Buy Right, Pay Right – How Procurement, AP, and Treasury Can Work Together for P2P Transformation and Working Capital Excellence
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Is invoice processing efficiency the exclusive focus of your payables automation program? If it is, you may be ignoring opportunities to support payment and working capital strategies that increase cash returns, enable supplier self-service, free up working capital, and improve free cash flow. Attend this session to learn how you can align procurement, accounts payable, and treasury when automating payables to enforce compliance with contracts, gain supplier support for electronic payments, and improve management of cash and working capital..
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Buy Right, Pay Right – How Procurement, AP, and Treasury Can Work Together for P2P Transformation and Working Capital Excellence
- 1. Phil Beck, SAP Ariba (SAP) / August 30, 2016 Buy Right, Pay Right – How Procurement, AP, and Treasury Can Work Together for P2P Transformation and Working Capital Excellence Public
- 2. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 2Public Payment and financing in SAP Ariba financial solutions Commodity classification Enrichment services Market intelligence Analysis D&B insight Dashboard – 360- degree visibility Vendor payment Supplier info and performance Spend visibility Sourcing Working capital management InvoicingProcurementContracts Process compliance eRFX Reverse auctions Knowledge repository Ariba Discovery Reporting and analysis Process compliance Repository Authoring Compliance Expiring contracts Requisitions Catalogs Workflows Approvals Compliance PO automation PO flip Invoice automation PO and non-PO Active compliance E-payment Days payables outstanding (DPO) extension and management Terms management Dynamic discounting Supply chain financing Portal Registration and onboarding Diversity, green, certs Risk management Surveys Quantitative and qualitative scorecard Performance management Lifetime supplier enablement services Automated e-payment and remittance advice Real-time transactions and track and trace Outsourcing of bank account data to SAP Ariba solutions SAP Ariba software, the true end-to-end source-to-pay solution: all activity conducted in one digital business-to-business network “Analyze to contract” “Procure to pay” + working capital management
- 3. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 3Public Our evolution to full procure-to-pay
- 4. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 4Public Overview of payables functionality in SAP Ariba solutions
- 5. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 5Public Buyer goals Provide payment status and approved invoice SAP Ariba solution Supplier needs Ariba Supply Chain Finance (April 2016) AribaPay Ariba Network and ERP adapter Buyervalue Low High Ariba Discount Professional Suppliervalue SAP Ariba financial solutions: crossing the payments chasm Solving buyer goals and supplier needs Secure electronic payment Earn discounts Increase cash-flow (DPO) Visibility to payment status and approved invoice Payment remittance details Early payment Low-cost, on-demand financing and fewer days sales outstanding Low High
- 6. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 6Public SAP Ariba financial solutions Leveraging the business network to extract value from the financial supply chain Working capital management advisory and supplier services (Payment terms standardization, rationalization, extension, supplier outreach) Supplier payables portal Buyer Banks & capital markets Ariba Supply Chain Finance Supplier sells approved invoices to a funder at a discount rate based on the buyer’s credit worthiness Suppliers targeted: Direct spend Large to midsize Ariba Discount Professional Supplier agrees to be paid by buyer at a prorated discount before due date Suppliers targeted: Indirect spend Small to medium size …Pay rightBuy right... Electronic payments to suppliers Bank account data stored externally Supplier self-management of bank account data Rich remittance info to match invoices with payments Track and trace status AribaPay Funded by In partnership with MUFG (BTMU) Procurement and invoice automation
- 7. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 7Public Annualspend # of suppliers • Focus on high- spend suppliers • ~>75% of buyer value 300 2,000 >10,000 • Focus on tail suppliers with low spend • Trx’l enablement or DPO management Traditional Ariba Supply Chain Finance Payment terms management & discounts* • Payment terms management: supports program strategy, increases DPO • Discounts: dynamic, buyer or supplier initiated P-card or virtual / settlement card * Available today through SAP AribaPay Card The B2B payment and financing continuum
- 8. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 8Public AribaPay: the next-generation payment solution and service Lower A/P costs • Lower cost to collect and maintain bank account data and pay suppliers • Reduced “first-line” A/P help-desk inquiry calls • Rebates Buy right, pay right • Single procure-to-pay (P2P) process visibility for buyers and suppliers • Electronic payment that accelerates working capital initiatives Boost security, eliminate fraud, reduce risk • All supplier onboarding done by SAP • Verification of supplier data • Data storage in secure external I/T environment Get real supplier value • Rich remittance detail to easily apply funds • Supplier ability to go online or call 24x7 for inquiries and support • Supplier adoption that’s 3x faster than PO or invoice • Supply chain financing AribaPay allows buyers to securely pay suppliers through the Ariba Network, while eliminating the need to maintain supplier bank account information and reducing supplier payment inquiries.
- 9. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 9Public Supply chain finance What problems are solved, and what is the value? Trading parties have contradictory cash concerns, mainly driven by payment terms. Banks and new financial parties are keen on accessing reliable assets and approved invoices and expanding their financing operations. Buyers benefits: Improved cash flow Reduced costs in the supply chain Supplier benefits: Low cost and flexible financing Improved cash flow without increased debt Supplier Buyer Cash Collection date Accelerate Extend Payment date The buyer wants to pay later.The supplier wants to get paid earlier.
- 10. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 10Public Dynamic discounting Supplier-initiated discounts and terms extensions What are “payment terms management” and “dynamic discounts”? Payment terms management: rationalizing, standardizing, and extending payment terms Dynamic discounts: enabling prorated discounts to be earned at any point to the invoice maturity date Why is it valuable? They represent the ability to earn $1 – $2 million in incremental discounts for every $1 billion in addressable spend. Increase DPO Earn high (12% – 36%), risk-free returns on short-term cash How do SAP Ariba solutions help? SMEs: payables strategy and program management Supplier outreach: messaging and recruitment Technology: largest B2B network, dynamic discounting, integration Risk management: governance, methodology, and analytics Day 10 0% 0.5% 1.0% 1.5% 2.0% 2.5% Day 30 $$ $$
- 11. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 11Public Buyer benefits Total: $6,600,000 Funding flexibility TBD #3 Payment risk management Supplier benefits Low-cost, on-demand financing Online payment visibility Accelerated payments Income statement impact Free cash-flow impact 300,000 payments Payment savings: $600,000 Savings per payment: $2.00 $3 billion in spend ~5% adoption: $150 million Average discount: 1.60% Discount: $2.4 million 25% DPO increase Free cash flow: $120 million Return earned: 3% Return earned: $3.6 million 15-day DPO extension DPO extension Free cash flow: $120 million Added benefits Illustrative payables business case
- 12. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 12Public Payables functionality in SAP Ariba financial solutions Road map2016Recent Payments • Japan, Other APJ Markets in 2017 • Germany, UK, France • Virtual card • Check Financing • Receivables financing • Key banking partners of SAP added to providers platform Working capital • Multiple calendars and payment schedules • Global discounting with VAT • Automated credit notes • Multiple currency support • Transactional terms management Payables platform Buyer and supplier working capital cockpit • Payment cancellation • AribaPay in Canada • Tax withholding • Enhanced reporting • 10,000 payment lines • New reverse factoring functionality in Ariba Supply Chain Finance • Seamless partner integration • Enhanced notifications • Enhanced reporting • Integration enhancements
- 13. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 13Public Payables success stories from 2015 Earning discounts Payment automationExtending payment terms Fortune 50 pharma • >$5 billion spend moved to net 60 • 38,000 suppliers in 40 countries • >$300 million cash flow gain and ~$10 million P&L benefit Fortune 500 • Extended $200 million spend to 45 days • Increased DPO 1 day Fortune 100 telecom • Payment volume: $12 billion • 95% of spend activated within 7 months across 1,700 suppliers • P2P acceleration: >800 suppliers registered and ready to transact Fortune 500 • 2015: earned $11.3 million in discounts • 50% discount improvement 2014 to 2015 • Average discount: 1.6% Fortune 300 retailer • 2015: earned $3.4 million in discounts • Average discount: 0.84% • ~75% of spend focused on merchandise Fortune 500 • Payment volume: >$170 million • 140 suppliers activated • P2P acceleration: >1,100 suppliers registered and ready to transact
- 14. Thank you Contact information: Phil Beck Senior Vice President, SAP Ariba phillip.beck@sap.com 412-297-8921 #SAPAribaLive
- 15. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 15Public Important information This information reflects the status of SAP Ariba solution planning as of June 2016. All such information is the Confidential Information of SAP Ariba (per the contract between our companies), and must not be further disclosed, as stated in the confidentiality clause of that contract. This presentation contains only intended guidance and is not binding upon SAP Ariba to any particular course of business, product strategy, and/or development. Its content is subject to change without notice. SAP Ariba assumes no responsibility for errors or omissions in this document. SAP Ariba 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 these materials.
- 16. © 2016 SAP SE or an SAP affiliate company. All rights reserved. 16Public Please complete session survey Locate Session Click Surveys Button Select Breakout Survey Rate Session