Best Practices in Capturing Vendor Discounts and Improving Your …€¦ · May 7-9, 2017 Disney’s Yacht & Beach Club Resorts®, Florida Best Practice Takeaway Tips • Take all

May 7-9, 2017

Disney’s Yacht & Beach Club Resorts®, Florida

Best Practices in Capturing Vendor Discounts and Improving Your Vendor Relationships

Facilitator: Elaine Stattler - APM, CPC Editor APP2P and ARO2C Network [email protected]

Panelists: Keith D. Dabbs - MBA, CMRP, APM Director, Procurement and Sourcing Riverside Health System Supply Chain Management Division [email protected]

Joni Geurts Manager, Accounts Payable JetBlue [email protected]

Montee Kaminetzky - APM Accounts Payable Manager, B&H Photo and Video [email protected]

What We Will Discuss Today:

– How many organizations are being offered vendor discounts?

– Do vendor discount policies vary from organization to organization?

– What can a company expect to save with a vendor discount program?

– How many AP and P2P departments are actually capturing all the available discounts?

How Vendor Discounts Affect Our Organizations

Keith Dabbs, Riverside Health System. A recent survey by IOFM found that 82 percent of the organizations surveyed are offered discounts on at least some invoices.

Montee Kaminetzky, B&H Photo and Video. The survey reveals that more than thirty-five percent of the respondents were capturing only between one and 20 percent of the early invoice payment discounts offered them. And more than 10 percent of the respondents were capturing no discounts at all.

Joni Geurts, JetBlue. The amounts an organization can save with vendor discounts can be significant. For example, if your organization makes $500 million of vendor payments each year, and 50 percent of the payments are eligible for a one percent discount, this translates into $2.5 million in total available discounts!

Audience Question: Are You Taking Full Advantage of Vendor Discounts? What Is Your

Experience?

May 7-9, 2017


What Can Prevent APP2P From Taking Full Advantage of Discounts?

• Differences between industries can dictate your vendor discount policies.

• Cash flow considerations may influence decisions regarding vendor discounts. (Is your organization cash heavy? Cash poor?)

• P-cards come into play (discounts vs. rebates).

• Some organizations are extending payment terms.

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What Is the Advantage to Vendors for Offering Early Pay Discounts?

• Vendors get paid more timely.

• It creates good relationships.

• The discount process gives vendors choices, invites them into the process.

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How to Get Started

• Talk to Treasury about your cash flow.

• Does your company prefer to hold cash and take advantage of float time?

• Determine what’s best for your organization.

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Taking it One Step Beyond: Dynamic Discounting

What is it?

What do I need to implement it?

• ACH is essential.

• Need systems and operations in place, including vendor portals.

• Invoicing process must be efficient.

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Vendor Portals

• What are they?

• How do they facilitate discounts?

• What's the payoff for implementing a vendor portal?

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Working With Your Bank and Your Supply Chain

Stay on top of the new services banks offer. For example, banks can pay invoices within the early discount terms on AP’s behalf, capturing the discount.

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Keep Your Relationship Open With Purchasing

Here are some tips for successful AP-purchasing communication in a P2P environment:

• Build teamwork and camaraderie.

• Share metrics and KPIs.

• Ban finger-pointing.

• Be open-minded.

• Meet regularly, no matter how busy you are.

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Analyzing Lost Discounts

• Analyzing and discovering ways to capture lost discounts can have a direct impact on the bottom line.

• How to do an analysis and track lost discounts.

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Best Practice Takeaway Tips • Take all discounts. Your discounts

represent a significant savings, and can make much more sense financially than holding off on your payment.

• Determine when the clock starts. With discount terms of 1/10 net 30, for example, make sure you know what constitutes day one. Is day one on the invoice date? Is it when you receive the invoice? Or is it when the product shipped? By knowing what vendors expect, AP will be in position to either meet the terms or work to adjust them.

• Establish default terms. When invoices do not list terms, determine what your “default” terms will be for vendors offering discounts, and use those terms on all invoices that do not delineate terms.

• Enter the vendors’ terms into your system. By entering the discount terms for each vendor into the system, you enable the system to do the discount calculation for you, which ensures that it will be done consistently every time–and calculated correctly.

• Review the discount terms periodically. Vendors may change their terms over time, so review the terms in your system to make sure they are current and correct. Keep lists. Create a list of vendors with unusual discounts, and make sure that every AP staffer has a copy.

• Consolidate and standardize terms. Work with purchasing to decrease the number of different terms that are used, and standardize the terms whenever possible.

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Tips, continued • Keep communication open with

purchasing. Vendors are not likely to call AP to advise them that they are now offering terms. Even if they print terms on their invoices, they could be missed. Purchasing and AP should be communicating regularly about new vendor discounts.

• Be on the lookout for special terms. Some terms may require you to override the system’s calculations. AP departments often create forms so that purchasing can forward the particulars of their term negotiations to AP as soon as they make the deal.

• Handle picky vendors carefully. Identify those vendors who are strict about terms and take extra care to ensure that their invoices are handled promptly.

• Plan for the big payment days. The 10th and the 25th are two days on which many invoices must be paid. Be sure you plan for this and have enough AP people on hand to process the invoices in a timely manner.

• Know the grace periods. There are times when you end up paying an invoice outside the discount period and still take the discount. About two-thirds of vendors will allow a discount grace period of about five to seven days.

• Pay back unearned discounts. If you took a discount that you shouldn’t have, it is a sign of good faith to pay it back. (But first see if the vendor will split it with you!)

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Tips, continued

• Track lost discounts. Discounts not captured represent money left on the table. Keep a record of discounts you lost and why–and then work to solve the problems.

• Track discounts captured. Generate a report for management that quantifies the percentage of all discounts that are captured, and track it over time to highlight the extra money that is being generated.

Key Point: The amount you save the company through vendor discounts can be significant. For example, if your organization makes $500 million of vendor payments each year, and 50 percent of the payments are eligible for a one percent discount, this translates into $2.5 million in total available discounts!

May 7-9, 2017


Questions?

Documents

Best Practices in Capturing Vendor Discounts and Improving Your …€¦ · May 7-9, 2017 Disney’s Yacht & Beach Club Resorts®, Florida Best Practice Takeaway Tips • Take all