Introduction to Purchase to Pay
Software
11/29/2012
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Experience
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Why Purchase to Pay Automation?
• Helps organizations gain control over their
purchasing and accounts payable functions. The
impact is:
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Problem
Paper-based Purchasing & Invoice processing rob CFO’s of the clear visibility and
control needed to manage cash and reduce indirect spending.
Source: Purchase Insight and Forrester
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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
–
–
–
–
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• Buying – administrating
the purchase of needed
goods & services
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–
–
–
–
–
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Identify need
Requisition
Route Approval
Create PO
Shipping
Receiving
Payment
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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.
• Managed
•
Goods and services have
been through a sourcing
process and preferred
suppliers are contracted to
deliver at advantageous
prices and terms.
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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.
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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
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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
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Common Spend Categories
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
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Approval Routing
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•
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•
•
•
•
Financial & Hierarchical
Special commodities
Ad Hoc
Budget visibility
Smart phone – mobile approvals
Line item
Full audit trail
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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
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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
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PO Payment
• Automated 3 way match
• Discrepancy identification
– Financial
– Quantity
• Discrepancy management workflow depending
on type of discrepancy
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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
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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
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•
•
•
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Visibility & Reports
• Gain increased accuracy into accruals because
system replaces paper shuffling
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Analyze by user
By supplier
By commodity
By cost center
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Verian Value Proposition
See - Manage - Save
Confidential
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Our Solution Footprint
Verian Suite
Verian Platform
Workflow, Business Rules and
Policy Enforcement
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
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Step 1 - See
Purchasing Strategy
Invoice Processing Strategy
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Step 2- Manage
Confidential
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Step 3 - Save
Spend Under Management
Confidential
Spend Under Control
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ROI
Regional Financial Institution
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
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Calculating ROI
Initial
Year 1
Year 2
Year 3
Total
Benefits
1. Purchasing Savings (Price)
120,000
5,000,000
7,000,000
12,120,000
-
300,000
600,000
900,000
750,000
900,000
1,650,000
120,000
120,000
120,000
360,000
240,000
6,170,000
8,620,000
2.Purchasing Savings (Avoid)
3. Purchasing Savings (Compliance)
4.Vendor Discounts
5. Efficiency Savings
6. Total Benefits
15,030,000
Costs
7. Implementation
400,000
400,000
8. Subscription fees
360,000
360,000
360,000
9.Total Costs
1,080,000
1,480,000
Total benefit (6) less Total Costs (9)
(400,000)
Project IRR
(120,000)
5,810,000
8,260,000
13,550,000
325%
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ROI
Large Medical Practice
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%)
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Calculating ROI
Initial
Year 1
Year 2
Year 3
Total
Benefits
1. Purchasing Savings (Price)
60,000
2.Purchasing Savings (Avoid)
180,000
320,000
-
560,000
-
3. Purchasing Savings (Compliance)
-
4.Vendor Discounts
-
5. Efficiency Savings
6. Total Benefits
60,000
180,000
320,000
560,000
Costs
7. Implementation
12,000
8. Subscription fees
12,000
24,000
24,000
24,000
9.Total Costs
Total benefit (6) less Total Costs (9)
Project IRR
72,000
84,000
(12,000)
36,000
156,000
296,000
476,000
491%
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Additional Resources
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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Questions
• mschaffner@verian.com
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