Webinar: The Benefits of AP Automation with The Accounts Payable Network

7/28/2019 Webinar: The Benefits of AP Automation with The Accounts Payable Network

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Slide 12009 Financial Operations Networks LLC


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Agenda

Introduction

Current State

Automation benefits beyond cost

Process change and Automation

Solution Selection

Small Business Case Study

Summary


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Introduction

Over the past 40 years, the greatest contributions

in innovation have come in the area of informationtechnology. But companies will take time to learn

how to use them, so it will probably be manydecades before their full impact is felt.

(The Economist Jan 12th 2013)


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Introduction (Continued)

AP has struggled to keep pace

For many companies automation was beyond theirreach

Increased legislation in the post Enron 9/11 world hasincreased the pressure on AP

The difficult world wide economy has increased thepressure on operational cost and efficiency


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Only 15% of companiesare highly automated


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The Problem

Many companies have automated only a few processes,such as e-invoicing

Scanning is often still a back end process

The approval process is still manual with an image usedinstead of paper

Little or no use of automated workflow or matching

Small to medium sized companies often find it difficult tojustify automation on cost savings alone


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Top-performing firms gain majorbenefits in five key ways:

1. Procurement advantage, through better cost analysisand contract management

2. Cash management advantage, through betterforecasting and working capital management

3. Discount and rebate advantage, plus penalty avoidance

4. Compliance with SOX and other government

regulations

5. Cost advantage


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Key Concerns of AP


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Key Concerns of the CFO

About the economyConsumer demandFederal government policiesPrice pressure

About their own companiesAbility to maintain marginsAbility to forecast resultsWorking Capital Management


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Key Concerns,Federal Government Policy

Sarbanes-Oxley ActResults in increased control over financial operations,

Corporations are required to document processes toassure compliance with sound business practices.

CFO (and CEO) has to Sign off on accuracy of

financial documents.

OFACCompaniesare required to comply with all aspects of

the Patriot Act as regards to who they do business

with, i.e. vendors.

FCPA (Foreign Corrupt Practices Act)Applies to a companies to customers and vendors

Regulation


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Key Concerns of AP Dont Match CFOs


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Combining the Goals

Both sets of goals can be met using:Process change

i.e. Centralizing AP

Automation Improved visibility

Margin maintenance through spend analysis

Manual processes replaced

On time payments


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Top Reasons for Productivity Rise

Improvements in

business process62%

Improvements in

technology

50%

More hours Worked

37%

Better morale or

teamwork

31%


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Productivity Rise, Process

AP and Purchasing work to improve the complete

purchase to Pay Cycle

Centralization of AP into a shared serviceenvironment

PO distribution, front end Scanning, e-invoicing,workflow and payments integrated into acomplete solution

It is the combination of the automatedsolutions with process change that return

the best results


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Process Change, Automation

Utilize machine to machine e-invoicingXML, EDI or HTML preferred, although XML etc. can

be used

Use a portal to allow small players to createinvoices on line, or flip purchase orders.

Use workflow for internal matching and resolution

Move to e-payments


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Automations Effect on Costs


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Automation Benefits, Visibility

Automation allows for the data to be visible fromthe moment of entry.Accruals can be accurately made Invoices can be tracked by AP, purchasing and

Vendors from entry through to payment The auditors of one failing UK company found 50,000 invoicesthat had not been entered or accrued.

Finance can accurately forecast cash requirements

Management can track progress against goals


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Benefits beyond Cost, Discount Capture

Companies with the best cycle times can targetdiscount capture.

Discounts

2 /10 net 30 can return over 35%. One majorcorporate estimated a $200 million addition to thebottom line from discounts Offer discounts as an alternative to extended terms. One

company offered 1.5 / 15 or 60 days.


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Early Payment Discount CaptureYields Lucrative Annualized Returns

Day 0 Day 10 Day 30

Example:Typical 2/10 Net 30 on $100 Invoice

Option 1: Pay $100 on Day 30

$100 minus Interest= $99.73 @ 5%/yr Interest

20 days

20

365198100

i

3689.0i

$100

$2 Interestover 20days implies Interest

Rate of37%/yr!!!

Day 0 Day 10

Option 2: Pay $98 on Day 10

20 days

$98

$98 + Interest= $100

Day 30

20

3651

iPVFV


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Slide 20

2009 Financial Operations Networks LLC

Better Vendor Pricing

Spend analysisAberdeen consulting estimate that US business leave $260

billion on the table by not taking advantage of discounts andcontract negotiation

Companies are often buying the same product from the samevendors at different prices

Reduce the Number of VendorsSupply Standardization

For Example buying less expensive pens, paper etc.

Lets look at an example


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Slide 21


Benefit Example

Our sample company has:Sales Of $250 millionProfit before tax $25 millionCost of Goods purchased, 45% of revenue

Many companies achieve a 10% reduction inprice paid for goods and services. In this example if 10% reduction is on only 50% of

spend the return to the bottom line is $5.6 million

Most Commonly Used


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Slide 22


Most Commonly UsedInvoice Delivery Methods


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Slide 23


Workflow

WorkflowRouting of Invoiced for approval

Use negative or assumed approval

Add accounting codes to the invoice automaticallyfrom the PO One company study showed 50% error rates on invoices

where buyer/requestor added the account info.


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Slide 24


Portal

Self ServiceAll information can be distributed directly to end users

PO.s, RAs, Tax and legal agreements etc.

Invoices can be generated, or uploaded to the site

PO flip can be used.

Client ServiceVirtually eliminates the need for phone based

customer service.


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Slide 25


Solution Selection

Key Considerations.Build for today and tomorrowScalability, do you have monthly or seasonal

fluctuations to consider, are you allowing for M and A

activity.Consider short term options as part of the long term

solution E.g.Use scanning while automating invoice or payment

processing


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Slide 26


The Ideal Solution


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Slide 27


Solution Selection

In house license Most common Practice, gives the company completecontrol over system.

Utilize Software As A Service (SAAS) For smaller companies this can be a complete

solution, for larger companies can be utilized as acomponent, i.e. payments or e-invoicing.

Can be an interim solution while staging a fullautomation program.


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Slide 28


Solution Selection, The Cloud


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Slide 29


The Cloud, Additional Benefits

Back up and recoveryOff site storage and back up

Automatic updates to software and applications Secure accessibility from any location

Flexible Pricing


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Slide 30


Solution Selection

Key Considerations in selecting a softwarepartner. Select one who handles;

the largest range of document types, and input methods. Has a large client base, with experience in your industry

Has multi-country reach and experience


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Slide 31


Case Study, Small Business

Business involved in Training, Service and Retail50% of revenue from retail and government contracts

Old POS system

POS and Spread sheets used for accountingsystem

No scanning, e-invoicing or payment systemsused


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Slide 32



Multiple suppliers / lines carriedPaying list price for all ordersMargins between 35% 40%

Unable to compete on government bidsWeb merchants offering lower prices

AP Purchasing


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Slide 33


Case Study, First Steps

Analyzed spend over a six mon th per iod bysuppl ier and SKU

Compared suppliers as to range of products

carried, customer service, delivery etc. Looked at requirements for volume pricing


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Slide 34



Reduced key suppliers to 3One high endOne Medium PricedOne slightly below Medium Priced

Signed annual spend commitments with thesethree suppliers.Commitments ranged from $6,000 to $20,000 Increased margins to 50%-75%Allowed us to price more competitively with webLower COGS allowed us to more aggressive, and win

government bids.


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Slide 35



Sample, Supplier Program

Part # Tier 1 Tier 2 Tier 3 Core + Retail

55.26 $27.00 $24.00 $21.50 $19.00 $59.95

Margin 54.96% 59.97% 64.14% 68.31% Spread 13.34%

30.1 $240.00 $225.00 $225.00 $218.00 $474.95

Margin 49.47% 52.63% 52.63% 54.10% Spread 4.63%


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Slide 36


Next Steps

Move to a cloud based solutionBack up in place

Reasons for this MoveAllow access from remote locations, i.e. off site

bookkeeperDisaster recovery, Server lost after major storm. Data was backed up but new

system software was not compatible with (old) operatingsystems

S


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Slide 37


Summary

By implementing process change and automationcompanies can meet both AP and CFOs goals

For AP Improve Process and reduce errors

Automate manual Process Improving Productivity

For the CFO Maintain (or improve) margins

Forecast results Accurately

Improve Working Capital management


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Slide 38

2009 Fi i l O ti N t k LLC

Thank You !

The Accounts Payable Network2100 RiverEdge Parkway, Suite 380

Atlanta, GA 30328David W [email protected]

For further information on this topic, contact:

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Webinar: The Benefits of AP Automation with The Accounts Payable Network

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