This document summarizes a presentation on trends in procure-to-pay processes. It discusses how procure-to-pay is moving towards more perfect, touchless transactions with high levels of automation and collaboration between stakeholders. The presentation outlines a maturity model for purchase-to-pay operations and provides examples of innovative organizations that have achieved high rates of electronic ordering, invoice processing, and payments. It emphasizes the importance of people, process redesign, and technology working together to transform procure-to-pay functions.

1. March 11, 2014
Henry Ijams – Managing Director
PayStream Advisors, Inc.
1
Trends in Procure to Pay:
The Coming Revolution and You

2. Session Overview
• Current State of AP & P2P
• PPT & The Perfect Process
• Lessons from the innovators
2
• Networking: Turn to your neighbor
and introduce yourself

3. What’s Wrong with AP?
As the majority of
invoices received on
paper continues to
decline the challenges
associated with the
invoice management
process are also
declining.

4. Three Big Opportunities
• Getting the data
– Good data is “step one” to a flat process
• Workflow & bicycles
– Routing is easy
– Designing business logic is not
• Solid foundations are built on well-developed design
– Technology & automation is only 1/3 of the story
– People & business process are the rest
4

5. 1
Purchase to Pay
Automation
Purchase Request

6. P2P 2013
1. High-Touch Processes
2. Incomplete Purchase Visibility
3. Limited collaboration
Frazzled Frank
People
Process
Technology
PPT?

7. 7
Stage 1
Stage 2
Stage 3
Stage 4
P2P Leadership
has defined P2P
Vision
Well defined &
controlled Process
Centralized
Procurement &
Payables
Defect rates <7%
Shared Goals &
Metrics
Automated
Purchases &
Online Catalogs
> 50% Touchless
Transactions
Authoring shifted
to departments
Automated
ordering/fulfillmen
t
70% electronic
transactions
Defect rates <4%
Highly automated
environment
>50% of
transactions self-
managed
Local control for
most services
Defect rates <2%
>75% Touchless
PayStream P2P Maturity Stages
Order Cycle Times
Avg. less than 2
days
Defect rates <5%
PayStream Purchase to Pay Maturity Assessment
Metrics
Touchless
Collaborative
Vision Driven
PayStream developed a P2P Maturity model to gauge the status of organizations purchase to
pay operations.

8. P2P 2020 is about
Perfect Processing
1. Touchless Transactions
2. “First Pass” Processing
3. Stakeholder Collaboration
Happy Harry

9. What is Perfect Processing?
Effective vs. Efficient Processes
Effective:
• What is your invoice
exception Rate (%)?
• How long is your PO approval
release cycle? (Days)
• What percent of invoices can
be posted on the first pass.
• What is your compliance to
spend policy? (e.g. how much
maverick spend do you
have?)
Efficient:
How much paper?
Data entry time/staff?
How much does it cost?
How long does it take?

10. Measuring Exception Categories of
(excluding receiving errors)
10
First Pass Rate: Between
8-11% of invoices can’t be
posted with first try.
Why?
PO is closed (30%), PO# is
missing (19%), and Invalid
PO’s (14%) together
account for 63% of
exceptions.
1 Footnote: UCLA: One Quarter breakdown of invoices on “I” status by category
PO IS CLOSED
30%
PO NUMBER
MISSING
19%
NOT VALID PO.
14%
INVOICE
AMOUNT > PO
AMOUNT
10%
MULTIPLE ISSUES
9%
INVOICE LINES
DO NOT MATCH
PO
7%
PO IS FOR
ANOTHER
VENDOR
6%
INVOICE UNIT
PRICE IS > PO
UNIT PRICE
5%
Invoice Match Exceptions and Problem Invoices, By
Type1

11. Top AP Benchmarking Items
Metric Laggards
Average processing time from
invoice receipt to approval
45 days
Average processing costs
(combination of paper and
electronic)
$15.00
Percentage of invoices received
electronically
3%
Percentage of invoices with
discrepancies
25%
Percentage of discounts captured 18%
Mainstream Innovators
23 days 5 days
$6.70 $2.36
9% 32%
16% 4%
40% 75%

12. Purchase to Pay Change is
Accelerating
Why?
1. Need for Speed
2. Consumer Tech Pull
3. Labor Challenges

13. Need for Speed
1. Increasing Value of Big Data
2. Efficiency yields to better
purchasing decisions
- Saving a dollar per PO
vs.
- Purchasing

14. Staffing in 2010
• Pressure was
on people
Frazzled Frank

15. Growing Usability Gap
1. Consumer Productivity
2. Business Productivity

16. Growing Staffing
Challenges
1. Increasing Value of Big Data
2. Efficiency yields to better
purchasing decisions
- Saving a dollar per PO
vs.
- Purchasing
Millennials

17. P2P Academy Research
1. Long term transformation plan
2. Cohesive coalition
3. Metrics to define success
4. A Leader to drive the vision
Four Common Success Factors

18. Three Themes Dominate P2P
Purchase Order
Delivery
Invoice
Receipt
Data
Extraction
Invoice
Matching
Procurement
Management
Approval
Workflow
Payment &
Remittance
PURCHASE TO PAY
Payments & Working Capital
Electronic Invoice &
Workflow/Matching
eProcurement & Supplier Collaboration
19

19. What are the Innovators doing?

20. What’s behind the curtain?

21. Automation Adoption
Companies of all sizes are participating
Source: PayStream Advisors, 2013
Q. What
solutions have
you adopted to
automate AP?

22. UPMC Case Study
Goal: Lights Out – Touchless Transacting
Step 1 - Drive invoice automation for those suppliers that
support electronic invoicing
Results: Achieved ~65% automation by leveraging those
suppliers
Step 2 – Drive invoice automation for those suppliers that do
not support electronic invoicing
Results: Achieve ~95% automation by outsourcing the
conversion of the paper to electronic
Additional Data Points:
- Process efficiency
- Staff Reduction
- Average cost of an invoice reduction
University of Pittsburgh
Medical Center
• Leading integrated health
care system in Pennsylvania;
one of the largest and most
diverse in the nation
• 48,000 employees; second
largest employer in
Pennsylvania; major force in
local economy
• Hospital – 20 tertiary,
community, and specialty
hospitals
• Physician – more than 4,000
physicians with privileges at
UPMC hospitals including
about
2,300 employed

23. Example: First Time Match Rate: Voucher to PO
71%
64% 66% 67% 69% 70% 72% 73%
65%
71% 72% 73%
77%
24%
30% 28% 27% 25% 23% 22% 21%
21%
23% 23% 23% 17%
6% 5% 6% 6% 6% 7% 6% 6%
14%
6% 5% 4% 6%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
AVG
FY12
Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13
Recycle ME Matched

24. Exception Management
Q. What’s your plan to reduce exceptions?
• What percent of invoices contain an exception?
• What is the cost of exceptions?
• What is (should be) your exception rate goal?
A. Develop a P2P Vision and Plan.
• PO based invoices that can’t be posted – i.e. if invoice fails
entry (duplicates, missing/Invalid PO)
• Fails batch-match process (Receiving, Pricing, Unit of
Measure, PO out of funds, etc.)
• Non-PO (including Manual and Automated Entry)

25. • The 5 Why’s
• 8 Wastes
• Value Stream
Analysis
25
P2P Six Sigma Tools
Framework & Toolkit
• Voice of the
customer
• Quick hit charter
• SIPOC
Toolkit
•Brainstorm Ideas
•Future State Map
•RACI
•Pilot
•Visual Controls
•Implementing
Change
•Celebration of
Success
•Process Maps
• Basic
• Cross-functional
swim lanes
D
Define
M
Measure
A
Analyze
I
Improve
C
Control
What is the
problem?
How bad is the
problem?
What is the root
cause?
How was the
problem fixed?
How will
reoccurrence of the
problem be
prevented?
25

26. Achieving Perfection

27. P2P and The Perfect
Order
A Perfect Order:
A purchase order processed electronically
(from order to payment) without human
intervention, which is delivered to the
correct location, on time, undamaged, at the
right price, with the desired quantity, on the
first attempt.
Source: SMI Perfect Order Presentation Steve Gunderson and Dennis Orthman
27

28. The Perfect Payment?
A Perfect Payment:
A perfect payment is characterized as being
paid on time, using the lowest cost payment
method, and which achieves the highest
incentive discount.
Source: PayStream Advisors 2013
Perfect
Payment
Index (PPI)
% on time X % paid electronically
X % of discount potential captured
95% x 95% x 95% = 85.7%
The PPI strives to balance the payment
efficiency and working capital needs of
buyers and suppliers
1 Top Quartile Innovators in industry can achieve PPI’s in the 80 percent range.
Payment Discounts/Incentives Company 1 Company 2 Company 4 Company 4 Average
% Paid on time (<60 Days) 92% 92% 93% 91% 92%
% Paid Electronically (ACH or Card) 55% 52% 39% 68% 53%
% of Potential Discounts Captured1 32% 76% 26% 74% 45%
Perfect Payment Index 16.0% 36.7% 9.6% 45.8% 27.0%

29. 29Purchase to Pay Academy
Section 1 - General Cost and Full Time
Equivalent (FTE) Metrics
• Total Cost of the total P2P Function as a
Percentage of Revenue
• Total Cost of the Procurement Function as a
Percentage of Revenue
• Total Cost of the Accounts Payable Function as a
Percentage of Revenue
• Number of FTEs in the total P2P Function
• Number of FTEs in the Procurement Functions
• Number of FTEs in the Accounts Payable Function
Section 2 - Procurement Cost and Process
Metrics
• Cost Per RFP
• Cost Per Contract
• Cost Per Purchase Order
• Strategic Sourcing Cost Savings
• Purchase Order Workflow Defects
• Unapproved Items in Purchase Order Workflow
• Non-Purchase Order Invoices
Section 3 - Accounts Payable Cost and
Process Metrics
• Cost Per Invoice
• Cost Per Invoice Line Item
• Days Payable Outstanding (DPO)
• Percentage of First Time Payment Matches
• Supplier Payment With Errors
• Duplicate Payments
• Percentage of Payment Recoveries
• Percentage of Recoveries by Check
• Percentage of Recoveries by Credit Memo
• Percentage Use of Electronic Invoicing
• Percentage Use of Electronic Payments
• Invoices Paid Within Specified Terms
• Policies for Taking Supplier Discounts
• Number of Manual Checks
• Reduction of Number of Payments
• Processor Productivity
• Percentage of Electronic Invoice Processing
29

30. Purchase to Pay Academy
• A Certified P2P Professional demonstrate a mastery of all
aspects of the P2P process.
• PayStream Advisors developed a the program to train
managers so that they can help transform the Purchase-to-
Pay process.
• P2P Certification Program delivered via self-study using online
educational components and case studies.
• Brings together all the components of the P2P process into a
single body of knowledge.

31. Winning Over Your
Partners
• Engage Your approvers
and Suppliers
• Influence Change
• Collaborative
Solutions
• Getting to “YES!”

32. Workflow Adoption
Adoption of approval
workflow solutions
continue to increase, up
three percent from 2012
to 54 percent in 2013.

33. Integration is the Key to
Eliminating Exceptions
The true value in AP
automation lies in how
successful a company is at
assimilating invoice data into
accounting systems and
management workflows.
The higher percentage of
invoices processed straight
through, yields the best ROI.
eInvoicing
Add $ to PO
26%
Vendor Invoice
Error
18%
Other
12%
Vendor Wrong
PO
38%
AP Entry Error
3%
Duplicate Invoice
3%
Invoice Match Exceptions and Problem
Invoices, By Type1
(as a % of total Exceptions and Problems)
For 9/28/2012 through 10/31/2012*

34. Purchase to Pay Academy
• A Certified P2P Professional demonstrate a mastery of all
aspects of the P2P process.
• PayStream Advisors developed a the program to train
managers so that they can help transform the Purchase-to-
Pay process.
• P2P Certification Program delivered via self-study using online
educational components and case studies.
• Brings together all the components of the P2P process into a
single body of knowledge.

35. Quick Tips to
Stay Current In AP & P2P
• Stay tuned for PayStream’s White Paper “Electronic Invoice
Management”
• Take advantage of complementary resources such as
PayStream’s Cost Per Invoice Calculator
• Utilize PayStream’s Business Case Builder to get your project
moving
• Get involved! PayStream’s 2014 INNOVATE Conference is
September 8-10, 2014 in San Antonio, TX

36. Henry Ijams, Managing Director
PayStream Advisors
henry.ijams@paystreamadvisors.com
36
Questions
Henry Ijams
Art Sarno

37. PayStream INNOVATE 2014
The Purchase to Pay Summit
September 8-10
San Antonio, Texas
Hyatt Regency Riverwalk
• Targeted focus on automation and
process improvement
• 18 case study workshops facilitated by
leaders at the most innovative
organizations
• Network with your peers in AP,
Procurement, Finance and Supply
Chain
• More Information
Contact:
Brad Josephson
Brad.Josephson@paystreamadvisors.com
704-926-3921