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UC
Ariba Working Capital Management
Becoming a Discount Pro!
© 2011 Ariba, Inc. All rights reserved.
Agenda
• Overview of WCM Suite of Solutions• Demo – What’s new since last year• What’s coming – Roadmap themes• How is it helping other users?
Customer Stories Best Practices Benchmarks
• Working Capital Karaoke
2 © 2011 Ariba, Inc. All rights reserved.
Manage CashCollaborative Finance Management
3
Collaborative Finance Management improves the money flow between buyers and suppliers through automated invoice, payment and working capital management for:
This is Collaborative Finance Management This is Collaborative Finance Management
• Improved efficiency and effectiveness• Greater visibility• Better liquidity• Increased savings• Reduced supply chain risk
© 2011 Ariba, Inc. All rights reserved.
Corporations have been depositing 42% of their short-term cash in bank
accounts this year, compared with 25% in 2008
Ari
ba
Col
labo
rativ
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nanc
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gtChallenges for Finance
• 80% of invoices are paper• 23 days to approve an invoice• 70% of discount opportunities
are missed• 30% of invoices have
exceptions costing $600K for every 100K invoices
• Low interest and tight credit supply chain risk
4
Where's Corporate Cash? In the Bank, CFO Magazine August 3, 2010 http://www.cfo.com/article.cfm/14514893/c_2984367
4 © 2011 Ariba, Inc. All rights reserved.
Beyond Efficiency to Effectiveness
Outcome
Enablers
Business Goals
Balance Sheet Impact
P&L ImpactP&L Impact
WC Strategy
Process Redesign
Supply Chain Finance
Term Strategy
Process Redesign
Discount Pro
Procure-to-Pay
Invoice Automation
Working Capital Improvement
Discount Savings
TransactionEfficiency
Improve Visibility and Control
Mitigate Supply Chain Risk
Must-Haves
Ari
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5 © 2011 Ariba, Inc. All rights reserved.
Working Capital ChallengesCompeting Objectives between Buyers and Sellers
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work
ing
capi
tal c
halle
nges
wantto holdontocash
wantto get
paidfast
Working Capital Tension
Buyers Suppliers
Need to unlock working capital
Maintain or increase DPO
Need better return on cash
Need to minimize liquidityrisk in supply chain
Need to unlock working capital
Maintain or decrease DSO
Need better access to cash
Face significant liquidityrisk due to credit crunch
© 2011 Ariba, Inc. All rights reserved.
7
Challenges with Traditional Approaches to Liquidity
work
ing
capi
tal c
halle
nges
Not sustainable
Introduces Liquidity Risk
50% + Discounts Missed
Avg. < 10% spend
Fed Funds = 0.00 - 0.25%
Historically Low Return
Fed Funds/Libor Indices
Contract Negotiations
2-Part ERP Terms
Phone Calls to Suppliers
Extend DPO
Push Terms Out
Pay Suppliers Late
Money Market Funds
Commercial Paper
Maximize Return on
Capital
MaximizeDiscount Potential
Optimize Working Capital
7 © 2011 Ariba, Inc. All rights reserved.
Ariba’s Working Capital SolutionsFlexible suite to help you manage cash better
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Payment visibility and low-cost third-party financing permits on-demand payment acceleration
8
Suppliers sell receivables in online marketplace to highest bidder and get
paid faster
Offer buyers payment extension and rebates
while suppliers get paid faster
Expand supplier participation and leverage dynamic discounting with timing and cash use control
SupplyChainFinance
P-cards
ReceivablesFinance
Early PaymentDiscount
work
ing
capi
tal c
halle
nges
© 2011 Ariba, Inc. All rights reserved.
Broad Spend Segmentation Analysis Typical Example
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• Low $ Volume/High # Suppliers (10,000’s)• Non-strategic, easily replaceable, high
Buyer leverage• WCM Focus: Receivables Financing, Discount, Pcard
• Moderate-High $ Volume/1,000’s of Suppliers• Moderately strategic• Mix of Med-Small• WCM Focus: Discount & Receivables Financing
• High $ Volume/Low # suppliers (~50-300)• Strategic Suppliers, critical to supply chain• Larger Suppliers• WCM Focus: SCF
$ S
pen
d
# Suppliers
High
Low
~250 1,000’s 10,000’s
Buyer Value P-Card Rebates & WC Benefit
Buyer Value P-Card Rebates & WC Benefit
Buyer Value:DPO Increase, Early Payment Discounts
Buyer Value:DPO Increase, Reduction in WC
© 2011 Ariba, Inc. All rights reserved.
10
Discount Pro –Buyer Perspective
AR
IBA
wor
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olut
ions
Visibility and Control Actionable information to identify and act upon discount opportunities
Dashboard and Analytics
Early PaymentDiscount
Improve management reporting of bottom line savings and organizational impact
Cash Flow Control Control the amount of cash, rate of return, and timing of cash used for discount program
© 2011 Ariba, Inc. All rights reserved.
Visibility and Control Actionable information to identify and act upon discount opportunities
Collection Cost and TimingReduce the cost and effort required for collections. Lower DSO through process optimization and receivables acceleration
Improve Cash Flow Control the invoices you want accelerated in exchange for an agreed upon discount rate
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Discount Pro – Supplier Perspective
AR
IBA
wor
king
capi
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agem
ent s
olut
ions
Early PaymentDiscount
© 2011 Ariba, Inc. All rights reserved.
What’s New in Past Year
• Calendars Holiday Calendars Payment Processing Schedule
• Enhanced Notifications• Enforced Standing Terms• Reporting Enhancements
12 © 2011 Ariba, Inc. All rights reserved.
Discount Pro Demo
13 © 2011 Ariba, Inc. All rights reserved.
WCM Roadmap Themes
• Enhanced Discount Discovery and Collaboration PO Flip and eForm Early Pay Requests Notification Push
• Buy-Side Cash Flow Analysis Tools Real-time Discount Performance Tracker Forecasting Tools Cash Flow Dashboard
• Discount-Only Easy Integration to ERP
14 © 2011 Ariba, Inc. All rights reserved.
Customer StoriesBest PracticesBenchmarks
15 © 2011 Ariba, Inc. All rights reserved.
Increasing discount capture to >90%
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CompanySports equipment manufacturer
ProfileOne of the world’s largest sports equipment manufacturers with global direct and channel retail outlets
Ariba Commerce Cloud Features Ariba invoice Automation Ariba Discount Pro
Challenges Solutions Results
• $600 million spend across 260 suppliers
• Complex services spending (marketing, retail stores …)
• Broad inability to take advantage of early payment discounts
-̶Few negotiated agreements-̶Low capture rate (35%) -̶No opportunity for discount after initial discount day (i.e. day 15 for a 2%/15 net 45 term)
• Unable to capture ad-hoc discounts
• Ariba technology to automate manual processes and capture discount opportunities
• Ariba services to speed implementation, optimize processes, and improve ability to act on discount capture
• Automated discount-related supplier interactions
-̶ “Always Accelerate” and ad-hoc features-̶Accelerate terms to every supplier-̶Pro-rated term sliding scale to maximize capture
• Increased early payment discount capture from 35% to > 90%
• Increased supplier discount participation by 20%,
• Increased average discount to 1.5% (24% APR)
• Capturing dynamic discounts on 4% of targeted spend
• Over $1 million in projected annual savings
© 2011 Ariba, Inc. All rights reserved.
© 2011 Ariba, Inc. All rights reserved. 17
Enabling thousands of suppliers for PO automation, e-invoicing, remittance delivery and dynamic discounting
CompanyGlobal entertainment leader
ProfileLeading diversified international family entertainment and media enterprise
Ariba Commerce Cloud Features Ariba Buyer Ariba invoice automation Ariba discount Pro
Challenges Solutions Results
• Manual invoice processing led to excessive costs, large number of supplier inquiries
• Limited invoice-payment-cash flow visibility
• Difficulty managing vendor master data
• Low discount capture rates
• Automate PO creation, approval and delivery
• Ariba Network for supplier profile management and transmission to SAP master vendor file
• Working capital management solutions, including Ariba Discount Pro, for enabling dynamic discounting with suppliers
• Ariba Adapter for SAP integration
• Reduced AP headcount by nearly 30%
• Thousands of suppliers enabled for PO delivery and PO status, invoice management and remittance delivery
• Leveraging Ariba dynamic discounting feature for all suppliers.
• Ariba Network for supplier profile management and transmission to SAP master vendor file
17
Supplier Results from Ariba Network: Big-Giant
• Challenge with Paper No visibility Invoices processed in
weeks or months Delayed payments
• Results with Ariba Network
Real-time status visibility Invoices paid as quickly
as four days Improved cash flow
forecasting
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“I love the Ariba service. When we submit paper invoices, it can take a long time to get our invoices approved. With Ariba electronic invoicing, we get our invoices paid as quickly as four days, and the visibility into payment
status is like gold.”
Joy Stoelting, Studio Manager, Big-Giant
© 2011 Ariba, Inc. All rights reserved.
Supplier Results from Ariba Network: Photo Craft
• Challenge with Paper Too many exceptions Poor on-time payment
performance Inability to reliably forecast
cash flow• Results with Ariba Network
Virtually eliminates invoice exceptions
Accelerate collections from improved process, early payment discounts
“Really helps our DSO”
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"By processing invoices over the Ariba Network, we have improved our cash flow forecasting and seen a dramatic increase in prompt payments. The substantial DSO improvement from the Ariba Network has strengthened our finances, and that’s a huge
advantage in this difficult economy." Trish Jackson, Accounts Receivable, Photo Craft
© 2011 Ariba, Inc. All rights reserved.
Best Practices• Readiness
Set clear goals (# suppliers, discount income, etc.) Align the organization
– Early Payment Program Champion– Involve Treasury, Procurement, Finance/AP
Define a terms strategy• Program
Closely align early payment program with supplier enablement High-value campaign Define early payment offer strategy
– Pro-Rated Terms– Supplier Selection– Simple Segmentation
• Measurement Choose a few KPIs to align with goals/objectives
– # Discount Suppliers– $ Discounts Earned– Avg. % APR earned
Learn from experience…and adjust approach
20 © 2011 Ariba, Inc. All rights reserved.
Appendix
21 © 2011 Ariba, Inc. All rights reserved.
Invoice Approval Efficiency Foundational to Working Capital Value
22
1%
Dis
cou
nt
Rat
e
Days
2%
20
10
30
Pap
er In
voic
e
Ap
pro
vals
60
3%e-
Invo
ice
Ap
pro
vals
Reduce your invoice approval cycle and
Unlock working capital opportunities
Capture discount savings
Maintain strong vendor relations
Reduce Cycle Time
Reduce Cycle TimeAriba Prorated Terms
© 2011 Ariba, Inc. All rights reserved.
Questions
23 © 2011 Ariba, Inc. All rights reserved.
24
“Safe Harbor” and Confidential Information Statement
This information reflects the status of Ariba solution planning as of January 2011. All such information is the Confidential Information of 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 Ariba to any particular course of business, product strategy, and/or development. Its content is subject to change without notice. Ariba assumes no responsibility for errors or omissions in this document. 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.
© 2011 Ariba, Inc. All rights reserved.
UC
Ariba Working Capital Management
Becoming a Discount Pro!
© 2011 Ariba, Inc. All rights reserved.