Introduction to Purchase to Pay Software 11/29/2012 1.

Introduction to Purchase to Pay Software

11/29/2012

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Experience

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Why Purchase to Pay Automation?

• Helps organizations gain control over their purchasing and accounts payable functions. The impact is:

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Problem

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Paper-based Purchasing & Invoice processing rob CFO’s of the clear visibility and control needed to manage cash and reduce indirect spending.

Source: Purchase Insight and Forrester

Sourcing and buying differences• Sourcing – Funneling

demand to fewer suppliers at better price – Analyze spend– Manage demand– Sourcing strategy– Supplier Discovery– RFX process ( RFP, RFQ,

RFI, Reverse Auction)– Contract– Manage Contract

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• Buying – administrating the purchase of needed goods & services– Identify need– Requisition– Route Approval– Create PO– Shipping – Receiving– Payment

Managed vs Unmanaged Spend

• Unmanaged• Goods and services are

purchased in an ad hoc fashion. Clear visibility into total spending by types of goods and services are lost due to inconsistent invoice coding practices across profit centers, detailed expenditure information is trapped on paper invoices, expense reports and credit card statements.

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• Managed• Goods and services

have been through a sourcing process and preferred suppliers are contracted to deliver at advantageous prices and terms.

Definition of a P2P system

• A single software platform capable of managing PO, Non PO, and T&E spending. – Broad and flexible – scaleable. – Modular in design - start small and grow– Single database of all spending details for

easier analysis.

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Requisitions

• Punch out – High volume, low price items from technologically sophisticated supplier

• Catalog – Higher volume categories; where supplier can provide you with spreadsheet

• Free form – unusual purchases where the supplier may be unknown

• Requisitioner should code requisition to profit center

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Setting up Catalogs

• Unique to each company• Want to start earmarking spending into

sourceable categories• Look at 20 % of suppliers that represent

80% of spending• Use them to create 5-7 broad categories of

spending• Break the larger spend categories into

subcomponents overtime

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Common Spend Categories

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Administrative Expenses – 5-7% savingsOffice suppliesOffice EquipmentFurniturePostageShipping / Small package deliveryTemporary Services

Facilities – 7-9% savingsHVAC ServicesElevator ServicesPlumbingMaintenance SuppliesCleaning/ Janitorial ServicesSecurity Services

Finance and HR – 6-8% savingsPayroll processingEquipment leasesMerchant accountsBenefitsProperty Casualty InsuranceOutsourced Collections

Sales and Marketing – 18-20% savingsPromotional ItemsPrinting Market ResearchCreative Services

Information Technology & Telecommunications – 9-11% savingsSoftwareHardwareVoice & data networksCell PhonesLocal and Long Distance phone lines

Capital Expenditures & maintenance - 6-8% savingsNew constructionEquipmentArchitectural or Engineering ServicesUp fits and improvementsMRO supplies

Direct materials – driven by industry - 5-7% savingsChemicalsElectronic componentsMetalsPlastics

Approval Routing

• Financial & Hierarchical• Special commodities• Ad Hoc• Budget visibility• Smart phone – mobile approvals• Line item• Full audit trail

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Buying

• Support centralized or decentralized purchasing

• Consolidate requisitions to single PO• Po with multiple ship to addresses• Easy 3 bids and a buy functionality for the

“free form” buying

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Receiving

• One of the most difficult parts of the P2P process

• Need to make it easy• Simple entry of the packing slip info into

browser• Support 2 step receiving - quantity &

quality

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PO Payment

• Automated 3 way match• Discrepancy identification

– Financial– Quantity

• Discrepancy management workflow depending on type of discrepancy

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Non PO Payment

• Input invoice info from outsourced service, KFI, EDI, portal or network

• Accurate account coding • Should code invoice to commodity

categories that are consistent with catalog – help identify number of suppliers per commodity category

• Speedy approvals via mobile• Identify suppliers with contracts and sample

non-po invoices to ensure pricing compliance

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Travel & Expense

• Goal is efficiency & demand management• Lessen the time it takes to complete an expense

report• Speed the approval time• Use the system to educate users on company

travel & entertainment policies• Capture savings opportunities on hotel, flights &

car rentals• Big savings come from identifying unusual

spending habits, educating & avoiding in the future

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Visibility & Reports

• Gain increased accuracy into accruals because system replaces paper shuffling– Analyze by user– By supplier– By commodity – By cost center

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Verian Value Proposition

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See - Save- Manage

Confidential

Our Solution Footprint

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Verian PlatformWorkflow, Business Rules and

Policy Enforcement

Verian Suite

Help Organizations gain visibility & control over their entire spend including PO, Non PO, Employee Expense Reimbursement, Asset and Inventory Tracking & Maintenance in single database for consolidated analysis.

Confidential

Step 1 - See

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Purchasing Strategy

Invoice Processing Strategy

Step 2- Manage

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Step 3 - Save

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Spend Under Management

Spend Under Control

Confidential

ROI

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3 Years After Implementing Verian100 Buying Categories Managed - $110M in Spend in PM

• Better visibility into what was purchased from whom• basic contracting process in place• Change in behavior to question process and look for product substitutions.

•Result in Purchasing• Faster approvals and focus on using less expensive substitutions (i.e. switching from color

forms to b/w)• Better transaction data allowed them to generate 10% savings/year on $110 million in PO

based spend. Plan to address $220 million in non-PO spend next year•Accounts Payable

• Because of PO process catching $1M in invoicing errors per year. Catching $120k/yr in late fees

• Scrutinizing expense reports allowed them to reduce expenses by $1.8M/over 5 years

Regional Financial Institution

Calculating ROI Initial Year 1 Year 2 Year 3 Total

Benefits

1. Purchasing Savings (Price) 120,000 5,000,000

7,000,000 12,120,000

2.Purchasing Savings (Avoid) -

300,000

600,000 900,000

3. Purchasing Savings (Compliance) 750,000

900,000 1,650,000

4.Vendor Discounts 120,000

120,000

120,000 360,000

5. Efficiency Savings

6. Total Benefits 240,000 6,170,000

8,620,000 15,030,000

Costs

7. Implementation 400,000 400,000

8. Subscription fees 360,000

360,000

360,000 1,080,000

9.Total Costs 1,480,000

Total benefit (6) less Total Costs (9) (400,000)

(120,000) 5,810,000

8,260,000 13,550,000

Project IRR 325%

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ROI

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After Implementing Verian

Med Supplies + D/M/V + Office Supplies (Annualized)

Current Provider + Office Supply VendorCurrent Expense = $3,253,149Rebid Current = $3,028,833 Savings = $224,316 (6.9%)

GPO + Office Supply Vendor Current Expense = $3,253,149First Alternative = $2,672,626Savings = $580,523 (17.8%)

Competitive GPO + Office Supply Vendor Current Expense = $3,253,149Second Alternative = $2,592,241Savings = $660,908 (20.3%)

Large Medical Practice

Calculating ROI

Initial Year 1 Year 2 Year 3 Total

Benefits

1. Purchasing Savings (Price) 60,000 180,000 320,000 560,000

2.Purchasing Savings (Avoid) - - 3. Purchasing Savings (Compliance) - 4.Vendor Discounts - 5. Efficiency Savings

6. Total Benefits 60,000 180,000 320,000 560,000

Costs

7. Implementation 12,000 12,000 8. Subscription fees 24,000 24,000 24,000 72,000 9.Total Costs 84,000

Total benefit (6) less Total Costs (9) (12,000) 36,000 156,000 296,000 476,000 Project IRR 491%

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Additional Resources

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Verian blog (verian.com/blog)•Useful articles and commentary on ways to increase efficiency using automated purchasing and invoice processing systemsInstitute for Supply Management – ISM (ism.ws)•An association that exists to educate, develop, and advance the purchasing and supply management professionBuyers Meeting Point blog (buyersmeetingpoint.com/blogs)•A helpful online knowledge and professional development resource for supply management and procurement professionalsInstitute of Finance Management – IOFM (iofm.com)•Valuable tools, best practices, benchmarks, research and resources that will improve your accounts payable processThe Accounts Payable Network – TAPN (theaccountspayablenetwork.com)•A comprehensive knowledge base for executives and managers who oversee accounts payable

Questions

• [email protected]

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