1. Chris Rauen, SAP Ariba Hanif Dhrolia, BC Hydro November 13, 2017
P2P and Payables Breakthrough: Five Proven Strategies for Achieving Accounts Payable Excellence
Chris Rauen, SAP Ariba
Hanif Dhrolia, BC Hydro November 13, 2017

5. Rethinking your payables process in the digital economy

6. What’s driving the digital transformation?
We’ve all seen stats like these, and they’re all very powerful.
The amount of data in the world is doubling every 18 months.
By 2020, there will be 75 billion connected devices in the world.
An estimated 1 billion people are connected via social networks.
And by the end of this year, more than 75% of enterprise IT spend will be cloud-based.
World data doubles every 18 months
75 billion connected devices by 2020
1 billion people connected on social networks
75% of IT spend will be cloud-based

7. Invoice processing performance: fair or foul
90:10

8. Embracing the digital supply chain
And as this digital transformation revolutionizes our new and digital economy, it becomes more critical than ever to be able to adapt every part of how business gets done.
How you manage your supply chain, both physical and, for this audience, Financial —your supplier relationships & their financial health, your transactions, the timing of payments and flow of funds —is, of course, no exception.
And for those suppliers, how they connect to their customers, how they build and sustain relationships with them, and how they access the cash flow needed to grow their business needs to evolve as well.
Now, for most businesses, this change has been or is underway. You’ve likely already taken steps to automate many of your financial processes, from quarter close, to Treasuery operations and liquidity mangement, to financial operations of AR/AP and payment — you’ve connected the departments in your organization. You’ve done your best to rid yourself of paper wherever possible and start transacting electronically with your suppliers and partners.
And your suppliers have likely taken steps here as well—creating ways to make the process of working together more efficient and smooth.

9. Automation alone isn’t the answer
This focus on automation makes a lot of sense, but if automation is your only focus, you could be exposing your business to risks, and you are most certainly missing out on many opportunities. Truly managing Payables goes far beyond basic process. It’s about more than making transactions zip back and forth over the web. And truly managing relationships with customers is about more than getting invoices to them as fast as possible with as few clicks as possible.
And automation alone, simply yields an ROI that consists primarily of efficiency savings. And efficiency savings, while real and certainly worthy of the effort to obtain, are nonetheless the LEAST of the opportunities afforded to Finance by embracing a digital financial supply chain. Digitizing the financial supply chain through the use of business networks opens the door to enormous areas of value beyond merely doing more with less.
Sure, automating the basic process of any financial supply chain is important, but the question is: is it enough? And is that all there is?
Automation alone isn’t the answer

10. The power of payables ERP Smart Invoicing Connected Compliance
Direct & Indirect
Suppliers
ERP
This is where business networks can really empower businesses to move beyond mere electronification of data and processes, to the digitization of business. And what I mean by that is the ability to take the digital data of commerce, bring together a community and ecosystem of stakeholders and value providers, and make the right information selectively transparent to the right people and the right partners at the right time to enable right decisions and so drive the right business results.
When you connect to the Ariba Network, you connect to millions of suppliers across direct and indirect expense categories. You can manage everything from sourcing to payments and financing in a few simple clicks. You can collaborate electronically with suppliers on each transaction. And you can do it all, while data is flowing securely between your ERP system, your purchasing process and your suppliers.  
Improved DPO
B2B Payment
Dynamic Discounts

11. Strategy #1 Be smart about invoice automation

12. Smart invoicing Suppliers Buyer
Invoice
number
Bill to / ship to
PO number
Requestor (non PO)
Invoice date
VAT / GST IDs
Suppliers
GST/VAT compliance
PO & PO-line match
Buyer match (non-PO)
UOM & SKU change
Currency match
Sub total & total amount
PO-line change
Line & total consumption thresholds
Shipping & tax thresholds
Buyer
Account coding
Workflow
Compliance
Invoice
With Ariba Invoice Management, you can collaborate more effectively with suppliers, speed up approval cycles, dramatically reduce exceptions, dramatically reduce processing costs, capture more discounts, and support global e-invoice operations.
Complete automation of the financial supply chain with a solution that includes
electronic payments, detailed remittance statements, vendor self-service portal, and vendor bank routing information verification.
Additionally, eliminates supplier inquiries on payments and remittance reconciliation.
• Ensures that remittances don’t get lost or incorrectly correlated to invoices
• Eradicates paper, along with check printing and processing costs
ERP
98% touchless processing

13. Smart invoicing at BC Hydro
Automating exceptions and driving straight-through processing

14. Smart invoicing at BC Hydro
Enabled Invoice Volume
>$1M
AP cost savings
100k
Invoices per FTE
1,150
Suppliers moved off paper

15. Strategy #2 Close the loop to capture value

16. Sourcing & Procurement
Siloed Processes
Mail
Fax
Analyze
Source
Contract
Order
Sourcing & Procurement
Mail
Scan
OCR
Invoice
Notify
Ship
Fulfill
STEVE
Supplier
Invoice receipt
Manage
Match & approve
Pay AP

17. Sourcing & Procurement
Supplier Portals
Send PO
Analyze
Source
Contract
Order
Sourcing & Procurement
Invoice
Notify
Ship
Invoice receipt & status
Fulfill
STEVE
Supplier
Invoice receipt
Manage
Match & approve
Pay AP

18. Business Network: Close the Loop to Capture Value
Source
Requisition
Contract
Analyze
“Actual” spend data
Defined & approved catalog content
Perfect PO
Catalogs
Supplier
Pay
Fulfill
Ship
Notify
Invoice PO AR
Order
Payment visibility, execution & remittance
Order acknowledgement & ship notice
Invoice receipt
Perfect invoice
Manage/ approve
Match

19. Close the loop to capture value
How an airline company’s P2P value took off
Not actually Lufthansa,,, pix worked well, facts not get in the way.
Stock the plane, depending on location; every thing service co does; cleaning, restock food-alcohol, fuel, bathroom; sku associated with it; price, but changes, configuraiotn of plane, 2-3-2, 3-3; type of plane, 737 vs jumbo jet or Dreamliner; time of day, first shift costs left; airport it’s in; weather on the day; examples, multiply all different planes, all diff airporst, contracts affects; literally 1000s of line items on invoices each day; didn’t send invoice for eveyr plane; or even daily; monthly; literally, invoice received monthly, delivered in paper ream boxes; thousands-thousands of line items; manually check? Didn’t, just paid the invoice; turned to post audit recovery firms, capture back .25 on $ of value
Connect up, save double digit millions
Slide 18: Energy industry example
Key message: The Networked economy prevents disruptions and increases efficiency and growth
Talking points:
What:
Embedded sensors in every turbine
Connected to sophisticated operations application to proactively analyze and plan for optimal maintenance and work load schedules
Measure the critical physical values pressure in pipes and temperature of machine parts
Detect physical wear of mechanical parts (e.g., by sensing vibrations)
Compare with past data
Set in correlation to past maintenance situations
Extrapolate into the future
How networked economy supports efficiency and growth in the energy industry:
Efficiency:
It enables labor efficiencies with automated work orders, remote management and workforce reassignment
It enables budget savings with preventative equipment maintenance and remote monitoring
(note: future revisions should include stats on % efficiency gains/improvements)
Growth:
It enables an increased amount of energy to be delivered with fewer outages; generating an increase in revenues
(note: future revisions should include stats on % growth gains/improvements)

20. Strategy #3 Increase strategic value

21. Strategic initiatives to achieve accounts payable excellence
New capabilities to monetize trading collaboration
Funding Sources
Mitigate liquidity risks
True multi-funding options
Low rate funding
Buyer Values
Extend days payable 0utstanding (DPO) - unlocking millions in free cash flow
Increase EBITDA with dynamic discounting
Strengthen and tighten relationships with strategic suppliers
Reduce risk with outsourced supplier bank account info and e-payments
Increase A/P management efficiency providing visibility through vendor portal and outsourced payment services
Supplier Values
Optimize DSO and A/R management with early payment or financing options
Utilizing dynamic discounting and supply chain Finance
Lower costs and enhance overall access to capital
Visibility to approved invoices, eliminating invoice status calls
Payment visibility and access to remittance information
Discounts
Payment terms
Invoice automation
Buyers
Suppliers
Cloud Network
Optimize the payment process
Electronic payments meeting regulatory compliance
Payment Processing

22. Strategic initiatives to achieve accounts payable excellence DPO and payment terms rationalization and extension
Ensures paying suppliers to term and enhancing free cash flow
Review multiple supplier segments for inconsistencies
Drives consistent supplier payment experience
Delivers DPO improvement and uplift adoption for early pay program
Aligns DPO with industry peers
Rationalized across all suppliers
Positions extended net terms to specific suppliers / categories
DPO benchmark
Free cash flow - Every $1 billion of targeted spending extended 15 days = Estimated $40 million in free cash flow

23. Strategic initiatives to achieve accounts payable excellence Supply Chain Finance – Strengthen your Payment Terms Strategy
Buyers
Suppliers
Supply Chain Finance 1
Buyer electronically transmits payables data to the system. No change to existing invoice approval process. 2
Supplier views receivables via web. Has option to sell receivables and determine their collections date or wait until maturity.
Invoice automation
Discounts
Payment terms 4
At invoice maturity date, Buyer funds Buyer controlled clearing account. The system executes payment instructions to pay…
…the Funder, if supplier has sold receivable
…the Supplier, if supplier has not sold receivable
Cloud Network 3
Funder(s) receives and processes early payment requests - provides funding to Supplier.
Funders

24. Increase strategic value
Home building materials retailer keeps on building…
Lowe’s – SCF
Increasing strategic value; just explain what SCF is, hjelps suppliers access cash flow, lower rates, leverage buyer cost of capital.
This is something, so beneficial about a network vs portal; connects documents to documents, buyers-suppliers and ecosystem of partners, funding sources, buyer holds cash as long they want
Have any WC initiatives going? A few hands. Easiest way to affect positivlye WC is your DPO, full control over when to pay
AR, harder, inventory longer term; just a matter of your pay terms; you can extend out; InBev, 2009, extended days, good for you, but that xfer pain to your suppliers; tool to have on AN, SCF, made possible by smart invoicing, approves invoice right away; supplier sees opp paid early, even though you pay late, TP funder pays
Hold onto cash, increase DPO, improve WC, without problem in supply chain
Famous to do this, this home improvement company. They’ve seen strategic value of payable to improve WC; for every day increase DPO by 1 day, free up enough WC to build out-open 4 new stores. Here, where AP/payables, not just liability-cost center, drive strategic, top line revenue
Prime Revenue
Slide 18: Energy industry example
Key message: The Networked economy prevents disruptions and increases efficiency and growth
Talking points:
What:
Embedded sensors in every turbine
Connected to sophisticated operations application to proactively analyze and plan for optimal maintenance and work load schedules
Measure the critical physical values pressure in pipes and temperature of machine parts
Detect physical wear of mechanical parts (e.g., by sensing vibrations)
Compare with past data
Set in correlation to past maintenance situations
Extrapolate into the future
How networked economy supports efficiency and growth in the energy industry:
Efficiency:
It enables labor efficiencies with automated work orders, remote management and workforce reassignment
It enables budget savings with preventative equipment maintenance and remote monitoring
(note: future revisions should include stats on % efficiency gains/improvements)
Growth:
It enables an increased amount of energy to be delivered with fewer outages; generating an increase in revenues
(note: future revisions should include stats on % growth gains/improvements)

25. Strategy #4 Transform from cost to value center

26. Discounting Benchmark
Strategic initiatives to achieve accounts payable excellence Discounting – Drive ROI while focusing on your core business
Available to some or all suppliers
Delivers client savings and improves ROI
Improves EPS
Dynamic / Pro-rated discounts to be earned at any point up to the invoice maturity date
Buyer initiated
Optional program suppliers can use to manage their liquidity
Applies to some or all invoices 3
Ad Hoc captures “as needed” acceleration
for net term suppliers
Automate to minimize
missed discounts 1
Current DPO 0%
0.5%
1.0%
1.5%
2.0%
2.5% 2
Pro-rate discount to cover
remaining missed opportunities $$
Discounting Benchmark
Net Income - Every $1b of targeted spend = Estimated $1 - $2M in discounts $$
Day 10
Day 30

27. Transform from cost to value center
How BC Hydro supports supplier cash flow

28. Strategy #5 Modernize payment for P2P adoption

29. Big Blue, Batman, Betamax & B2B Payments
The answer to the question has a lot to do with the answer to What do Big Blue (IBM), Batman and Betamax have in common with today’s B2B Electronic Payments, particularly in the US?
To understand the answer here, you need to understand a couple details about ACH payments, which are the primary form of Electronic payment in the US. ACH payments are governed by the National Automated Clearing House Association or NACHA. NACHA defines the format of data for all electronic payments in the US made through ACH, and that format is structured such that there are 2 lines with every payment.
First a payment record which states the amount being paid, from whom and to whom it is being paid. It is essentially the electronic equivalent of an envelope with to and from address containing the check.
The second line is the addenda record containing information about the payment (i.e. remittance). NACHA rules define this line as containing 94 characters of information, of which 14 characters are for sequencing, leaving a mere 80 characters of information for transmitting the rich remittance information required for B2B payments…clearly not enough. Because of this, ACH is structurally woefully inadequate to meet the needs of B2B payments and so has not yet displaced the check even after decades of use.
Now, to be fair, the NACHA rules provide for 2 types of ACH payments between businesses…those are called CCD and CTX. CCD is the type that only allows for 1 line of adenda and thus only 80 characters of informatiomn. CTX on the other hand, allows for 9999 adenda records, each containing 80 characters of informtion. SO why is this not the standard used to meet the needs of B2B payments. The reason is because it requires suppliers be able to consume an EDI ANSI 820 format of data…a formt that is very complex and expensive. And it is for this reason that, according to that AFP payments study, only 3% of all B2B electronic payments are made use the CTX format. The other 97% use CCD. Bottom line, 97% of payments made in the US via ACH are capable of carrying only 80 characters worth of data.
So, why only 80 characters? Why did NACHA choose that number? …Because it is a very specific number.
The 80 characters, according to NACHAs own historical timeline, is based on the 80 column “hollerith” punch card that was patented by IBM in 1928, was popularized by the 1960’s bat computer that used them as inputs, and which was the dominant standard of data format in 1975, the year the NACHA rules were laid out…the same year that the now long-defunct betamax videotape recorder was introduced by Sony.
So 21st century B2B electronic payments are still being governed by rules laid out in the Ford administration based on standards developed when the most popular car was built by another Ford…the model T.

30. B2B payments past: 1970’s innovation$
Buyer
Supplier
B2B payments have been established based on the realities of a bygone era. Back in 1975, when ACH was established in the US the reality was that data about payment was confined in cobol based mainframes behind the walls of company offices and so the only way to communicate that data was to print it on a check or extract what you could and send electronically.
So, make no mistake, taking the step of extracting the data and sending it electronically with the settlement was revolutionary….in But that Principle, that in order to send remittance with payment it must be extracted from the source system and attached to the payment and sent, is still the guiding principle for electronic payment today…globally.
80-140
Characters
80-140
Characters
Buyer
Bank
Credit
Supplier
Bank
Connect Data to Payment

31. B2B payments future: Connecting the credit contextually
Purchase orders, invoices, contracts, and receipts $
PO’s, Invoices, Contracts, Receipts
Buyer
Invoice status
Rich remittance
Payment
instructions
Track and trace
payment status
And THAT is really the core of AribaPay….the integration and delivery of the last step of commerce (payment) to all of the steps that come before…all intimately intertwined with the information that defines the payment, and fully visible, accessible and actionable on the Ariba Network. The fundamentals of the Network, with payment and payables integrated, is what makes AribaPay the future of B2B payments…It is how AribaPay is making B2B Payment Certain, Secure and Simple.
Certain –
By integrating the payment to the data on the network, AribaPay brings the certainty of knowing exactly WHAT is being paid for, WHEN, and WHY there are discrepancies. Truly Rich remittance leads to easy reconciliation. And with Track and trace functionality, buyers and suppliers know exactly WHEN a payment is not just scheduled to be made, but when it is actually happening…at every step along the way. This cash flow visibility is HUGE to suppliers…and to Buyers who no longer have to field inquiries about when a supplier is getting paid or where that payment is.
Secure:
Not only is the network central to communicating the information critical to B2B payments, it also is essential in providing the security missing today as well. To make an electronic payment today, Buyers need to capture, manage and maintain sensitive supplier bank info inside their ERP. But through our ecosystem partnership with the Discover Network, AribaPay eliminates this need. Instead, Discover manages all of the capture, validation and ongoing fraud prevention around bank account info and payments and all that sits on the network is a tokenized AribaPay merchant ID number that is worthless until unlocked inside the secure Discover network. AS Brent Kinman likes to say, “you can’t lose what you don’t have!”
Simple
And with a single, user-friendly experience to connect this last leg of the process, AribaPay is simple…. Simple to use. Simple to reconcile payment. Simple self service… and it is perfectly aligned with the idea of Simple Finance and the overall SAP Run Simple message.
One thing AribaPay is NOT, is it is NOT a credit card offering.
Bank account
management
Supplier
Supplier
Bank
Buyer
Bank
Debit
Credit
Integrate Payment with Data

32. Improving P2P adoption with payment
Why A cell phone network spells P2P backward
Fast, 15-week deployment in first phase, representing over $6 billion in spend, 20,000 payments and 2,000 suppliers
Bank data no longer managed or stored in T-Mobile systems
Automatic OFAC/AML check handled by AribaPay
Broad supplier adoption of an intuitive, easy-to-use payment process
Links payments to detailed remittance data and to related transaction documents such as contracts, purchase orders and invoices
Starts with something valuable to supplier

33. Five proven strategies for achieving accounts payable excellence
Be Smart about Invoice Automation
Close the Loop to Capture Value
Increase Strategic Value
Transform from Cost to Value Center
Modernize Payment for P2P Adoption

34. Going digital… It feels like this.

35. Thank you. Chris Rauen, SAP Ariba christopher.rauen@sap.com
Hanif Dhrolia, BC Hydro