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ITFMA ConferenceProcure-to-Pay Best PracticesIntegrating P2PBest Practices withTechnologyChris Evanoff: Principal, Soltec, Inc.Transforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.1

Presentation Outline Introduction and Background Procure-to-Pay Cycle Adopting Best Practice Strategies for AP Transactions Purchasing and Receiving Best Practices for AP AP Technology Enablers Questions & AnswersTransforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.2

Procure-to-Pay Best PracticesIntroduction andBackgroundTransforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.3

Soltec Inc. Consulting iceandSolutions Solutions Transforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.4

Soltec’s Best Practices ntCustomerRelationManagementSupply ManagementFinance, Accounting, Treasury Evaluated Receipts Settlement Procurement Card Financial Closing Shared Services Travel & Expense Reporting Inter/Intra-Company SettlementManufacturing Production Demand Replenishment Material Requirements Planning Material Receiving and Movement Indirect Materials Rationalization Warehouse Management Supplier Quality Process Defective & Damaged MaterialProcess Development and ImprovementTransforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.5

What are P2P Best Practices?A series of policies, procedures and processes thateliminate waste and optimize operating efficiencies inthe P2P cycle in order to pay suppliers accurately andon timeDISCIPLINERESULTSWORK ENVIRONMENTCUSTOMER FOCUSRISK TAKINGQUALITYP2P BP Supports Company ValuesTransforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.6

Procure-to-Pay Best PracticesProcure-to-PayCycleTransforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.7

Traditional P2P CycleGoods and Packing SlipSUPPLIERShippingOrderCustomerServiceAdvice eceiptInvoice aPaymentCUSTOMERPurchasingPricePurchase Order /NegotiatedPricesTransformingCompaniesThrough Best Practice Education and Implementation 2010 Soltec, Inc.8

P2P Best Practice cing DataDelayedInaccurateOrderVendor tShippingDiscrepanciesInvoice EntryReceiptOpen ReceiversErrorsDiscrepanciesTransforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.9

Procurement CostsProcurement SpendsSpends MoreMore ofof thethe RevenueRevenue DollarDollar ThanThan AnyAnyProcurementOther AreaAreaOtherTransforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.10

Procurement CostsProcurement ExertsExerts FarFar GreaterGreater LeverageLeverage onon EarningsEarningsProcurementThan AnyAny OtherOther AreaAreaThan3%5%Reductionin ProcurementAdds toNet ProfitsTransforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.11

Procurement CostsAverage CostCost ofof ProcurementProcurement fromfrom AcquisitionAcquisition throughthroughAveragePaymentPaymentHigh 300Other20%Systems22%Labor58%Low 25PurchasingReceivingAccountingTransforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.12

Labor Cost Per InvoicePaperInvoicesTransforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.13

Invoice Productivity Level perFTETransforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.14

Procure-to-Pay Best PracticesAdopting BestPractice Strategiesfor APTransactionsTransforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.15

Transaction TypesCheck Requests,Non-PO Invoices,5%10%PayrollDeductions, 2%Non-Inventory(POs), 20%Utilities, 3%Inventory, 50% Production, DirectMaterials, SKUs MRO MaterialsService Rentals,5%T&E, 5%Transforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.16

Procure-to-Pay AlternativesPurchasingCardERSNon-Inventory 5-10%25-30%10-20%Non-Inventory Misc Expense Materials Construction & Capital Rentals & Leases ServicesERSInventory Production, DirectMaterials, SKUs MRO MaterialsApply BestPractices50-60%Other Travel ExpenseReports Payroll Deductions Check Requests UtilitiesTransforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.17

Processing Options for PO-BasedTransactions Manual Three-Way Match Imaging and Workflow Optical Character Recognition (OCR) Electronic Invoice Presentation and Payment Electronic Data Interchange (EDI)Non-Inventory(POs), 20% Evaluated Receipt Settlement (ERS)Inventory, 50%Transforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.18

What is ERS? ERS is NOT About: Software Imaging and Workflow Electronic Data Interchange (EDI) Electronic Invoice Presentation and Payment (EIPP) ERS IS About: Elimination of the Invoice from the Procurement and Disbursement Processis a processthat allowsa customermake ERSTransformingAP From TransactionalProcessingto Analysis, toControlAndReportingsupplier payments based on its records and not by Establishing a High Performing Partnership between Purchasing, Receiving, APand Suppliersrelying on supplier invoices (paper or EDI)Transforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.19

Traditional Disbursement ProcessGoods and Packing SlipSUPPLIERShippingOrderCustomerServiceAdvice lePriceReceivingInvoice ePurchase Order /TransformingNegotiatedCompanies PricesThrough Best Practice Education and Implementation 2010 Soltec, Inc.20

ERS ProcessGoods and Packing dvice ofShipmentAccountsReceivablePaymentPriceReceipt QtyCUSAPReceiptTEvaluationOMERPurchasingPrice / TermPurchase Order /TransformingNegotiatedCompanies PricesThrough Best Practice Education and Implementation 2010 Soltec, Inc.21

ERS Process Evaluate Receipt atPO Unit PriceGoods and Packing SlipSUPPLIERReceiving Use Packing SlipNo. as Invoice No.AdviceofShipping UseReceiptShipmentDate asInvoice DateOrderAccounts EstablishPaymentDueReceivableDate based onCustomer PO TermServicePaymentPriceReceipt QtyCUSAPReceiptTEvaluationOMERPurchasingPrice / TermPurchase Order /TransformingNegotiatedCompanies PricesThrough Best Practice Education and Implementation 2010 Soltec, Inc.22

Present Disbursement ProcessPURCHASE ORDERCurrencyPayment TermsSupplier CodePart NumberPurchase Order No.Unit of MeasureQuantityPricePACKING SLIPSupplier CodePart NumberPurchase Order No.Unit of MeasureQuantityShipment ID No.Ship/Received DateINVOICECurrencyPayment TermsSupplier CodePart NumberPurchase Order No.Unit of MeasureQuantityPriceInvoice No.Invoice DateWhen All Match Generate PaymentTransforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.23

ERS ProcessPURCHASE ORDERPACKING SLIPCurrencyPayment TermsSupplier CodePart NumberPurchase Order No.Unit of MeasureQuantityPriceSupplier CodePart NumberPurchase Order No.Unit of MeasureQuantityPackingPacking SlipSlip No.No.BillBill ofof LadingLading No.No.CustomerCustomer OrderOrder No.NoShipment ID No.Ship/Received DatePRICEXQUANTITY PAYMENT TOSUPPLIERTransforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.24

ERS Functional eceiptReceiptVerificationVerificationAccounts sTransforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.25

ERS BenefitsImproved:Reduced:Elimination of: Working Capital Receipt DiscrepancyProcess Defective Material andReturns Process BOM Prices andQuantitative Records Mailing and / or DataTransmission Costs Data Entry, Imaging andClerical Costs Reconciliation of Priceand Quantity Records Forms and StationeryCosts Freight Costs Lost and DuplicateInvoices Lost Discounts Miscellaneous Charges Prepaid and Add FreightTerms Monthly LiabilityAccrualsTransforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.26

Processing Options for Non-Inventory(POs)Transactions Manual Three-Way Match Imaging and Workflow Optical Character Recognition (OCR) Electronic Invoice Presentation and PaymentCheck Requests, 5% Electronic Data Interchange (EDI) Purchasing CardNon-Inventory(POs), 20%Non-PO Invoices, 10%Utilities, 3%Service Rentals, 5%Transforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.27

What is the Purchasing Card?A processprocess thatthat allowsallows aa companycompany toto utilizeutilize RetailRetailAElectronic PaymentPayment NetworksNetworks toto paypay supplierssuppliers forforElectronicgoods andand servicesservices orderedordered withoutwithout thethe issuanceissuance ofofgoodsPurchase Orders,Orders, InvoicesInvoices andand Checks.Checks. AuthorizedAuthorizedPurchaseend-users orderorder directlydirectly fromfrom thethe supplier.supplier.end-usersTransforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.28

Purchasing Card Detail ProcessShip ShippingShippingAdvice solutionDept.End-UserPaymentAPAPCUSTOMERPlace OrderTransforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.29

Purchasing Card BenefitsCustomer:End Users:Suppliers: Reduces Process andTransaction Costs inPurchasing, Receivingand AP Reduces CheckProcessing Costs Bank Rebates forPurchases Reduces ExpenditureCosts Accurately States MonthEnd Expenses Improves Cash Flow byProviding Faster andMore PredictablePayment Eliminates Billing and allAssociated CostsUser EmpowermentReduced WorkloadFaster DeliveryAssured DeliveryTransforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.30

Options for Non-PO Transactions Purchasing CardCheck Requests, 5% Online Check Requests Repetitive Payment ProcessNon-PO Invoices,10% Imaging and WorkflowPayrollDeductions, 2%Utilities, 3% Monthly Drafts for UtilitiesService Rentals, 5% Automatic Feed from Payroll SystemT&E, 5%Transforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.31

Procure-to-Pay Best PracticesP2P TechnologyEnablersTransforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.32

P2P Cycle Technology EnablersDiscrepanciesShipment gAdvice ofShipmentInvoiceOrderCustomerService nt/RemittancePriceOrder ConfirmationUser ersTransforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.33

Supplier Portal Role in P2PSUPPLIERShippingPurchase OrderReceiving DiscrepanciesRemittance AdviceShipping StatusAccountsReceivableCustomerService /SalesPaymentDiscrepanciesOrder ConfirmationSupplier iving gAccountsPayablePurchase Order/RevisionsShipping StatusOrder ConfirmationPayment DiscrepanciesUser /PurchasingCUSTOMERReportingTransforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.34

P2P Automation PrinciplesCAPTUREMANAGEACCESSTransforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.35

Ideal SystemSupplier SystemDocumentElectronic DocumentsIndexesIndexes FullFullTextText FieldsFieldsWorkflowArchiveDataEntry2 WayMatch3 WayMatchApprover1,2, Internal financial reportsApprover1,2, Vendor invoicesData toERP Web based formsData fromERP PDF, Text, XML, EDI, Email,Word, Excel, PayInvoice100% accurateNo human interventionPrinting and distribution cost savingsWorkflow automation & Archive benefitsERPTransforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.36

Paper HandlingSupplier SystemDocumentIndexesIndexes FullFullTextText FieldsFieldsPaper documents scanned internallyIndex documents Barcode automation Data population downloaded from ERPsystem OCR Manual entryWorkflowArchiveDataEntry2 WayMatch3 WayMatchApprover1,2, Approver1,2, Data toERPData fromERPPayInvoiceHuman intervention for scanning and indexingSome time to processWorkflow automation & Archive benefitsERPTransforming Companies Through Best Practice Education and Implementation 2010 Soltec, Inc.37