e-invoicing: don't let your business case embarrass you, the delhaize story

E-Invoicing

Don’t Let your Business Case Embarrass YouThe Delhaize Belgium Story

Thierry ClaesStF Consulting

© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 2

IntroductionDelhaize Belgium

Delhaize Group is a Belgian food retailer present in 8 countries on three continents with a sales network consisting of 2,673 stores (2008);

Delhaize Group posted EUR 19.0 billion in revenues (2008) and EUR 410.1 million (USD 562.1 million) in net profit for 2007.

At the end of 2007, Delhaize Group employed approximately 138,000 people. Delhaize Group’s stock is listed on Euronext Brussels (DELB) and the New York Stock Exchange (DEG).

* Source AC Nielsen

As part of Delhaize Group, Delhaize Belgium’s sales network consisted of 775 stores (730 in Belgium, 40 in Luxembourg, 4 in Germany and 1 in France).

In 2008, Delhaize Belgium posted EUR 4.4 billion in revenue, presented a market share of 25,7%* and employed approximately 18.000 people

More than 3.000 suppliers

Around 650.000 vendor invoices per year


What will be covered in this presentation ?

• Real questions for Real project !

– What’s e-invoicing ?

– Why should you go for e-invoicing ?

– What are the benefits AND the costs of an e-invoicing project ?

– What are the key elements for your RFP ?

• Sharing of experience from on real case !


1. Define Vision

2. Business Case

3. Solution 1. E-invoicing Model Selection2. Service Provider(s) Selection (RFP & Contract)3. Selected Solution

4. Critical Success Factors

Agenda


Digital Mail Room

Vision DefinitionUnderstand E-Background

• As in every projects, you will have to start by Defining your Vision

• You will be confronted with the “e-vocab”

• Let’s put some conventions …

E-BillingScanning

OCR

E-Invoicing


Vision DefinitionUnderstand E-Background – E-invoicing

• What’s e-invoicing ? – E-invoicing is used in a “buyer centric” model to

describe the vendor’s invoice.

– Vendor’s paper invoice is replaced by an electronic message => replacing the legal paper vendor invoice

– The electronic message is seamlessly recorded in the AP system …

– Sending a PDF invoice by mail is NOT e-invoicing !

– Vendor’s paper invoice was never created => never received by buyer

– When using the term e-invoicing, we usually consider the AP process

BUYERVENDOR

E-invoicing



• Scanning/OCR is NOT e-invoicing !– Digital Mail Room, OCR, Scanning are “just” a way to encode paper into your (AP)

system

– Vendor’s paper invoice still exists and (most of the time) remains the legal invoice

– Manual and low added value tasks are still present in the process, so are the handling costs !

=> it will not be part of this presentation

OCROCRDeliveryDelivery ScanScanOpenOpenIsolateIsolate ValidateValidate IntegrateIntegrate

PaperArchiving

PaperArchiving

APWorkflows

APWorkflows

Low Added Value tasks



• What’s E-Billing then ? – E-Billing is used in a “biller centric” model to describe

the bills/invoices sent to the customers.

– Same characteristics as e-invoicing

– When using the term e-billing, we usually consider the AR process

• Today, we will talk about e-invoicing !

VENDORCustomers

E-Billing


Vision DefinitionStarting point - Does it look familiar ?

Mislaid and lost invoicesMislaid and lost invoices22

Unnecessary duplicatesUnnecessary duplicates33

Manual encoding and poor productivityManual encoding and poor productivity11

A/P people chasing approversA/P people chasing approvers55

Missed supplier discounts or Missed due datesMissed supplier discounts or Missed due dates66

Poor control of approvalsPoor control of approvals44

Managers spending time on invoice handlingManagers spending time on invoice handling77

Painful Compliance Processes (SOX,…)Painful Compliance Processes (SOX,…)88


Vision DefinitionDrivers & Objectives

Direct cost savings of XFTE by eliminating manual encoding, paper

copies/image scan, archiving and decrease volume of disputes

Direct cost savings of XFTE by eliminating manual encoding, paper

copies/image scan, archiving and decrease volume of disputes

From a daily challenge to an usual & easy procedureFrom a daily challenge to an usual & easy procedure

From blocking factor to enabler for increasing cash discounts

and cashflow management initiatives (eg. reverse factoring)

From blocking factor to enabler for increasing cash discounts

and cashflow management initiatives (eg. reverse factoring)

From lost in banana box to perfect audit trailFrom lost in banana box to perfect audit trail

Upgrade and valorise AP people and activitiesUpgrade and valorise AP people and activities

Direct cost savingsDirect cost savings

Payment on time

& Better Service

Payment on time

& Better Service

Working Capital ManagementWorking Capital Management

Compliance & VisibilityCompliance & Visibility

Eliminate non value added tasksEliminate non value added tasks

Paperless strengthen Company’s “green” imagePaperless strengthen Company’s “green” imageCorporate ResponsibilityCorporate Responsibility

Provide necessary flexibility for FutureProvide necessary flexibility for FutureEnabler for sourcing or centralize AP operations

Enabler for sourcing or centralize AP operations


Vision DefinitionWhy should you implement E-invoicing ?

E-invoicing will help you to achieve your objectives by reducing the timing of

transactional processing

Today’s competitive environment requires optimal cost structure


“NON LEGAL” E-ARCHIVING

LEGAL PAPER ARCHIVE

Vision DefinitionScope of e-invoicing

SUPPLIERS

PAYMENTPAYMENTBOOKINGBOOKINGMATCHING(WORKFLOWS)MATCHING(WORKFLOWS)

ENCODINGENCODINGINVOICE

RECEIPT & HANDLING

INVOICERECEIPT & HANDLING


Vision DefinitionE-invoicing Solutions Models

Buyer Centric (direct model)– Buyer driven– Order-to-Payment– A/P and Procurement optimization– B2B custom features– Extendable to other message streams

(logistics,..)

Consolidator– Roll-out efficiency : Community, Translation, on-boarding

services, interoperability– Legal Compliance– Cost- and time-efficient roll-out if standardized way is OK– Works for Buyer and Sender centric models (mostly)

Buyersupplier

supplier

Consolidator

Company

Company

Company

Company


Vision DefinitionModels - Direct vs Consolidator

• “New” but emerging• Works for multiple inbound- and

outbound invoicing• Compliance certifications

• “New” but emerging• Works for multiple inbound- and

outbound invoicing• Compliance certifications

• Degree of standardization vs customer features required,

• Contractual guarantees on compliance

• Degree of standardization vs customer features required,

• Contractual guarantees on compliance

+ -

+ -• Roll-out dynamic• Compliance management for

dematerialized invoices

• Roll-out dynamic• Compliance management for

dematerialized invoices

Direct – Point2Point

Consolidator

• “legacy” EDI communication hub• Buyer Centric • Customization capabilities• Other business transactions supported

(logistics, procurement,..)

• “legacy” EDI communication hub• Buyer Centric • Customization capabilities• Other business transactions supported

(logistics, procurement,..)


Vision DefinitionInhouse vs Outsourced

ONBOARDING RESOURCES

DECISION :OUTSOURCING !

• Telesales & community care centers

• Functionality to cope with various supplier/customer segmentations

• Telesales & community care centers

• Functionality to cope with various supplier/customer segmentations

• Know how• Investment in Audit certificates – Insurance – Dialogue with

Tax administration• Capability to monitor and adapt if any regulatory change

• Know how• Investment in Audit certificates – Insurance – Dialogue with

Tax administration• Capability to monitor and adapt if any regulatory change

• IT Resources (not) available • IT Resources (not) available

MITIGATING THE COMPLIANCE RISK

ADVISORY ROLE


Vision DefinitionUltimate Project Objective

Replace 90% of our paper supplier invoices by e-invoices within the next 3 years.

Outsource the Compliance “headache” and the onboarding management to a service provider

Increasing our productivity and decreasing our operational costs by …


1. Define Vision

2. Business Case



Agenda


Business Case What are the elements to consider

• Benefits – Costs Reduction Opportunities– Tasks elimination– Productivity Gain – Storage costs reduction – Working Capital Improvement

• Project and Process Costs– Training and Communication Costs– IT and Business Change Requirements– E-invoicing processing costs– E-Archiving costs– On-boarding costs (resources,…)

• Timing– Timing for your business case will depend on your on-boarding timing

• Volume of invoices converted


Business Case - BenefitsWhere will be the cost savings ?

Draw up invoice Send Solve

issuesManage disputes

Financial impact

approval Make payment Archive Manage

disputes

Inbound –Buyer: A/P process

Outbound – Supplier: A/R process

Archive Follow-upunpaid

Handling Process(key-in)

Prepare Reconcile

Matching

Source Isabel

“The average cost for a customer bill is 5 USD, of a dispute is 20 USD” – Gartner (Research Note, B2B invoicing, Cash is King)

Methis study: “substituting all paper bills into epaper, contributes 0,7% of Kyoto norm for Belgium”

1,2 € 2 € 5,6 € 3 € 1,4€ 1,8 € =15 *€ *averageAP cost accordingBillentis/Certipost

paper

http://images.google.be/imgres?imgurl=http://www.landbouwkrediet.be/das/young/Virement1_NL.jpg&imgrefurl=http://www.landbouwkrediet.be/das/young/StudentGame_NL.cfm&h=287&w=421&sz=150&tbnid=7pQ5WU7_zT9XDM:&tbnh=83&tbnw=122&hl=nl&start=6&prev=/images%3Fq%3Doverschrijving%26svnum%3D10%26hl%3Dnl%26lr%3D%26sa%3DN


Business Case Where will be the cost savings ?

Draw up invoice Send Solve

issuesManage disputes

Financial impact

Matching Approval Make payment Archive Manage

disputes

Archive Follow-upunpaid

Handling Process(key-in)

Prepare Reconcile

Source Isabel

Outbound – Supplier: A/R process

Inbound –Buyer: A/P process

•A/P Aberdeen Group estimates that digital invoice processing at A/P side saves up to 80% of encoding, archiving and dispute costs

•A/R: Gartner estimates that typical saving is 3,35 USD per invoice and 10 USD per dispute – Gartner Research Note, B2B Invoicing, Cash is King

http://images.google.be/imgres?imgurl=http://www.landbouwkrediet.be/das/young/Virement1_NL.jpg&imgrefurl=http://www.landbouwkrediet.be/das/young/StudentGame_NL.cfm&h=287&w=421&sz=150&tbnid=7pQ5WU7_zT9XDM:&tbnh=83&tbnw=122&hl=nl&start=6&prev=/images%3Fq%3Doverschrijving%26svnum%3D10%26hl%3Dnl%26lr%3D%26sa%3DN


Business Case Complexity - How hard can it be ?

22

11

Complexity

• Company with low maturity AP processes : lots of manual transactions, paper based, non efficient workflows, low visibility on process performance …

BUSINESS CASE IS EASY

• Company with high maturity AP processes : already using EDI (eg) or digital mail room and OCR, approval/exception workflows are efficent, payment are made on time

BUSINESS CASE IS CHALLENGING

AP

Matu

rity

11

22


Business Case Elements to consider based on AP maturity

Complexity

AP

Matu

rity

Mail Room Staffing, Data entry Staffing, Reduced costs of storage, Reduced costs of managing paper

Optimization of Exception Processing and Supplier Services

Optimization of Working Capital : Capture of discount, decrease of late payment penalties, early VAT claims, Dynamic discounting, Enabler for other projects (eg Reverse factoring initiatives …)


Business Case – Project and Process Costs Business Requirements & Developments

• Data Capture of E-invoicing– Where should the e-invoice message be integrated ?

– Initial process started with the paper receipt (also for EDI invoices)

– How to make the difference between non legal EDI invoice and legal EDI invoice ?

• Pre-Controls on e-invoicing plateform– Where controls should be performed ? In E-invoicing platform or in

company’s processes

– What about the master data exchanges ?

– When E-invoice is created, it may not be cancelled => credit notes is to be created if changes are required


Business Case – Project and Process Costs Business Requirements & Developments

• Archiving– Where do you need to have the invoice image and for which task?

– Visualisation versus Hyperlink

– Connection or Copy-pasting the database

– You always can have 2 archiving databases but there is always only one “legal”

• Vendor Portal (legacy) – status of invoice– Do you already have a “vendor Portal” ?

– Build or outsource

– New functionalities


Business Case – Project and Process Costs Training and Internal/External Communication

• Focus on External Communication – Rely on communication package provided by service providers but “one size does

not fit all”

– Your communication needs to be aligned with your suppliers segmentation and has to :

– Be Enriched with your company’s style

– Be in phase with your ambitions and project steps

– Combination of targeted mailings, workshops and personalized communication through Procurement department

• Do not underestimate the Internal Communication and Training– Every people in contact with suppliers needs to be aware of the project basics

– Training depending on audience

– Do not underestimate the profile shift needed and the education required to go along with this shift


Business Case – Project and Process CostsWhat does e-invoicing cost ?

• The cost per invoice is depending on the service providers and the volume of invoice

• A quick market review showed for a volume of 500.000 invoices an average between 0,5 eur and 1 eur

• These costs will indeed depend on the additional services to be included such as :

– The onboarding activities

– The archiving

– The technical assistance

– Etc


Business CaseOnboarding Timing

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Y1 Average 16%

Y2 Average46%

Y3 Average76%

90%


Business Case Delhaize specifics

• Assumption : Delhaize is outsourcing the e-invoice generation

=> For our business case we took a conservative approach of 1 eur (including legal archiving)

=> Onboarding was to be done by Service provider

• Our business case has been firstly build on the very conservative approach of only considering the direct payroll cost on :

– Mail Room

– Data Entry (manual & scanning)

– Storage and data retrieval in case of Supplier enquiry

• The option of outsourcing the scanning of all the remaining paper invoice as from day 1 has been rejected during the vision definition but is still an option to consider when drafting your business case


Business CaseThe preliminary results

P/L Impact without outsourcing remaining paper invoice

0

100.000

200.000

300.000

400.000

500.000

600.000

Y1 Y2 Y3 Y4 Y5

#Inv

oice

s

0,00 €

200.000,00 €

400.000,00 €

600.000,00 €

800.000,00 €

1.000.000,00 €

1.200.000,00 €

1.400.000,00 €

1.600.000,00 €

Volume DEMAT Salary Cost Savings Cost (Transactional +OTC) Profit


1. Define Vision

2. Business Case



Agenda


Solution1. E-invoicing Model Selection – The Drivers

• Standard for Retail Industry is EDI (PO, DESADV, RECADV, INV, …)

• Already more than 30% of our invoice through EDI (but still with paper)

• Strategic Decision to select an EDI solution for Direct Goods

• Standard for Retail Industry is EDI (PO, DESADV, RECADV, INV, …)

• Already more than 30% of our invoice through EDI (but still with paper)

• Strategic Decision to select an EDI solution for Direct Goods

DIRECT GOODSDIRECT GOODS

• No existing standard• Roll out complexity • Mitigating Compliance risk• Suppliers segregation – specific approach & tools are

required

• No existing standard• Roll out complexity • Mitigating Compliance risk• Suppliers segregation – specific approach & tools are

required

INDIRECT PROCUREMENTINDIRECT PROCUREMENT

Point2Point - EDIPoint2Point - EDI

•Strategic Decision to select an EDI solution for Direct Goods

•Strategic Decision to select an EDI solution for Direct Goods

Any2Any FormatAny2Any Format

•Strategic Decision to have 1 specific solution for each channel•Consolidator Model –relying on the Any2Any business model

•Strategic Decision to have 1 specific solution for each channel•Consolidator Model –relying on the Any2Any business model


Solution2. Selection of Service Providers – The RFP

• Service Provider’s profile and shareholder structure

• Technical aspects (interfaces used, supported format, …)

• Compliance :

– Authorized E-invoicing Method used (EDI, AES, Other)

– Certifications obtained

– SAS 70 & Other comfort letters

– Ruling with local tax administrations

• Liability cap (if any)

• Onboarding :

– Method and guarantees

– Languages capabilities

– Interoperability


Solution2. Selection of Service Providers – The RFP

• SLA’s towards the client AND the supplier

• Setup and maintenance costs

• Pricing

• Optional Services : Scanning, dynamic discounting, portal …..

• YELLOW PAGES (% match between the supplier community and the suppliers on the plateform)


Solution2. Selection of Service Providers – The Contract

General Attention Points

• Do not underestimate the time you will take to validate the contract and convince people internally

• Complex versus “New and Unknown”

• Have your Tax and Legal Department on board

• Set your objectives straight and have clear Risk Assessment :

– Do we already have this risk ?

– Do we want to keep the same risk level as today or do we want to decrease the risk ? (eg VAT rate validation)

• Conceptually, e-invoicing implementation means “replacing the Postal Service” :

– But do you want to outsource/add some more controls ?

– Do you just want to replace the “mail guy” ?



Compliance Roadmap

1. Be careful : Technical Compliance versus full coverage of the compliance

– Does the Service provider fulfill only the “e-invoicing” law (European Directive)?

– Does the Service Provider warrant that the e-invoicing that you will receive fulfills any “Any applicable laws” : EU Directives, laws, binding rules, or regulations issued by a governmental authority of the relevant country” (VAT –Commercial Tax)

– Cross Border Compliance – outside Europe/ Intra-Europe/ Local

2. Have the SAS 70 and read it !

– What’s the timing for deficiency resolution ?

– What type of deficiency is for you critical ? (eg Compliance, Archiving,…)

3. Certifications/Comfort Letter

– From a reputed auditor …

– As always, be careful on the wording of the comfort letters



Compliance Roadmap

4. Insurance

– Warranties are nothing without any insurance

– What’s the content of the insurance policy

– Is it only for you ?

– What’s the covered amount ? What do you want as coverage ? What is reasonable ?

– VAT penalty amount (10% of total yearly expenses)

5. Right to perform your own audit

– Do not limit the scope of the authorized audit

– What’s the guaranteed support of Service provider during this audit ? Is it free of charge ?



Worst Case Scenario

• SLA’s– SLA for service availability

– Archiving and data losses

– Onboarding campaign

• When are you entitle to break the contract ?

• What if service level is not in line with expectations and SLA and that you decide to break the contract ?

• Consequences …. Are you covered for this ?

• Search for new Service Provider, Processing of the paper invoice, communication to suppliers …



Tasks Distribution

• What’s the support expected from the company ?

• What are the resources required ?

• Is it sufficiently described in the contract/Service Manual ?

• Are the answers to the RFP part of the contract ?


Solution Choosen : Direct Goods EDICOM

PO

DESADV

AP System

SUPPLIERSWith EDI

SUPPLIERSWith WebEDI

SUPPLIERSW/o EDI


Preferred Solution : Indirect ProcurementThe Consolidator model

A/PSystem

Checkor

ACH

Payment & Remittance

Financial System

Auto Match

Work Flow Approval& G/L Allocation

Image/Invoice

InvoiceData in Buyer

Format

Archive

Data Transformation

- Validate- Enhance- Re-format

PO Transaction

Non POTransaction

Requisitioner

Supplier

Supplier

Supplier

Supplier

Supplier

Web

For

mSupplier

* Picture from OB10


1. Define Vision

2. Business Case



Agenda


Critical Success Factors for an Easy Selection

• Sponsorship from Finance and IT Departments… and Supply Chain

• Tax and legal department on board and understanding the project

• Managing compliance risk on a practical way – Good view on risk involved

– Outsource to professionals (service providers, insurance, ….)

• Have a clear view on your internal resources and on task distribution between Service Provider and Your organization

• Do you have a fall-back scenario ? What would be the cost of it ? Who would bear the cost of it ?


Critical Success Factors for an Easy Business Case

• Do not make your business case more complex than it is !

• Be clear on your objective ! Replace the “mail guy” vs AP process Re-engineering

• Take into account the Supplier’s perspective in your business case (Win-Win Solution)

• E-invoicing as the starting point for new Working Capital initiatives (Intangible benefits)

• Identify carefully the required changes (legacy system, archiving, master data) to work paperless

• Do not underestimate the training and communication costs in your business case

• E-invoicing will only mean additional costs if you do not convert your efficiency gain (task redistribution, downsizing, volume increase, …)

THANK YOU

QUESTIONS ?

Thierry Claes

[email protected]

+32 473 64 00 60

mailto:[email protected]

e-invoicing: don't let your business case embarrass you, the delhaize story

Documents

critical success

critical success

shared service

digital mail

vision definition

business case

vision definition

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