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

e-mail: bram.kuijper@basware.com

Web: http://www.basware.com

Thank you for your attention!!!