availability – Archiving and data losses – Onboarding campaign• When are you entitle to break the contract ?• What if service level is not in line with expectations and SLA and that you decide to break the contract ?• Consequences …. Are you covered for this ?• Search for new Service Provider, Processing of the paper invoice, communication to suppliers …16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 37
  • 38. Solution 2. Selection of Service Providers – The ContractTasks Distribution• What’s the support expected from the company ?• What are the resources required ?• Is it sufficiently described in the contract/Service Manual ?• Are the answers to the RFP part of the contract ?16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 38
  • 39. Solution Choosen : Direct Goods EDICOM SUPPLIERS With EDI SUPPLIERS With WebEDI SUPPLIERS W/o EDI DESADV AP System PO16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 39
  • 40. Preferred Solution : Indirect Procurement The Consolidator model Financial System Supplier Archive Auto Match Invoice Supplier Data in Buyer Format PO Check Transaction A/P Non PO or System Transaction ACH Supplier Image/ Work Flow Approval & G/L Allocation Invoice Data Transformation Supplier - Validate rm Fo - Enhance eb Supplier - Re-format W Requisitioner Supplier Payment & Remittance * Picture from OB1016-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 40
  • 41. Agenda 1. Define Vision 2. Business Case 3. Solution 1. E-invoicing Model Selection 2. Service Provider(s) Selection (RFP & Contract) 3. Selected Solution 4. Critical Success Factors16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 41
  • 42. Critical Success Factors for an Easy Selection• Sponsorship from Finance and IT Departments… and Supply Chain• Tax and legal department on board and understanding the project• Managing compliance risk on a practical way – Good view on risk involved – Outsource to professionals (service providers, insurance, ….)• Have a clear view on your internal resources and on task distribution between Service Provider and Your organization• Do you have a fall-back scenario ? What would be the cost of it ? Who would bear the cost of it ?16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 42
  • 43. Critical Success Factors for an Easy Business Case• Do not make your business case more complex than it is !• Be clear on your objective ! Replace the “mail guy” vs AP process Re- engineering• Take into account the Supplier’s perspective in your business case (Win-Win Solution)• E-invoicing as the starting point for new Working Capital initiatives (Intangible benefits)• Identify carefully the required changes (legacy system, archiving, master data) to work paperless• Do not underestimate the training and communication costs in your business case• E-invoicing will only mean additional costs if you do not convert your efficiency gain (task redistribution, downsizing, volume increase, …)16-Mar-09 © StF Consulting - Shared Service Link - London 19-03-2009 43
  • 44. THANK YOUQUESTIONS ? Thierry Claes thierry.claes@stf-consulting.eu +32 473 64 00 60

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