Fusion 2014: Lessons Learned from Advanced Discount Management
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The presentation discusses (1) cash flow challenges for buyers and suppliers, and how dynamic discounting can benefit both parties, (2) best practices for maximizing discounts captured, including cross-functional alignment and flexible financing options, and (3) examples of companies saving millions through dynamic discounting by automating invoice processing and incentivizing early payments.
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Fusion 2014: Lessons Learned from Advanced Discount Management
- 1. Lessons Learned from Advanced Discount Management Markus Ament, Chief Product Officer Taulia
- 2. I. Cash Flow Challenges for Buyers and Suppliers II. The Benefits of Dynamic Discounting and Supplier Finance III. Best Practices and Tips to Maximize Discounts Captured IV. Real World Examples of How to Manage Segmentation Brackets Within Your ERP V. Solution Demonstration VI. Questions Agenda
- 3. Transforming Your Payables Department Imagine a world where… Supplier inquiry calls become a thing of the past Buyers have a lean invoicing, payables & discounting process trimming millions off the bottom line Automating and maximizing supplier discounts is finally achievable Finally Complete the AP Automation Journey…While Realizing Significant Financial Benefit
- 4. There Is a Fundamental Inefficiency in Today’s Supply Chain Buyers are Holding Record Amounts of Cash Generating Low Returns Small Businesses Have Limited Liquidity and High Cost of Capital Traditional Supply Chain Connectivity Creates Delays in Supplier Payment
- 5. Record Amount of Cash Earning Low Returns Buyers Have Excess Cash U.S. Non-Financial Companies’ Cash & Liquid Assets Low Return on Cash U.S. Interest Rate – 10-Year Treasury Rate ($ in tn)
- 6. While Their Suppliers Struggle to Stay Afloat Factoring market is growing rapidly and exceeds $2.9 trillion Global Factoring Market in Trillions* 1.54 1.77 1.81 1.75 2.25 2.75 2.91 1 1.2 1.4 1.6 1.8 2 2.2 2.4 2.6 2.8 3 2006 2007 2008 2009 2010 2011 2012 * Source: http://fci.nl/about-fci/statistics/total-factoring-volume-by-country-last-7-years TYPE: INTEREST: Credit Card 18% Factoring 20-40% • Due Diligence Effort • Few Companies Qualify • Exceptionally Expensive
- 7. Lack of Connectivity Causes Delay in Payments SuppliersBuyers Inefficient Buyer-Supplier Connections Lead to No Visibility into Invoice Process APPROVED INVOICE 10 DAYS Average time to approve a valid invoice Source: Taulia Analysis Source: REL/Hackett Group Average U.S. payment terms 55+ DAYS
- 8. Common Challenges within Payables Process No visibility into the invoice process Unnecessar y invoice status and inquiry calls Missed early payment discount opportunities AP Depts. drowning in paper High cost of manually processing invoices
- 9. Never-Ending Friction Between Buyers and Suppliers
- 10. SUPPLIER Invoices Customer BUYER Approves Invoice on Day 5 BANK Invoice-Net 60 Buyer Earns 0.75% APR until Due Date Suppliers Factor at 20+% APR 1. 2. 3. Banks Benefit from Payment Inefficiency
- 11. Payables as an Opportunity for Revenue 0 DAYS invoice 10-15 DAYS approval 60 DAYS due date OPPORTUNITY AVERAGE PAYMENT TERMS (DAYS) Anheuser-Busch Hertz Apple Industry Average 120 DAYS 60 DAYS 45 DAYS 56 DAYS
- 12. I. Cash Flow Challenges for Buyers and Suppliers II. The Benefits of Dynamic Discounting III. Best Practices and Tips to Maximize Discounts Captured IV. Real World Examples of How to Manage Segmentation Brackets Within Your ERP V. Solution Demonstration VI. Questions Agenda
- 13. The Win-Win Solution that Generates Revenue Enables Buyers to save money and improve return on cash by paying suppliers early Enables Suppliers to access less expensive financing alternatives by accepting time-variable Dynamic Discounts
- 14. Forget the cliff. Automate discount capture. 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0% 0 10 Days 20 Days 30 Days $ 2% 10 Net 30 “Hit-or-Miss Discount” 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0% 0 10 Days 20 Days 30 Days $ $ Sliding Scale Discount Antiquated Discounting Dynamic Discounting
- 15. Why Suppliers Choose Early Payment Discounting Allow suppliers to get paid sooner Payment dates are well under industry averages Discount rates are less expensive than alternative forms of financing More convenient than funding alternatives Better balance sheet Helps to meet quarterly targets
- 16. I. Cash Flow Challenges for Buyers and Suppliers II. The Benefits of Dynamic Discounting III. Best Practices and Tips to Maximize Discounts Captured IV. Real World Examples of How to Manage Segmentation Brackets Within Your ERP V. Solution Demonstration VI. Questions Agenda
- 17. Five Factors for Maximizing Global Discounting Gain cross-functional alignment1 Best practice terms policy2 Best in class tools3 Ongoing change management4 Architecture for maximum flexibility5
- 18. 1. Gain Cross-Functional Alignment Improve working capital management Connect and streamline processes internally Create an integrated and centralized way to manage spend, suppliers and process efficiency Pay the RIGHT suppliers, the RIGHT amounts at the RIGHT times ONE SHARED GOAL Accounts Payable Treasury Procurement IT
- 19. 2. Best Practice Terms Policy Did you know? Better practices can improve results 20-40%* *Tom Glassanos, Bavelos Group Research, 2013 The deployment of payment terms and supplier strategies that align with cash management, DPO, and financial supply chain goals One size (term) does not fit all Understand when to use corporate cash, bank cash or third-party cash
- 20. 3. Best in Class Tools Seamless integration into your ERP Supplier segmentation through your ERP or convenient web based platform AP automation helpful for straight through processing Flexible funding models to meet the needs of the entire supply chain Did you know? AP Automation can improve results 10-30%* *Tom Glassanos, Bavelos Group Research, 2013
- 21. 4. Ongoing Change Management Supplier preferences change Cost of capital changes Internal policy and expectations change
- 22. 5. Architecture for Maximum Flexibility ERP Workflow Supplier Financing Module Leverage supplier financing with any combination of new or existing portal and workflow strategies for maximum flexibility eInvoicing Network Pay Me Early Vendor Portal Pay Me Early Propriety Portal Pay Me Early
- 23. What Makes the Difference? Seamless integration into your ERP1 Providing 100% visibility of AP information to 100% of suppliers 2 Compatibility with all AP automation solutions and ability to coexist and integrate with other portals 3 4 Enabling Advanced Discount Management on 100% of spend
- 24. I. Cash Flow Challenges for Buyers and Suppliers II. The Benefits of Dynamic Discounting III. Best Practices and Tips to Maximize Discounts Captured IV. Real World Examples of How to Manage Segmentation Brackets Within Your ERP V. Solution Demonstration VI. Questions Agenda
- 25. “Taulia has saved us more money quicker than anticipated.” - Finance Dept. 0 10 20 30 40 50 2008 2009 2010 2011 2012 2013 Taulia Deployed in 2011 $46M $31.4M $10M $5.8M$3.9M $120M in Discounts $43M Large U.S. Utility Adds Dynamic Discounting in 2011, And Early Payment Discounts Skyrocket!
- 26. In addition, as eInvoices Increase, Payment Error Rate Decreases, Clerical FTE’s Decrease and Productivity Increases 0 200 400 2002 2005 2008 2011 2012 95K 178K 226K 312K 371K Thousands eInvoices 0.0000% 0.0050% 0.0100% 0.0150% 2002 2005 2008 2011 2013 0.0120% 0.0050% 0.0040% 0.00008 % 0.00006 % Payment Error Rate 0 10 20 30 2002 2005 2008 2011 2013 24 16 12 8 6 Clerical FTE's 0 500 1000 1500 2002 2005 2008 2011 2013 121 206 337 714 1138 Invoices / FTE / day
- 27. Livesincelate2013 1,500Suppliersin Scope [others are independent retailers that aren’t applicable] 1,235SuppliersInvited and532Suppliers Enrolled 43% enrollment rates within weeks (without policy) . Captured$250,000 DiscountsCaptured in 3months [80% Canadian, 20% U.S.] Trending towards $110,000 per month Leading Telecomm saw immediate ROI
- 28. Three Month Engagement Snapshot 0 500 1000 1500 2000 2500 3000 Vendors Invited Vendors Enrolled Invoices Submitted
- 29. 87% of I N V I T E D S U P P L I E R Senrolled WITHIN 6 MONTHS 90 % of enrolled suppliers actively use the portal Live in late October 2011 Internal personnel eager to adopt the new system Enrollment and Engagement Prove Program Success
- 30. I. Current State of the Invoicing & Payables Process II. Moving from Traditional Invoicing to Full Electronic Invoicing III. Getting Suppliers On Board: 5 Supplier Value Propositions IV. Supplier Discounts & Turning Issue Into Opportunity V. Real World Success Stories VI. Demonstration VII. Questions Agenda
- 31. Questions? Get in touch with us! Markus Ament Chief Product Officer, Taulia Office: 415-376-8280 x83 E-mail: markus.ament@taulia.com Twitter: @maex242
Editor's Notes
- When portal policy is introduced, # of suppliers enrolled will increase (probably double) so number of discounts captured will increase.