Ariba Network: Introduction to Discounting and Payments

13th June 2017
Saeed Rezavi
Senior Director, Payments & Finance, Solutions Management
Introduction to Discounting and Payments

2© 2017 SAP SE or an SAP affiliate company. All rights reserved.
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Legal Disclaimer
The information in this presentation is confidential and proprietary to SAP and may not be disclosed without the
permission of SAP. This presentation is not subject to your license agreement or any other service or subscription
agreement with SAP. SAP has no obligation to pursue any course of business outlined in this document or any
related presentation, or to develop or release any functionality mentioned therein. This document, or any related
presentation and SAP's strategy and possible future developments, products and/or platforms directions and
functionality are all subject to change and may be changed by SAP at any time for any reason without notice. The
information on this document is not a commitment, promise or legal obligation to deliver any material, code or
functionality. This document is provided without a warranty of any kind, either express or implied, including but not
limited to, the implied warranties of merchantability, fitness for a particular purpose, or non-infringement. This
document is for informational purposes and may not be incorporated into a contract. SAP assumes no
responsibility for errors or omissions in this document, and shall have no liability for damages of any kind including
without limitation direct, special, indirect, or consequential damages that may result from the use of this document.
This limitation shall not apply in cases of intent or gross negligence.
All forward-looking statements are subject to various risks and uncertainties that could cause actual results to
differ materially from expectations. Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of their dates, and they should not be relied upon in making purchasing
decisions.

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Why Discounting & Payments matter
What SAP Ariba can do for you
How a customer has benefitted from Discounting
What are the challenges with VAT in Europe
Agenda

Why Discounting and
Payments matter Legislation, Fraud

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Legislation to combat late payment
EU Directive 2011/7/EU
 Set ‘limits’ on payment terms
 Suppliers can charge interest and claim compensation
 Member states can further legislate in favour of
suppliers
Government Initiatives
 Germany: 30 day maximum payment term
 UK: Supply Chain Finance
 France: Late Payment Register

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Payment Fraud
phishing vishingsmishing

What SAP Ariba can do for you SAP Ariba Payables

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SAP Ariba Supply Chain Finance capability
As buyers extend payment terms, supply chain financing enables suppliers to accelerate payments
by selling their invoices to a funder at a discount as soon as they are approved.
Buyer
Supplier
Reduce supply
chain costs
Improve supplier
relationships/
reduce risk
Increase cash
flow
Reduce supplier
financial risk
Low-cost, on-
demand financing
Improves operating
cash flow and DSO,
does NOT increase
debt
Cash-flow
visibility

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SAP Ariba Discounting capability
Improved Days Sales
Outstanding
On-demand cash flow
Cash-flow visibility
SAP Ariba Payables, discounting capability, enables you as a seller to accelerate payment to meet
your immediate working capital needs.

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SAP Ariba Payment capability
Improved days sales
outstanding (DSO)
Visibility into payment
status
Secure payment method Apply your cash
A next-generation payment solution that allows your buyers to securely pay you via Ariba Network

SAP Ariba Discounting Customer Example

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Capture early payment discounts anytime up to invoice maturity
10 30
1%
2%
3%
0
1%
2%
36% APR
Capture prorated discount
on invoices approved after
the discount due date
Save 2% if paid on
or before the
discount due date.
The prorated discount rate
A term of “2% 10 Net 30 Pro”
approved on day 20 has a
1% prorated discount rate.

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BC Hydro: Commercial Crown Corp. owned by province of British Columbia
Provides 4 million customers
with reliable power
Third lowest residential rates
in North America
Over 290 substations
334,000 transformers
Serves 95% of the province’s
population
Powering B.C. with clean reliable electricity for
generations.
Supporting a network of more than 77,000 kms of
transmission and distribution lines

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Challenges BC Hydro had to overcome
 In-sourcing procurement with AP outsourced
 Lack of understanding of procurement processes and procedures
 BC Hydro and our suppliers
 Non-compliant and duplicate invoices
 Lengthy approval processes with no controls
 Not paying suppliers on time
 Suppliers building premiums into contracts
 Duplicate payments
 Strained relationships
 Government audit
 Fiscal restraint

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Guiding principals and objectives in moving to SAP Ariba solutions
Improve relationships
 Make it easier for suppliers to work with us
 Obtain benefits for us and our suppliers
 Pay our suppliers on time
 Give suppliers visibility into the order and payment cycle
Leverage technology
 Adopt practices of leading procurement and supply chain organisations
 Reduce manual invoicing
Reduce costs
 Become more efficient
 Minimise manual effort to free up time for higher-level activities
 Realise early payment discounts

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Progress update
Captured over $1m in early
payment discounts using SAP Ariba
Over 1,150 suppliers managing their orders and invoices through Ariba Network – representing:
 > 84% of all orders and invoices
 > $1.4 billion in annual spend – largest network in Canada
 90% or higher on-time payment performance

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 VAT must be accounted for accurately
 Discounting rules vary country by country
 E-Invoicing rules apply
 Discounting may be automated or ad-hoc
 Pro-rated discount rates
 VAT fraud, MTIC/Carousel fraud
 ….things keep changing!
What is the challenge?
HMRC (<2015): …suppliers making PPD
offers are permitted to put on their invoice,
and account for, the VAT due on the
discounted price, even if the full price (i.e. the
undiscounted amount) is subsequently paid.
Customers receiving PPD offers may only
recover as input tax the VAT stated on the
invoice…
HMRC (>2015): …suppliers must account for VAT
on the amount they actually receive and
customers may recover the amount of VAT that is
actually paid to the supplier…

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Dynamic Discounting Tax Adjustments
1
Article 79 of the Council Directive 2006/112/EC
states:
“The taxable amount shall not include the
following factors:
(a) Price reductions by way of discount for early
payment;….
Swiss VAT Law Article 24 para. 1:
• Tax is calculated on the consideration
actually received

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Country Tax Type Credit Note Required
Austria VAT No
Australia GST Yes
Canada GST + PST + QST + HST No
Czech Republic VAT Yes
Hong Kong - Yes
USA Sales No
Differing rules country by country

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1000.00 EUR Purchase amount of goods or service
200.00 EUR VAT (20%)
1200.00 EUR Total invoice amount
1000.00 EUR Discount basis
Dynamic discount offers to suppliers
Settlement date Discount % Discount amount Tax adjustment Settlement amount
…. X% of discount basis X% of VAT (DE)
15 Aug 2016 2.1% 21.00 EUR 4.20 EUR 1174.80 EUR
16 Aug 2016 2.0% 20.00 EUR 4.00 EUR 1176.00 EUR
….
In most countries, suppliers must issue credit note in order to account for the discount allowed to the customer.
Article 79 of the Council Directive
2006/112/EC states:
“The taxable amount shall not include
the following factors:
(a) Price reductions by way of discount
for early payment;….
Discounting tax adjustments

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Dynamic discounting credit memo creation
.
.
SellersBuyers Tax invoice
1000.00 EUR purchase
200.00 EUR VAT (20%)
Payment proposal request
Payment proposal request (update)
20.00 EUR discount (2%)
4.00 EUR VAT adjustment (2% of VAT)
Remittance
1176.00 EUR amount paid
Credit memo
20.00 EUR discount (2%)
4.00 EUR VAT adjustment (2% of VAT)

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Great Partnership and Community: Validation of Discounting Globalisation
PWC VAT / Tax Research
EMEA customers
Multinational customers
SAP integration and FI
experts in Walldorf and India
SAP’s in-country
localisation manager
SAP’s in-country tax advisor
Customers’ Business, IT,
Tax departments

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Globalisation status
2016
Tax adjustments
2017
Credit memo creation
2017 Q3
(Roadmap)
USA
Germany
Canada
Switzerland
Austria
Australia
Czech Republic
Denmark
Finland
France
Hong Kong
Ireland
Luxembourg
Netherlands
Malaysia
New Zealand
Slovakia
South Africa
Singapore
Spain
Sweden
United Kingdom
Belgium

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Early Payment Instruction
Tax Amount and Adjustment
Discount Basis = Taxable Amount
Example of a buyer-initiated
discount accepted by a supplier for
early payment on November 20th.

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Remittance
• Discount including tax amount
• SAP limitation prevents payment run
from breaking out adjustment
Matching early payment instruction with tax
and discounting breakout

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Dynamic Discounting Credit Memo Header
Document type describing purpose of traction
Credit Memo Date is date of remittance receipt resulting
from buyers payment run.
Original Invoice # regulatory requirement for credit memos
Original Invoice Values
* supplier selected %
New type of Generation Method indication created by Ariba on supplier’s behalf
Trading partners copied from original tax invoice
Sequential range regulatory requirement for France

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Dynamic Discounting Credit Memo Header
Shipping Information copied from original tax invoice
VAT ID’s regulatory requirement for credit memos
Comments indicate credit memo created by Ariba on
supplier’s behalf.

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Dynamic Discounting Credit Memo Lines
Line details copied from original tax
invoice
Line details copied from original tax
invoice
Original Invoice Values *
supplier selected %
supplier selected %Line details copied from original tax
invoice
supplier selected %

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Dynamic Discounting Credit Memo Summary
Digital Signature for authenticity and integrity regulator
requirement
supplier selected %
supplier selected %

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Archive Zip File
• Suppliers may archive by download tax invoices and
dynamic discounting credit memos and burning on write
once read many storage media.
• Alternatively suppliers may receive archive Zip file by https
to store in their local archive system.
Dynamic discount files
include: cxml, PDF,.

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Document Archive Service
Suppliers may alternatively archive subscribe to SAP Ariba
archive service.

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Early Payment Detail Report supports
supplier’s tax postings
Supplier may use Early Payment
Detail Report to post tax
adjustments daily, weekly,..

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SAP Ariba Payment capability

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Best practices
 Phase your rollout plan per country
 Investigate and understand key VAT requirements/scenarios
 Align discounting and payments plans where possible
 Prioritise countries by discounting revenue opportunity

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Thank you.
Contact information:
Saeed Rezavi
Senior Director, Solutions Management
Payments & Finance Solutions
London, England
saeed.rezavi@sap.com

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of other software vendors. National product specifications may vary.
These materials are provided by SAP SE or an SAP affiliate company for informational purposes only, without representation or warranty of any kind, and SAP or its affiliated
companies shall not be liable for errors or omissions with respect to the materials. The only warranties for SAP or SAP affiliate company products and services are those that are
set forth in the express warranty statements accompanying such products and services, if any. Nothing herein should be construed as constituting an additional warranty.
In particular, SAP SE or its affiliated companies have no obligation to pursue any course of business outlined in this document or any related presentation, or to develop or release
any functionality mentioned therein. This document, or any related presentation, and SAP SE’s or its affiliated companies’ strategy and possible future developments, products,
and/or platform directions and functionality are all subject to change and may be changed by SAP SE or its affiliated companies at any time for any reason without notice. The
information in this document is not a commitment, promise, or legal obligation to deliver any material, code, or functionality. All forward-looking statements are subject to various
risks and uncertainties that could cause actual results to differ materially from expectations. Readers are cautioned not to place undue reliance on these forward-looking statements,
and they should not be relied upon in making purchasing decisions.
SAP and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP SE (or an SAP affiliate company)
in Germany and other countries. All other product and service names mentioned are the trademarks of their respective companies.
See http://global.sap.com/corporate-en/legal/copyright/index.epx for additional trademark information and notices.
© 2017 SAP SE or an SAP affiliate company. All rights reserved.

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