fusion 2014: lessons learned from advanced discount management
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Lessons Learned from Advanced Discount Management
Markus Ament,Chief Product Officer
Taulia
I. Cash Flow Challenges for Buyers and Suppliers
II. The Benefits of Dynamic Discounting and Supplier Finance
III. Best Practices and Tips to Maximize Discounts Captured
IV. Real World Examples of How to Manage Segmentation Brackets Within Your ERP
V. Solution Demonstration
VI. Questions
Agenda
Transforming Your Payables Department
Imagine a world where…
Supplier inquiry calls become a thing of the pastBuyers have a lean invoicing, payables & discounting process trimming millions off the bottom lineAutomating and maximizing supplier discounts is finally achievable
Finally Complete the AP Automation Journey…While Realizing Significant Financial Benefit
There Is a Fundamental Inefficiency in Today’s Supply Chain
Buyers are Holding Record Amounts of Cash Generating Low Returns
Small Businesses Have Limited Liquidity and High Cost of Capital
Traditional Supply Chain Connectivity Creates Delays in Supplier Payment
Record Amount of Cash Earning Low Returns
Buyers Have Excess CashU.S. Non-Financial Companies’ Cash & Liquid Assets
Low Return on Cash U.S. Interest Rate – 10-Year Treasury Rate
($ in tn)
While Their Suppliers Struggle to Stay Afloat
Factoring market is growing rapidly and exceeds $2.9 trillion
Global Factoring Market in Trillions*
2006 2007 2008 2009 2010 2011 20121
1.2
1.4
1.6
1.8
2
2.2
2.4
2.6
2.8
3
1.54
1.77 1.81 1.75
2.25
2.752.91
* Source: http://fci.nl/about-fci/statistics/total-factoring-volume-by-country-last-7-years
TYPE: INTEREST:
Credit Card 18%
Factoring 20-40%
• Due Diligence Effort
• Few Companies Qualify
• Exceptionally Expensive
Lack of Connectivity Causes Delay in PaymentsSu
pplie
rsBu
yers
Inefficient Buyer-Supplier Connections Lead to No Visibility into Invoice Process
APPROVED INVOICE
10 DAYS
Average time to approve a valid invoice
Source: Taulia Analysis Source: REL/Hackett Group
Average U.S. payment terms
55+ DAYS
Common Challenges within Payables Process
No visibility into the invoice process
Unnecessary invoice
status and inquiry calls
Missed early payment discount
opportunities
AP Depts. drowning in paper
High cost of
manually processing
invoices
Never-Ending Friction Between Buyers and Suppliers
SUPPLIER Invoices Customer
BUYER Approves Invoice on
Day 5
BANK
Invoice-Net 60
Buyer Earns 0.75% APR until Due
Date
Suppliers Factor at 20+% APR
1.
2.
3.
Banks Benefit from Payment Inefficiency
Payables as an Opportunity for Revenue
0 DAYSinvoice
10-15 DAYSapproval
60 DAYS due date
OPPORTUNITY
AVERAGE PAYMENT TERMS (DAYS)
Anheuser-Busch
Hertz
Apple
Industry Average
120 DAYS
60 DAYS
45 DAYS
56 DAYS
I. Cash Flow Challenges for Buyers and Suppliers
II. The Benefits of Dynamic Discounting
III. Best Practices and Tips to Maximize Discounts Captured
IV. Real World Examples of How to Manage Segmentation Brackets Within Your ERP
V. Solution Demonstration
VI. Questions
Agenda
The Win-Win Solution that Generates Revenue
Enables Buyers to save money and improve return on cash by paying suppliers early
Enables Suppliers to access less expensive financing alternatives by accepting time-variable Dynamic Discounts
Forget the cliff. Automate discount capture.
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0%0 10 Days 20 Days 30 Days
$
2% 10 Net 30
“Hit-or-Miss Discount”3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0%0 10 Days 20 Days 30 Days
$
$
Sliding Scale Discount
Antiquated Discounting Dynamic Discounting
Why Suppliers Choose Early Payment Discounting
Allow suppliers to get paid sooner
Payment dates are well under industry averages
Discount rates are less expensive than alternative forms of financing
More convenient than funding alternatives
Better balance sheet Helps to meet quarterly targets
I. Cash Flow Challenges for Buyers and Suppliers
II. The Benefits of Dynamic Discounting
III. Best Practices and Tips to Maximize Discounts Captured
IV. Real World Examples of How to Manage Segmentation Brackets Within Your ERP
V. Solution Demonstration
VI. Questions
Agenda
Five Factors for Maximizing Global Discounting
Gain cross-functional alignment1
Best practice terms policy2
Best in class tools3
Ongoing change management4
Architecture for maximum flexibility5
1. Gain Cross-Functional Alignment
Improve working capital management
Connect and streamline processes internally
Create an integrated and centralized way to manage spend, suppliers and process efficiency
Pay the RIGHT suppliers, the RIGHT amounts at the RIGHT times
ONE SHARED
GOAL Accounts Payable
Treasury Procurement
IT
2. Best Practice Terms Policy
Did you know?Better practices can improve results 20-40%*
*Tom Glassanos, Bavelos Group Research, 2013
The deployment of payment terms and supplier strategies that align with cash management, DPO, and financial supply chain goals
One size (term) does not fit all
Understand when to use corporate cash, bank cash or third-party cash
3. Best in Class Tools
Seamless integration into your ERP
Supplier segmentation through your ERP or convenient web based platform
AP automation helpful for straight through processing
Flexible funding models to meet the needs of the entire supply chain
Did you know?AP Automation can improve results 10-30%*
*Tom Glassanos, Bavelos Group Research, 2013
4. Ongoing Change Management
Supplier preferences change
Cost of capital changes
Internal policy and expectations change
5. Architecture for Maximum Flexibility
ERPERP
WorkflowWorkflow
Supplier Financing Module
Supplier Financing Module
Leverage supplier financing with any combination of new or existing portal and workflow strategies for maximum flexibility
eInvoicing Network
Pay Me Early
Vendor Portal
Pay Me Early
Propriety Portal
Pay Me Early
What Makes the Difference?
Seamless integration into your ERP1
Providing 100% visibility of AP information to 100% of suppliers2
Compatibility with all AP automation solutions and ability to coexist and integrate with other portals
3
4 Enabling Advanced Discount Management on 100% of spend
I. Cash Flow Challenges for Buyers and Suppliers
II. The Benefits of Dynamic Discounting
III. Best Practices and Tips to Maximize Discounts Captured
IV. Real World Examples of How to Manage Segmentation Brackets Within Your ERP
V. Solution Demonstration
VI. Questions
Agenda
“Taulia has saved us more money quicker than anticipated.”
- Finance Dept.
2008 2009 2010 2011 2012 201305
101520253035404550
Taulia Deployed in 2011
$46M
$31.4M
$10M$5.8M$3.9M
$120M in Discounts
$43M
UtilityLarge U.S. Utility Adds Dynamic Discounting in 2011, And Early Payment Discounts Skyrocket!
UtilityIn addition, as eInvoices Increase, Payment Error Rate Decreases,
Clerical FTE’s Decrease and Productivity Increases
2002 2005 2008 2011 20120
100,000
200,000
300,000
400,000
95K178K
226K
312K371K
eInvoices
2002 2005 2008 2011 20130.0000%0.0020%0.0040%0.0060%0.0080%0.0100%0.0120% 0.0120%
0.0050%0.0040%
0.00008%0.00006%
Payment Error Rate
2002 2005 2008 2011 201305
10152025 24
1612
86
Clerical FTE's
2002 2005 2008 2011 20130
500
1000
1500
121206 337
714
1138
Invoices / FTE / day
Live since late 2013 1,500 Suppliers in Scope
[others are independent retailers that aren’t
applicable]
1,235 Suppliers Invited and 532
Suppliers Enrolled
43% enrollment rates within weeks (without policy)
.
Captured $250,000 Discounts Captured
in 3 months
[80% Canadian, 20% U.S.]
Trending towards $110,000 per month
Telecomm
Leading Telecomm saw immediate ROI
Telecomm
Three Month Engagement Snapshot
9/10/1
3
9/14/1
3
9/18/1
3
9/22/1
3
9/26/1
3
9/30/1
3
10/4/1
3
10/8/1
3
10/12/1
3
10/16/1
3
10/20/1
3
10/24/1
3
10/28/1
3
11/1/1
3
11/5/1
3
11/9/1
3
11/13/1
3
11/17/1
3
11/21/1
3
11/25/1
3
11/29/1
3
12/3/1
3
12/7/1
3
12/11/1
3
12/15/1
3
12/19/1
3
12/23/1
3
12/27/1
3
12/31/1
3
1/4/1
4
1/8/1
40
500
1000
1500
2000
2500
3000
Vendors InvitedVendors EnrolledInvoices Submitted
87% of I N V I T E D S U P P L I E R Senrolled
WITHIN 6 MONTHS
90% of enrolled
suppliers actively use the portal
Live in late October 2011Internal personnel eager to
adopt the new system
BottlerEnrollment and Engagement Prove Program
Success
I. Current State of the Invoicing & Payables Process
II. Moving from Traditional Invoicing to Full Electronic Invoicing
III. Getting Suppliers On Board: 5 Supplier Value Propositions
IV. Supplier Discounts & Turning Issue Into Opportunity
V. Real World Success Stories
VI. Demonstration
VII. Questions
Agenda
Questions?
Get in touch with us!
Markus Ament
Chief Product Officer, Taulia
Office: 415-376-8280 x83
E-mail: [email protected]
Twitter: @maex242