1. © 2012 Financial Operations Networks LLC Improving Workflow, Streamlining Approvals and P2P Initiatives at the PNC Financial Services Group

2. About Your Presenter Dennis R. Cooper, MBA Vice President, Operations Director, Accounts Payable The PNC Financial Service Group Dennis is responsible for providing management, leadership, strategic direction and tactical oversight for PNC’s Accounts Payable function, reporting to the Supply Chain Management Executive. Additionally, he is tasked with developing and executing best-in-class Procure-to-Pay and Expense Management strategies for the enterprise in partnership with PNC Finance and PNC Supply Chain Management. Dennis’s 25 years’ experience includes positions with Ringling Bros. & Barnum and Bailey Circus as the Director of Financial Shared Services and the CFO for the Magic Johnson Foundation, Inc. He also represented Accounts Payable with implementation of various software systems. (J.D. Edwards, Lawson, Concur T&E, Gauss Imaging/Workflow) He holds a BS in Financial Management from Husson University and an Executive MBA from the University of Hartford.

3. Case Study Background PNC is one of the 5 largest banks in America, where the staff of 50 in the Accounts Payable department handles a monthly volume of more than 60,000 invoices, and 7,500 expense reports at an estimated $3-$6 billion in annual spend. PNC recently purchased National City Bank, so PNC had two businesses using two different workflow environments in PeopleSoft and Ariba. The companies were similar in size, and our processing demands had increased as a result of the acquisition. The Challenge Accounts Payable was tasked with developing a Centralized Invoice Receipt Strategy with the goal to transition PNC from a decentralized to centralized processing model. Accounts Payable had the opportunity to also evaluate our current organizational structure in preparation to successfully support the addition of the new business entity while becoming efficient within our workflow process and streamlining invoice approvals.

4. Integration Milestones Cross trained National City’s Accounts Payable staff on PNC’s new terminology and policies and procedures Trained all National City employees on PeopleSoft’s ERP (Enterprise Resource Planning) and Human Resources systems in addition to Ariba Travel & Expense and Invoice Approval workflow Developed new Accounts Payable organizational structure & defined new leadership roles & responsibilities Defined interim invoice payment processing approach for the Pittsburgh and Cleveland Accounts Payable sites

5. Organizational Structure Model

6. AP Organizational Model Re-designed Structure Milestones Transition from a dual site management structure to a functional entity structure Establish a leadership structure that serves as the direct point of contact for each function Each functional leader will be responsible for managing and directing staff resources at both sites (Cleveland, Pittsburgh) Benefits Positioned Accounts Payable Leadership Team to effectively manage our resources along with implementing Industry Best Practices Better aligned to implement change management and improve overall communication with staff

7. Leadership Structure

8. AP Centralized Receipt Strategy

9. Build Consensus Finance, Accounts Payable, and Supply Chain Management developed an overall strategy that served as the framework to define our respective requirements in support of Accounts Payable Centralized Receipt initiative. Joining efforts with the three groups positioned Accounts Payable to better set the expectations along with the overall benefits.

10. Overall Strategy Strategy Paper invoices are received centrally/e- Invoicing Preferred Invoices are received and are converted to P.O.(2-Way & 3-Way Match)or Non-P.O. Invoices are routed using the normal or the exception workflow process Measures are pursued for the optimal balance of service, control and efficiency Leverage existing operational investments and proven industry providers for success. Benefit Improves visibility to invoice processing Sets up improved efficiency and controls Unified user experience for approvals Improved compliance capability Responsive and adaptable to needs of PNC Rapid adoption and on-going cost efficiency Multi Currency Consolidated comprehensive payment solution Fully Integrated Solution

11. AP Centralized Receipt Strategy P2P e-mail and fax eInvoice or ePO “flip” mail Invoice Conversion Scan using OCR, converted to electronic format, and electronically archived for research and audits Workflow Engine Electronic Approval Invoices are routed for approval electronically based on a defined rule set Payment A payment file is sent for P- Card, Credit Card, ACH, wire transfer or check disbursement and GL is updated Supplier Employee Accounts PayableFully Electronic Invoices Legend Exceptions Only Invoice Receipt Invoices are sent to a centralized location for prepping and sorting Purchase Order P.O. Requisitions are submitted by business group for approval to create a purchase order. Vendor generate invoice and Mail or eInvoice mail -2-Way Match -3-Way Match Paper Invoices

12. Workflow Decision

13. Current Workflow Engines  PNC currently leverages the PeopleSoft and Ariba workflow environments to electronically route and approve vouchers for payment  PeopleSoft ERP (Enterprise Resource Planning) Module is not a fully integrated system. Based on this we leveraged Ariba Buys to process P.O. requisitions and capture approved purchase orders.  In our current decentralized invoice receipt environment, PNC business groups enter purchase order invoices into Ariba and Non- P.O. invoice transactions are entered into PeopleSoft.  The “hybrid” NCC processing model would require the business group to provide the accounting code and the AP staff would enter the invoice into PeopleSoft.

14. Recommended Workflow Approach Process P.O. (Purchase Order) and Non-PO invoice transactions in one workflow environment. Continue to leverage PeopleSoft AP as the standard, centralized Accounts Payable system.

15. Workflow Timeline RFP to PeopleSoft and Ariba Clarify requirements and expectations Conduct Ariba and PeopleSoft on-site demonstrations Workflow Decision 1/20/2011 4/10/2011 5/05/2011 9/08/2011

16. Solution Offered AribaOracle ProsAlready have all modules No software investment required Same system is used today for requisitions and expense reports (user acceptance) Huge supplier network – e-invoicing Highly customizable solution Same “brand” as PNC’s Human Resources, General Ledger, and Accounts Payable’s systems ConsDevelopment would be needed for control groups Solution being offered is not what PNC has installed in PeopleSoft AP and would be considered an add on No supplier network – any e-invoicing would have to be done on an individual set-up basis

17. Solution Evaluation System Recommendation The recommendation was to utilize Ariba as the workflow solution for electronically routing PO and Non-PO invoice transactions. This workflow decision will serve to support our Accounts Payable Processing Strategy for centralized invoice receipt recommendation. Determining Factors The determining factors in the decision were predicated on the following: –Lower investment cost –Faster value achievement –Close alignment with AP Centralization Strategy

18. PeopleSoft – System Evaluation

19. Evaluate System Controls Accounts Payable contracted the services of Drivestream with the purpose of performing a system evaluation and assessment of the PeopleSoft AP Module. The results of the evaluation revealed the following: System –Low Module Utilization –Key control modules were not activated –No systematic control fee validation to AP Module –Delivered reports not activated –Payment Terms not activated Process –No password controls built around Spreadsheet Upload –E-mail vendor remittance notification not activated –AP reviews and approve all invoice transactions

20. PeopleSoft Re-Engineering The Accounts Payable Department developed and implemented a total of 7 Process Improvement projects. Four (4) projects resulted in a staff reductions of 0.5 FTEs. Three (3) projects resulted in a 15% improvement of process controls.

21. PeopleSoft – Future Enhancements Systematic control fee interface reconciliation Electronic e-mail vendor notification Check printing at dual sites Implement payment terms Establish invoice approval threshold ($1 - $500 – No AP approval required) – Recently approved for implementation Develop reporting benchmarks – Measure performance vs. Industry Standards Multi Currency Ariba – Establish as a Sox Controlled application

22. Future Vision Accounts Payable will be recognized as the premier payment disbursement and audit control entity by ensuring that PNC’s financial obligations are fulfilled to our vendors and BEST-IN-CLASS system technology is provided to support our business partners while keeping pace with our ever-changing processing and regulatory demands.

23. 3 rd Party Vendor Selection (Invoice Depository & Front End Imaging Solution)

24. Centralized Receipt – Objectives Move to a scalable centralized Accounts Payable Model Outsource receipt, scanning, and OCR capture (back-office operations) of paper invoices Interface with existing AP approval workflow engine Transition from paper to electronic invoicing Establish key business indicator to measure process/cycle time versus industry standard

25. Centralized Receipt Model (Recommended)

26. 3 rd Party Vendor Selection – Determining Factors The Determining Factors in the vendor section process were as follows: Experience – Proven experience within AP industry with organizations of similar size to PNC preferably in the Financial Service Industry Infrastructure – Proposed service is “in production” with other organizations of similar size (i.e. equipment, resources, staff, etc.) Technology – Propose solution use OCE Technology or applicable Image Capture / Scanning Equipment Service – Can support turnaround time specified in the requirements of RFP estimated transaction volume (24 -72 hours) Risk – Business resiliency, disaster recovery, financial solvency, etc. Cost – Proposed estimated pricing does not exceed current in-house cost for back-office operation

27. Expected Benefits  Improved risk mitigation for disbursements by providing better quality controls and visibility into accruals and liabilities  Better management of our cash flow and overall payment disbursement process  Position PNC to take full advantage of vendor payment terms to enhance Treasury Management’s investment opportunities  Indirect saving would result from the elimination of the business user’s time currently devoted to receive/prep invoices

28. Best-In-Class Model

29. Define a best-in-class model. Successful invoice and payment management models have employed the following approach to streamline their processes:  Centralization of the receipt of invoice process ensures that the AP Department has instant visibility into the company’s outstanding liability  Front-end imaging – ensures that invoices entered into the system are processed faster and improve faster research and retrieval  Implementing OCR and intelligent document recognition with imaging to reduce the amount of data entry required to extract info  Electronic invoicing solution quickly expedites the submission of invoices, reduces cost per transaction and restricts only clean invoices to be entered into AP processing queues  Leveraging an automated workflow solution ensures that invoices enter the solution will be routed to the required approver systemically, based on pre- defined business rules

30. Automated Workflow Benefits Benefits of Automated Workflow PayStream Advisors, Inc. Survey

31. Benefits of Electronic Invoicing PayStream Advisors, Inc. Survey

32. Transaction Cost & Cycle Time 2011 CostCycle Time Best In Class $2.054 Median $5.4110 Laggards $10.2625 PNC Results $4.3015

33. Barriers to E-Invoicing Adoption Barriers To E-Invoicing Adoption PayStream Advisors, Inc. Survey

34. Questions ?

35. © 2012 Financial Operations Networks LLC Thank You! The Accounts Payable Network 2100 RiverEdge Parkway, Suite 1010 Atlanta, GA 30328 Contact: MemberCare@TheAPNetwork.com 866-827-6389 770-984-1184 www.TheAPNetwork.com For further information on this topic, contact