1. NASACT Annual Conference Accounts Payable Transformation Bill Kilmartin, Accenture
August 2006

2. Agenda Overview of Electronic Invoicing & Settlements Domain
EIPP Strategy and Approach
Example of EIPP Applied to a State
What does an EIPP Solution Look Like
Copyright © 2006 Accenture All Rights Reserved.

3. Process automation and elimination of paper
EIS focuses on automating key transactional elements of both AP and AR, including the assembly, creation, transmission and receipt of invoices electronically.
EIS has a compelling value proposition to clients in three key areas:
Process automation and elimination of paper
Labor savings
Cashflow Optimization
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4. EIS addresses key pain points within the financial value chain for both Buyers and Sellers
Recon & Analysis
Collection
Invoice
Account Mgmt
Offer & Contract
Sales & Marketing
Fulfil Order
Manage Order
Receive Order
Strategic Sourcing
Accounts Payable
Order Management
Strategy Develop’t
Contract
Supplier Mgmt
Invoice Processing
Approval & Query Mgmt
Payment & Analysis
Order Origination
Order Placement
Receive
Accounts Receivable
Customer Acquisition
Order Fulfilment
Maximize Visibility and Compliance
1-2% Savings
Operational Efficiency Improved by 70%
Optimize Early Payment Discounts
Capture 2% discounts
The Procurement to Payment Opportunity
Optimize Collections (Reduce DSO)
Reduce DSO by 2-10 days
Operational Efficiency
Reduce costs by 50%
Maximize Visibility and Buyer Compliance
10% Revenue Growth
The Order to Cash Opportunity
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5. The Electronic Invoicing and Settlement Landscape
B2B: Electronic Bill Presentment and Payment (EBPP)
B2B: Electronic Invoice Presentment and Payment (EIPP)
Addresses high volume, and/or high complexity bills
Disputes managed on a by line item exception basis rather than a by invoice basis
Generally only touches outbound invoices, but can integrate Proof of delivery documentation as well
Focuses on supply chain interactions between businesses trading partners
Generally involves multiple documents: mainly invoices, but could also include PO’s, Change/Acknowledge Orders, Remittance Advice, etc.
Payment typically requires:
1) matching (to PO, Invoice)
2) reconciliation / adjudication
3) approval and authorization
Key industries: Manufacturing, Wholesale, Retail, Government
Key industries: Utilities, Telecommunications, Insurance and Financing (credit cards and leasing) and Distribution, Health care, Government
Recurring Bills
(Simple)
Invoices
(Complex)
EBPP
EIPP
Pay
Anyone
B2C EBPP
Pay Anyone
Business-to-Consumer electronic bill presentment and payment
Transactions tend to be recurring (credit card statements, utility bills, etc.) but could involve a one-time-only transaction
Key industries: Utilities, Telecommunications (wireline, wireless) Insurance and Financing (credit cards), Government
Consumer transactions supporting one-time payments
Payment methods vary and include check, money wire, etc.
Examples include PayPal, C2It and Valid
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6. The Electronic Invoicing and Settlement Landscape
AR Automation
“EBPP”
AP Automation “EIPP”
EIPP solutions are oriented toward either buyers or sellers. Solutions designed for sellers aim to present all invoices electronically (EBPP), whereas solutions intended for buyers are geared toward receiving all invoices electronically (EIPP).
Copyright © 2006 Accenture All Rights Reserved.

7. Agenda Overview of Electronic Invoicing & Settlements Service Domain
EIPP Strategy and Approach
Example of EIPP Applied to a State
What Does an EIPP Solution Look LIke
Copyright © 2006 Accenture All Rights Reserved.

8. What is the Prompt Pay Discount Opportunity?
Major Payee Groups
Vendor Trade Payables
Employees
Other Governments (grants etc)
Recipients (such as Welfare, Unemployment, etc)
Beneficiaries (such as Pension, Worker Compensation)
Health and human service providers (such as Medicaid and social service provider organizations)
Bond holders
Customers receiving revenue refunds
Vendor Trade Payables
Suppliers already agree to contractual terms and already accomplish prompt pay discount
Suppliers already agree to contractual terms but not accomplishing prompt pay discount
Suppliers do not yet agree to contractual terms, but probably would if requested
In the past, considerable emphasis has been placed on ERP implementations to deliver business benefits for the larger organization, focusing on total cost of ownership reduction, integrated data model and end to end process integration. This has resulted in sub-optimal operations for specific functions.
The Accounts Payable function is often targeted as an area for cost reduction ; but is equally challenged to continually deliver process efficiencies.
Many accounts payable functions adopt discrete initiatives to address the symptoms of associated with an inefficient invoice to payment process (e.g. managing exceptions , avoiding late payment penalties) rather than holistic initiatives which target the cause inefficiencies.
Accounts Payable functions are seeking to add value back to the organization through improving the management of the invoice to payment cycle and delivering real value business value (e.g. business intelligence in payables, participation in supplier negotiations, realizing early payment discounts).
Considerable emphasis now exist in the market place for complimentary solutions which help an organization to improve the efficiency and effectiveness of managing payables.
Internal Pressures
Continued Cost Reduction: Drive to improve process efficiencies in invoice to payment process.
Compliance & Control: Renewed interest and rigor around process controls. In ability to process efficiently is viewed as a lack of internal controls.
Recognition that cost containment is insufficient : Must be seen to add value: Internal functions must offer compelling propositions to demonstrate its value to the organization.
Pressures to adopt other business models: Other organizations are demonstrating value and improved service delivery from shared services and business process outsourcing. To be competitive, AP functions must find new ways to demonstrate cost containment and value delivery.
External
Market – ERP & Niche Vendors : Renewed interest in Electronic Invoicing ; ERP vendors seeking new ways to add value to its client base through new electronic enablement solutions, challenged by niche players who are building credibility and critical mass in the market place (Xign, BottomLine Technologies, CheckFree).
Evolution of Credit & Collections Solutions: Debtors management capabilities have advanced significantly in recent times to allow sellers to manage its debt collection more effectively. In doing so, they are able to dynamically apply terms to seek early payment
Finance Supply Chain Integration: Financial institutions have traditionally had offering it invoice discounting but are increasing new solutions and partners to offer more comprehensive solutions.
Business Process Outsourcing: Organizations which support multi-client accounts payable operations are seeking new and innovative ways to reduce cost and add value to its client base. With the critical mass required to effect change,
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9. Reduce Accounts Payable Operating Costs Create value through discounts
Value Proposition of EIPP: Opportunity to Reduce Cost and Generate Hard Dollar Savings
As-Is
To-Be
Use of electronic
invoices
Supplier
queries
Receive
Post
Invoice
Approve
Idle
Time
Pay %
Discounts Opportunity 2
Days
Net terms – payment on time
No discount opportunity
2% saving on invoice if paid early
Day 10
Day 30
Incremental Savings Opportunity
Opportunity
Reduce Accounts Payable Operating Costs
40-60%
There are two aspects to creating value for our clients.
Firstly, there's the efficiency play, which is reducing the accounts payable operating cost. Typically, within accounts payable, one-third of the cost of the people within accounts payable resides within data processing. This includes receiving the mail, opening the mail, scanning it and keying the data into the ERP system. Query Resolution takes another third of the typical accounts payable cost. Query resolution is the process by which mismatches between the purchase order, goods receipts and invoices are resolved with the associated parties and with the ERP system. The final third will be the peripheral functions that surround accounts payable – including the management of the accounts payable function, supervision costs, performing payment runs, maintaining vendor data, maintaining bank data, et cetera.
The second stream of value is about the discount management and enhancing a client's ability to obtain discounts and then executing on those discounts. We use a rule of thumb, in terms of determining the target value, of .3% of the accounts payable spend. So for a buying organization that processes through accounts payable $1 billion, the value for that buying organization would be $3 million per annum, as a typical rule of thumb.
By comparing those two efficiencies, typically what you'd find is that the implementation of a technology to deliver electronic invoicing would typically pay for itself within a kind of 12- to 18-month timescale, based on the efficiency reduction that's achieved. And then anything that's created through discounts is icing on the cake. To give you an idea of the relative value of these two elements, you'd expect the discount capture to be worth two to five times the amount of the efficiency, in terms of dollar value. It's very significant.
Create value through discounts
1.3%-2% of Spend
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10. Value Proposition of EIPP: Typical Process Challenges
Over 50% of invoices arrive at the Accounts Payable for approval after 1 Week.
Over 50% of invoices require 1+ weeks for approval.
65% of invoices are entered in the Payables within 1 week of arrival at the Accounts Payable.
Over 25% of invoices are paid after the due date.
Minimal use of suppliers with early payment discount terms.
Significant invoices paid early in advance of due date.
Our Electronic Invoicing offering not only drives efficiency in AP, but also deals with the optimization of cash within the accounts payable cycle. And this is really done through maximizing our client's ability to take advantage of early payment discounts.
Fundamental to being able to achieve this is having control over the accounts payable process. This slide demonstrates how out of control the payment part of the accounts payable process can be, for one of our pipeline clients. This illustrates the spread of when payments have been made against specific invoices. So we can see a bell curve here. And the high point of the bell curve is, as you'd expect, around day zero, day zero representing when the payment should be made for an actual invoice according to the payment terms agreed with that supplier and embodied within the invoice itself. However, you can see that probably 80% to 90% of the payments that have been made have either been made later than 20 days after the due date or earlier than 20 days before the due date. There are two specific problems associated with this.
Firstly, if payments are being made early, then your buying organization, or the paying organization, is not taking advantage of their cash position and optimizing their working capital. Equally well, if they're paying late they might well not be taking advantage of early payment discounts, and they might be causing their suppliers problems and creating an environment that's detrimental to the relationship between the two partners. So this is a great example of just how bad payment processes can become.
There are numerous pain-points within the financial value chain ... A holistic financial value chain solution has opportunity to drive benefits for buyers and suppliers.
Copyright © 2006 Accenture All Rights Reserved.

11. Value Proposition of EIPP: Discount Management Strategy
1. Persuade & enable more suppliers to offer discounts
2. Equip the buyer with the ability to execute on and to control discounts
Suppliers
With Negotiated Discount Terms
Prompt Pay Discounts already Realized
Opportunity to negotiate more favorable & flexible discount terms
20%
Terms Adopted But Not Realized
Improve process & realize terms
Discounts not actively taken
Payment outside discount threshold due to inefficient internal process
Suppliers
Currently
Without Discount Terms 1
Currently
Without Discount Terms and Paid early 2
‘Low hanging fruit’
Modify contracts and/or enable suppliers to take advantage of more flexible discount possibilities
80%
Earlier we talked about the drop-off that occurs in “typical” invoice payment terms – for example, after the 2%/ten days parameter lapses. The concept of smoothing out that curve and extending the DPO is know as confirming, dynamic payables discounting or dynamic discounting.
There are a two different flavors of dynamic discounting a supplier can offer; ‘regular’ dynamic terms – which we’ve described as the sliding scale in the “triangle versus rectangle” slide, and “Pay me Now” terms. In a typical engagement we’d target a buying organization’s suppliers that are already offering discounts, and sign them up for new (generally more aggressive) terms. The more leverage a buying organization has over its suppliers, the easier this job becomes. The second target are suppliers not currently offering terms. And finally, all suppliers are able to take “Pay me Now” terms at any time. As the name describes, these terms are quite steep (5% +) in exchange for payment as quick as the approval process will allow. A surprising number of suppliers are delighted to be able to speed up invoice payments to round out their month, quarter or fiscal year
Currently
Without Discount Terms and paid in 30 days
Could these transactions be paid early to earn discounts?
Currently
Without Discount Terms and paid late
Assess rationale for late payment
Supplier
Base
Invoice Transaction
Base
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12. Value Proposition of EIPP: Strategic Discount Capture
Enforce discount
terms
Through EIPP
Individually negotiate discounts
Enforce through EIPP
Supplier A B C D H
Enforce discount terms
through EIPP
Group A
Group B
Group C
Spend
Size M
Corporate
P Card
Let's talk about the supplier segmentation strategies. A client will not, realistically, be able to go to their supply base and negotiate discount terms with every supplier. We need to use very different approaches to enabling suppliers, which depend on the leverage and the size of the buyer and the supplier.
Let’s look at these four bubbles. In the upper left quadrant, where our client – the buying organization – has little leverage over a category of suppliers, yet the dollar amounts are high, we need to track spending and ensure payments are to terms, but there’s not much room to win incremental discounts. Rent, Utilities, taxes all fall under this category of non-discountable spend.
The lower left quadrant represents low spend and corresponding low leverage; a perfect scenario for a corporate purchasing card (or “PCard”). By implementing or expanding a corporate PCard program, Accenture helps our clients capture what amounts to a discount in the form of the rebates on purchases. In recent years, PCard programs have begun encroaching up on the traditionally non-discountable spend categories such as utilities, whereby in the past such payments have been precluded by service or transaction fees.
Looking at the right-hand side, there’s a lot more buyer leverage -- the sweet spot in terms of the ability to capture discounts. This is precisely the area where we focus in terms of the discount optimization strategy. In the lower right quadrant, we create a program for the vendors where we discuss the opportunity with them, we extend DPO, and at the same time, we offer new payment terms that are dynamic versus static. For the larger suppliers found in the upper right quadrant, with whom a buying organization will typically have a more strategic relationship, we will leverage a more tailored approach to rolling out dynamic discounting – or even have our client’s procurement organizations handle negotiations. L L L M M H H
Buyer Leverage
Manage and monetize discounts across addressable spend
Copyright © 2006 Accenture All Rights Reserved.

13. Agenda Overview of Electronic Invoicing & Settlements Domain
EIPP Strategy and Approach
Example of EIPP Applied to a State
What Does an EIPP Solution Look Like
Copyright © 2006 Accenture All Rights Reserved.

14. For the 9 month period of analysis
Example Executive Summary (Based on analyzed data set – 9 Month Period)
For the 9 month period of analysis
Conclusion 1: The State realized 1.38% of discounts on a spend value of $47.3M resulting in savings of $651K ($868 annualized)
Conclusion 2: Enforcement of existing terms with current vendors could realize an additional $3.7M in savings.($4.3M annualized)
Conclusion 3: Changes in procurement policy and targeting of additional vendors and spend categories could realize $21.7M ($28.2M annualized)
Annualized Opportunity*
$28.2M
Extending terms and improvement in efficiencies
Enforcement
of existing
Terms and improvement in efficiencies
$4.3M
As-Is
$868K
Copyright © 2006 Accenture All Rights Reserved.
* 9 Month Analysis ; X 1.33 to annualise , assuming pro-rated spend

15. Example Executive Summary Graphical Summary of Analyzed Data
Vendors
Transactions
Spend
Discount
348K
$21.7M
$1,585M
14,120
20% of transactions account for 73% of spend
80% of transactions from 8.7% of suppliers
818
12K
$47M
$868K
490
Vendors with Discounts Captured
Vendors with Discount Terms
Total
Vendor
Data set
Transactions receiving discounts
Total Transactions data set
Spend
subject to discounts
Total spend in data set
Discounts
received
Discounts
opportunity
Copyright © 2006 Accenture All Rights Reserved.
As-Is
Data set
Opportunity

16. Agenda Overview of Electronic Invoicing & Settlements Domain
EIPP Strategy and Approach
Example of EIPP Applied to a State
What Does an EIPP Solution Look Like
Copyright © 2006 Accenture All Rights Reserved.

17. What a Typical EIPP Software Suite Does
Supplier
Management
Order
Management
Invoice
Management
Payment
Management
Discount
Management
Supplier Portal
Supplier Enrollment
Master Vendor Network
Supplier Matching & Activation
Private Supplier Entry
PO Delivery
PO Acknowledge
Advance Ship Notice
Supplier Order Mgt
Order Mgt Reports
Contract PO Mgt
E-Invoice Capture
Invoice Validation
Routing & Approval
Dispute Mgt
2/3-way match
Attachments
Supplier Invoice Mgt
Approval Status
Invoice Reports
Paper Invoice Entry
Imaging Integration
EDI VAN Invoices
Goods Receipt
Contract Enforcement
Payment Approval
Remittance Processing
Payment Status
Funds Movement
Payment Audit
Supplier Payment Mgt
Payment Reports
ACH, P-Card , RPPS
P-Card Payables Acct
CTX Remittance
Garnishment Payments
Employee Expense Payments
Discount Program Mgt
Dynamic Discounting
(Pay Me Now)
Prorated Terms
Terms Capture
ERP Reconciliation
DPO Mgt Reports
Xign terms its collective Product Suite the “Xign Payment Services Network” or XPSN. All the modules are distinct, but work together in a complementary way to enable the discount strategy we've been referring to. Intuitively, the Invoice Management module is typically the foundation upon which is layered on the Discount Management module, Order Management, and so forth.
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18. How An EIPP Solution Works
Buyer
Supplier
Treasury
Advanced Discount Management
Program Management
Supplier groups
Program definition
Dynamic Capture
Execution engine
ERP synchronization
Terms Management
Standard terms
Prorated terms
Pay Me Now™
Order Management
Order Delivery
Delivers Direct, Services, Blanket, and other order types
Acknowledgements and ASN support
Purchasing
Materials
Management
Invoice Management
Approval Routing
based
Auto routing/STP
Dispute management
Real Time Validation
Performed at submission
Business rule driven
Exception management
Invoice Capture
Web template, PO Flip
eFile/EDI
ERP invoice upload
Billing
Key Points
Order Delivery
delivers a variety of order types to the supplier and captures acknowledgements and advance shipping notices (ASN).
Xign does NOT generate the PO, this is done with the purchasing system. We typically extract this info from the ERP system.
Enables PO flip
Invoice Management
Once the supplier receives the order, they process it and send an invoice. This can be done through a variety of means, including web forms, PO flip or eFile/EDI.
Invoices are filtered by business rules for exceptions and then routed for approval
Payment Management
Once invoices are approved, Xign prepares the invoices for payment and the delivery of remittance information back to the supplier.
Discount Capture
With Xign’s discount management capabilities, early payment discounts can be managed and monetized.
Notes
Build slide
Payment Management
Payment Processing
Authentication
Timing control
Remittance Processing
Format mapping
, EDI, FTP, CTX
A/P
A/R
Citibank
JPMorgan
Chase
Wachovia
Wells
Fargo
Northern
Trust
Other
Disbursing Banks
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19. Where are the discounts coming from?
Top Categories*
Industrial Equipment & Supplies
Paper & Packaging
Engineering & Construction
Office Products
Facilities & Maintenance
Services Mix
58% of suppliers
26% of invoices
46% of spend
33% of discounts
Broad Participation
Suppliers large and small
Consider discount leverage
Need to consider discount leverage and supplier’s financial situation
Some well-known office products and paper & packaging organizations very accustomed to offering early pay discounts. Others are smaller organizations that have little access to capital and a real need for cash.
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*Source: Xign network statistics, 2Q05 Discount Manager customers

20. Bill Kilmartin William.Kilmartin@Accenture.com 781-367-9576
Contacts
Bill Kilmartin
Mark Howard
Hopefully we’ve demonstrated that this is an enormous opportunity. It has significant benefits for our clients, and for us. To conclude, we do believe that there is a tremendous opportunity here for EIS within the market space. We believe that we at Accenture are uniquely positioned to go after that. And we want to make sure that we've channeled our energies toward that because it's a very powerful value proposition, and we can help make our clients high-performing businesses by doing this type of work.
Copyright © 2006 Accenture All Rights Reserved.