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The Cost Of Control“De Missing Link tussen
Finance en Procurement”Delft, 1 juli 2010Bram Kuijper, Basware
2 studies
• Cost of Control 2009 & 2010– IESE , Loudhouse
• Finance & Procurement towards AP Invoice Processing Excellence– Forrester Research
• Survey of 550 CFOs of large organisations to explore
• Developed in conjunction with Loudhouse Research
• Themes of survey: • Strategic priorities of
organisations• Relationship between
procurement and finance• Attitudes and awareness of risk in
the supply chain• Levels of automation of purchase
to pay processes
“THE MISSING LINK”
Cost of Control – The missing link between Finance
& Procurement
4
80%
9% 7% 4%
1001 -10,000
employees
10,001 -20,000
employees
20,001 -50,000
More than50,000
employees
Other22%
Heads of finance
26%
Financial Directors
45%
CFO7%
Sample breakdown
Job role
Spain50
interviews
USA100
interviews
UK100
interviews
Scandinavia100
interviews
Germany50 (100)
interviewsBenelux50
interviewsFrance50
interviews
Average company size: 9,600 employees
5
What were the main priorities for FDs?
POLL 1
• A Cashflow
• B Cost cutting
• C Spend Visibility
6
What were the main priorities for FDs?
5%
16%
24%
27%
36%
38%
38%
42%
43%
45%
51%
60%
66%
0% 10% 20% 30% 40% 50% 60% 70%
Other
Investor relations
Environmental practices (e.g
Increasing profits
Maintaining or improving margins
Risk analysis
Long term operational efficiency
Short term operational efficiency
Delivering on cost savings targets
Planning, budgeting, forecasting
Cash flow
Reducing indirect costs
Reducing direct costs
7
What were the main challenges for FDs?
POLL 2
• A Technology challenges
• B Supplier Risk
• C Spend Visibility
8
What are the main challenges for FDs?
6%
17%
22%
22%
23%
26%
28%
32%
32%
33%
34%
36%
0% 10% 20% 30% 40%
Other
Environmental regulations /
More visibility into contract management
Need to squeeze suppliers on payment terms
Relationships between procurement and other functions
Systems integration / technology challenges
Need to improve invoicing and payment processes
Difficulties in realising cost savings across the business
Difficulties in identifying cost saving opportunities
Need to implement new technology quicker
Increased supplier risk
Spend visibility
9
Integration of purchasing & invoice processes
9% 7% 9% 7%2%
16% 16% 12%
16% 18%22%
21%
12%
8% 8% 12%
29%35%
30% 39%
16%
28%
16% 18%
39%33%
70%
48%
60% 58%
46%41%
0%
20%
40%
60%
80%
100%
Total (n=501) UK (n=101) US (n=100) Scandinavia(n=100)
France (n=50) Germany(n=50)
Spain (n=50) Benelux(n=50)
Not at all In part Mostly Fully
POLL 3: how do we integrate in NL?
• A Above 50%
• B Under 50%
10
Integration of purchasing & invoice processes
9% 7% 9% 7%2%
16% 16% 12%
16% 18%22%
21%
12%
8% 8% 12%
29%35%
30% 39%
16%
28%
16% 18%
39%33%
70%
48%
60% 58%
46%41%
0%
20%
40%
60%
80%
100%
Total (n=501) UK (n=101) US (n=100) Scandinavia(n=100)
France (n=50) Germany(n=50)
Spain (n=50) Benelux(n=50)
Not at all In part Mostly Fully
11
Level of Automation
26% 29%22%
27%34%
24% 24%18%
40% 32%37%
45%
58%
42%34% 42%
21%
21%33%
20%
8%
18%
8%
32%
13%19%
8% 8%16%
8%
34%
0%
20%
40%
60%
80%
100%
Total (n=501) UK (n=101) US (n=100) Scandinavia(n=100)
France (n=50) Germany(n=50)
Spain (n=50) Benelux(n=50)
Fully automated / tightly integrated with other enterprise systems
Fully automated / partly integrated with other enterprise systems
Mainly automated but with some use of manual processes
Mainly manual but with some use of automation
POLL 4: our fully automated score in NL?
• A Above 30%
• B Above 50%
12
Level of Automation
26% 29%22%
27%34%
24% 24%18%
40% 32%37%
45%
58%
42%34% 42%
21%
21%33%
20%
8%
18%
8%
32%
13%19%
8% 8%16%
8%
34%
0%
20%
40%
60%
80%
100%
Total (n=501) UK (n=101) US (n=100) Scandinavia(n=100)
France (n=50) Germany(n=50)
Spain (n=50) Benelux(n=50)
Fully automated / tightly integrated with other enterprise systems
Fully automated / partly integrated with other enterprise systems
Mainly automated but with some use of manual processes
Mainly manual but with some use of automation
13
43% of indirect spending captured 50% of
processes supporting purchasing are automated
46% of FDs consider that purchasing and finance functions are integrated effectively
Cap
ture
Autom
ation Integration
Integrated core of accuracy, automation and spend capture
Majority of processes operate outside the ‘core’
Capture, Automation & Integration
Confidence that there is an understanding of cash flow
Visibility of movement of cash within the organisation
Operating cost management of finance department
Levels of control within finance department
Accuracy within finance function / level of payment
Levels of collaboration with procurement
Efficiency of finance department / speed of process
46%
46%
43%
46%
56%
42%
47%
46%
45%
40%
42%
52%
35%
39%
Partly automated/Manual Fully automated
+3
+1
0
+4
+4
+7
+8
Automation of finance department leads to wins in areas of efficiency and collaboration with procurement
% scoring 6-7 (Good, Very Good or Excellent)
Impact on Finance Automation
Other
Accessing credit
Environmental practices
Regulatory compliance
Risk analysis
Improving short and long term operational efficiency
Cash flow and working capital management
Planning, budgeting and revenue forecasting
Increasing profits and top line performance
Maintaining or improving margins
Reducing overall purchasing costs
4%
22%
36%
36%
38%
46%
46%
48%
51%
58%
59%
Although cost reduction remains a key priority, there is a healthy focus on margins and profits in 2010
55%
43%
39%
27%
24%
45%
37%
39%
64%
2009
* Arrows reference movement of +/- 5%
2010 survey -> Priorities over the next 12 months
None of the above
Other
Relationships between procurement and other business functions
Need to squeeze suppliers on payment terms
Increased supplier risk
Environmental regulations / compliance
Need to automate financial processes more quickly
More visibility into contract management
Need to improve invoicing and payment processes
Spend visibility
Systems integration / technology challenges
Difficulties in realising cost savings across the business
Difficulties in identifying cost saving opportunities
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
6%
4%
24%
26%
27%
28%
31%
31%
33%
36%
37%
39%
40%
FDs are facing more challenges now than 12 months ago - particularly in identifying and realising further cost savings and issues relating to systems integration / technology. In 2009, the top two challenges were spend
visibility and increased supplier risk – both of which have diminished in relative importance this year
37%29%
22%
25%
34%
2009
31%
31%
18%35%
24%22%
6%
2010 survey -> More significant challenges than 12 months ago
None 1%-5% 6% - 10%
11% - 20%
21% - 30%
31% - 40%
41% - 50%
51% - 60%
61% - 70%
71% - 80%
81% - 90%
91% - 99%
All / 100%
17%
6%4%
5%
7%5%
8% 9% 8% 8%
11%
8%
3%
46%average
In 2010, on average 46% of indirect spend is captured by PO systems, a marginal increase since 2009 when the average was 43%
% of indirect spend captured in PO systems
None 1%-5% 6% - 10%
11% - 20%
21% - 30%
31% - 40%
41% - 50%
51% - 60%
61% - 70%
71% - 80%
81% - 90%
91% - 99%
All / 100%
7%
1%3% 3%
7%5%
11%12% 12%
16%
12%
6%5%
56%average
In 2010, on average 56% of processes behind spending are automated, a marginal increase since 2009 when the average was 50%
% of spending processes currently automated
What about the facts on capture, integration &
automation??
What’s the secret to success??
What is the best mix??
Time spent on AP activities
POLL 5
• A Data capture
• B AP Management
• C Exception Handling
Time spent on AP activities
High vs low performing AP departments
What is the respondent’s general opinion on:
What about procurement & finance collaboration:
What is the average automation level:
What is the way to handle approvals/exceptions:
What is the relationship between AP practice &
performance:
• Centralize AP responsibility
• Persuade suppliers to send invoices electronically
• Implement e-procurement
• Achieve high PO coverage, but not 100%
• Implement invoice (exception handling) approval software
• Good relations with procurement, system wise
What is the best mix to reach the top quadrant:
Basware offering e-procurement & e-invoicing
Procurement Invoice Automation
Customer Legacy Systems e.g. Financial Systems, ERP
Suppliers Legacy Systems e.g. Order Management, Billing
Basware Connectivity
CatalogExchange
Purchase MessageExchange
Scan andCapture
E-invoicingSupplier
Activation
Basware Open Network for e-invoices
BaswareBusiness
TransactionsBuyer
Buyers
Printingservices
Supplier
SupplierPortal
Scan and Capture
“VirtualPrinter”
Email sending
Integratedconnection
Invoices 100-500
Invoices > 500
Invoices 10-100
Invoices < 10
Supplier