The document discusses how traditional working capital management strategies can strain buyer-supplier relationships by extending days sales outstanding for suppliers and increasing days payable outstanding for buyers. It introduces Ariba Working Capital Management solutions as a way to collaboratively manage cash flow between buyers and suppliers by providing early payment options for suppliers at lower rates than traditional options, while also giving buyers greater control over payables to extend terms or negotiate lower prices. The solutions help address liquidity issues for both buyers and suppliers through increased visibility, control and automated processes.

1. Ariba Knowledge Nuggets
Working Capital Management and
Why Your CFO cares!
Traditional working capital management strategies can strain trading
partner relationships. As buyers focus on maintaining or extending
Days Payable Outstanding (DPO) and increasing cash returns,
suppliers often face extended Days Sales Outstanding (DSO) and
cash flow pressure. Ariba Working Capital Management solutions provide new and collaborative ap-
proaches that serve the needs of both buyers and suppliers. While providing you with the controls
you need to optimize cash use and to realize high-yield, risk-free returns on your payables, Ariba
Working Capital Management also provides your suppliers with the visibility and control over their
receivables to better manage their cash flow. These features help suppliers get early payment at
much lower rates than traditional market resources without incurring debt—and provide greater lev-
erage for you to extend payment terms or negotiate reduced prices.
Do any of these topics creep into conversations where your CFO or finance teams are involved?
• Driving Systems Improvements
• Desire to outsource non-competitive operations
• Extension of Days Payable Outstanding or Reduction of Days Sales Outstanding
• Fraud
• Audit and Compliance
• Corporate Reporting
• Controls
• Controlling Employee Expenses
One of the biggest challenges in cash flow management is unpredictability. The other is time. When
will a large customer settle what they owe? When will Sales bring in a large new account — and
how quickly can this account be up and generating revenue. Working capital management can
create tension between buyers and suppliers. While you prefer to hold
on to your cash, your suppliers would like to get paid sooner to improve
their cash flow. You can resolve the tension by routinely taking advan-
tage of suppliers' early-payment discounts. But those opportunities are
often lost in a sea of paper invoices, or bypassed when prevailing cash
management strategies call for delaying payment to earn interest on
cash balances. Meanwhile, the conflicting priorities can put cash-flow
pressure on your suppliers.
Your business growth relies on the free-flow of cash. Yet too much
working capital can get clogged up in receivables and payables up and
down your supply chain. That can create risks you don't want, for you
and your trading partners. Of course, there are ways to collaborate with
your cash-strapped partners to set it free, like dynamic discounting or
receivables financing. But too many companies rely on sluggish, paper-
based finance management processes, making it impossible to get the
visibility and communications you'd both need to make fast, informed
decisions and achieve consistent results.

2. Ariba Collaborative Business Commerce
Ariba Collaborative Finance Mgt
Helping companies manage cash better
Buyers MANAGE
Sellers
BUY SELL
CASH
Improve spend control Improve financial flows Accelerate sales through
Sourcing and performance with between buyers and efficient processes Sales /
reduced costs, lower risk, sellers with greater fostering stronger
Mktg.
improved and visibility, control and relationships with new and
enhanced compliance. liquidity with less risk. existing customers.
Procurement Order Mgmt.
Invoice & Payment Working Capital
Finance Management Management Finance
Invoice Automation Discount Professional
Payment Automation Receivables Finance
Invoice Scanning Supply Chain Finance
IT IT
Approval Workflow P-Card
Ariba is the leading provider of collaborative business commerce solutions to:
• control costs
• increase sales
• minimize risk
• manage cash
Delivered as a Cloud-based service…just plug in and tap the resources you
need when you need them.
Through Collaborative Finance Management, buyers and suppliers improve the financial flows be-
tween them through automated invoice, payment, and working capital management. Improved effi-
ciency, enhanced visibility, and optimized liquidity while
mitigating supply chain risk.
Through Sales Acceleration Management, sellers can better differentiate themselves in the mar-
ketplace, attract qualified buyers, drive revenue growth, and optimize sales process efficiencies. Col-
laborative and efficient market-to-cash processes result in stronger relationships with both new and
existing customers.

3. Getting Buy In For Your Project Means Understanding Who Is Holding The Cash!
Companies are hoarding cash because interest is at historic lows. This has created a liquidity problem and
risk in the supply chain. Suppliers have liquidity problems due to tight credit markets, which introduces
significant risk.
• 80% of invoices are paper
Corporations have been
• 23 days to approve an invoice
depositing 42% of their short-
• 70% of discount opportunities are
term cash in bank accounts this year,
missed
compared with 25% in 2008
• 30% of invoices have exceptions
costing $600K for every 100K
invoices
• Low interest and tight credit
supply chain risk
How are other companies
benefitting? Where's Corporate Cash? In the Bank, CFO Magazine August 3, 2010
http://www.cfo.com/article.cfm/14514893/c_2984367
Benefits
• Manage payables, cash, and DPO with What is your companies Working
greater precision, control, and visibility Capital Strategy?
• Maximize returns and reduce investment
risks on your short-term capital During the downturn, most CFOs and treasurers followed the
• Enforce pre-negotiated contracts and dis- playbook: they accelerated cash collections, extended
count terms established by procurement payments, and unloaded inventory as fast as possible.
• Optimize discount penetration across tar-
geted suppliers, spend, and invoices As a result, cash levels of the S&P 500 soared. Many CFOs
• Strengthen supplier relationships and their found themselves hard‐pressed to explain to their boards
financial stability with innovative tools offer- how they planned to aim those hoards of cash at growth
opportunities. Others wanted to use their cash piles to pay off
ing greater cash visibility and liquidity
debt, but because they continued to worry about future
economic shocks, they hesitated. Meanwhile, with money
Results markets paying only 25 to 50 basis points for parked cash, the
With Ariba Working Capital Management pressure intensified.
Solutions, the world’s largest sports
equipment company: Looking internally, three out of four CFOs and treasurers told
us they did not trust their cash flow forecasts. Some had only
• Increased early payment discount capture a loose grip on impending cash commitments. Others were
from 35% to > 90% uncertain how much default risk and slow payment risk lurked
• Increased supplier discount participation by in their receivables portfolios. Some voiced private concerns
that they could not completely rely on banks to fund sales and
20% and average discount to 1.5% (24%
operations.
APR)
• Captured dynamic discounts on 4% of A stark lesson was delivered: Cash is a cushion in times of
targeted spend turmoil, but its value is limited when you don’t have reliable
information about cash flow drivers or plans to use that cash
in economically efficient ways.
Source: White Paper - Working Capital Management: New Strategies for Maintaining Financial Strength through Economic
Cycles

4. Reasons for Missed Discounts
Q: On a scale of 1 to 5, where 1 is the lowest and 5 the highest, rank the reasons for your
organization’s late payments and missed discounts.
1
Source: Electronic Invoicing Benchmarking 2010
With these Ariba’s innovative working capital solutions,
you gain valuable business advantages that include:
Increased Efficiency, Greater Accuracy, and Lower Costs
Automation eliminates slow, error-prone manual processes, accelerating the entire capital
management cycle and saving time and money for you and your suppliers.
Greater Liquidity and Higher-Yield Returns on Short-Term Cash
By automating your payables and setting up early payment discount programs with your
suppliers, you realize a much higher return on cash compared to extending payables and
earning interest on the float.
Reduced Supply Chain Risk
Ariba Working Capital Management solutions provide many ways to remove high borrowing
costs and significantly reduce risk in your supply chain.
High Supplier Adoption
Convenient self-service features and a simple user interface make Ariba Working Capital
Management solutions easy for suppliers to use, maximizing their participation and incentive
to transact with you over the Ariba Network.