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

Experience 2

Why Purchase to Pay Automation? Helps organizations gain control over their purchasing and accounts payable functions. The impact is: 3

Problem 4 Paper-based Purchasing & Invoice processing rob CFOs 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 5 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. 6 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. 7

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 8

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 9

Common Spend Categories 10 Administrative Expenses – 5-7% savings Office supplies Office Equipment Furniture Postage Shipping / Small package delivery Temporary Services Facilities – 7-9% savings HVAC Services Elevator Services Plumbing Maintenance Supplies Cleaning/ Janitorial Services Security Services Finance and HR – 6-8% savings Payroll processing Equipment leases Merchant accounts Benefits Property Casualty Insurance Outsourced Collections Sales and Marketing – 18-20% savings Promotional Items Printing Market Research Creative Services Information Technology & Telecommunications – 9-11% savings Software Hardware Voice & data networks Cell Phones Local and Long Distance phone lines Capital Expenditures & maintenance - 6-8% savings New construction Equipment Architectural or Engineering Services Up fits and improvements MRO supplies Direct materials – driven by industry - 5-7% savings Chemicals Electronic components Metals Plastics

Approval Routing Financial & Hierarchical Special commodities Ad Hoc Budget visibility Smart phone – mobile approvals Line item Full audit trail 11

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 12

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 13

PO Payment Automated 3 way match Discrepancy identification – Financial – Quantity Discrepancy management workflow depending on type of discrepancy 14

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 15

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 16

Visibility & Reports Gain increased accuracy into accruals because system replaces paper shuffling – Analyze by user – By supplier – By commodity – By cost center 17

Verian Value Proposition 18 See- Save- Manage Confidential

Our Solution Footprint 19 Verian Platform Workflow, 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 20 Purchasing Strategy Invoice Processing Strategy

Step 2- Manage 21 Confidential

Step 3 - Save 22 Spend Under Management Spend Under Control Confidential

ROI 23 3 Years After Implementing Verian 100 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 InitialYear 1Year 2Year 3Total Benefits 1. Purchasing Savings (Price) 120,0005,000,000 7,000,000 12,120,000 2.Purchasing Savings (Avoid) - 300, , , Purchasing Savings (Compliance) 750, ,000 1,650,000 4.Vendor Discounts 120, , Efficiency Savings 6. Total Benefits 240,000 6,170,000 8,620,000 15,030,000 Costs 7. Implementation 400, Subscription fees 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% 24

ROI 25 After Implementing Verian Med Supplies + D/M/V + Office Supplies (Annualized) Current Provider + Office Supply Vendor Current Expense = $3,253,149 Rebid Current = $3,028,833 Savings = $224,316 (6.9%) GPO + Office Supply Vendor Current Expense = $3,253,149 First Alternative = $2,672,626 Savings = $580,523 (17.8%) Competitive GPO + Office Supply Vendor Current Expense = $3,253,149 Second Alternative = $2,592,241 Savings = $660,908 (20.3%) Large Medical Practice

Calculating ROI InitialYear 1Year 2Year 3Total Benefits 1. Purchasing Savings (Price) 60, , , ,000 2.Purchasing Savings (Avoid) Purchasing Savings (Compliance) - 4.Vendor Discounts - 5. Efficiency Savings 6. Total Benefits 60, , , ,000 Costs 7. Implementation 12, Subscription fees 24,000 72,000 9.Total Costs 84,000 Total benefit (6) less Total Costs (9) (12,000) 36, , , ,000 Project IRR 491% 26

Additional Resources 27 Verian blog (verian.com/blog) Useful articles and commentary on ways to increase efficiency using automated purchasing and invoice processing systems Institute for Supply Management – ISM (ism.ws) An association that exists to educate, develop, and advance the purchasing and supply management profession Buyers Meeting Point blog (buyersmeetingpoint.com/blogs) A helpful online knowledge and professional development resource for supply management and procurement professionals Institute of Finance Management – IOFM (iofm.com) Valuable tools, best practices, benchmarks, research and resources that will improve your accounts payable process The Accounts Payable Network – TAPN (theaccountspayablenetwork.com) A comprehensive knowledge base for executives and managers who oversee accounts payable

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