UC Ariba Working Capital Management Becoming a Discount Pro! © 2011 Ariba, Inc. All rights reserved

UC

Ariba Working Capital Management

Becoming a Discount Pro!

© 2011 Ariba, Inc. All rights reserved.

Agenda

• Overview of WCM Suite of Solutions• Demo – What’s new since last year• What’s coming – Roadmap themes• How is it helping other users?

Customer Stories Best Practices Benchmarks

• Working Capital Karaoke

2 © 2011 Ariba, Inc. All rights reserved.

Manage CashCollaborative Finance Management

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Collaborative Finance Management improves the money flow between buyers and suppliers through automated invoice, payment and working capital management for:

This is Collaborative Finance Management This is Collaborative Finance Management

• Improved efficiency and effectiveness• Greater visibility• Better liquidity• Increased savings• Reduced supply chain risk


Corporations have been depositing 42% of their short-term cash in bank

accounts this year, compared with 25% in 2008

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gtChallenges for Finance

• 80% of invoices are paper• 23 days to approve an invoice• 70% of discount opportunities

are missed• 30% of invoices have

exceptions costing $600K for every 100K invoices

• Low interest and tight credit supply chain risk

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Where's Corporate Cash? In the Bank, CFO Magazine August 3, 2010 http://www.cfo.com/article.cfm/14514893/c_2984367


http://www.cfo.com/article.cfm/14514893/c_2984367

Beyond Efficiency to Effectiveness

Outcome

Enablers

Business Goals

Balance Sheet Impact

P&L ImpactP&L Impact

WC Strategy

Process Redesign

Supply Chain Finance

Term Strategy

Process Redesign

Discount Pro

Procure-to-Pay

Invoice Automation

Working Capital Improvement

Discount Savings

TransactionEfficiency

Improve Visibility and Control

Mitigate Supply Chain Risk

Must-Haves

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Working Capital ChallengesCompeting Objectives between Buyers and Sellers

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work

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wantto holdontocash

wantto get

paidfast

Working Capital Tension

Buyers Suppliers

Need to unlock working capital

Maintain or increase DPO

Need better return on cash

Need to minimize liquidityrisk in supply chain

Need to unlock working capital

Maintain or decrease DSO

Need better access to cash

Face significant liquidityrisk due to credit crunch


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Challenges with Traditional Approaches to Liquidity

work

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Not sustainable

Introduces Liquidity Risk

50% + Discounts Missed

Avg. < 10% spend

Fed Funds = 0.00 - 0.25%

Historically Low Return

Fed Funds/Libor Indices

Contract Negotiations

2-Part ERP Terms

Phone Calls to Suppliers

Extend DPO

Push Terms Out

Pay Suppliers Late

Money Market Funds

Commercial Paper

Maximize Return on

Capital

MaximizeDiscount Potential

Optimize Working Capital


Ariba’s Working Capital SolutionsFlexible suite to help you manage cash better

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Payment visibility and low-cost third-party financing permits on-demand payment acceleration

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Suppliers sell receivables in online marketplace to highest bidder and get

paid faster

Offer buyers payment extension and rebates

while suppliers get paid faster

Expand supplier participation and leverage dynamic discounting with timing and cash use control

SupplyChainFinance

P-cards

ReceivablesFinance

Early PaymentDiscount

work

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Broad Spend Segmentation Analysis Typical Example

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• Low $ Volume/High # Suppliers (10,000’s)• Non-strategic, easily replaceable, high

Buyer leverage• WCM Focus: Receivables Financing, Discount, Pcard

• Moderate-High $ Volume/1,000’s of Suppliers• Moderately strategic• Mix of Med-Small• WCM Focus: Discount & Receivables Financing

• High $ Volume/Low # suppliers (~50-300)• Strategic Suppliers, critical to supply chain• Larger Suppliers• WCM Focus: SCF

$ S

pen

d

# Suppliers

High

Low

~250 1,000’s 10,000’s

Buyer Value P-Card Rebates & WC Benefit

Buyer Value P-Card Rebates & WC Benefit

Buyer Value:DPO Increase, Early Payment Discounts

Buyer Value:DPO Increase, Reduction in WC


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Discount Pro –Buyer Perspective

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Visibility and Control Actionable information to identify and act upon discount opportunities

Dashboard and Analytics


Improve management reporting of bottom line savings and organizational impact

Cash Flow Control Control the amount of cash, rate of return, and timing of cash used for discount program


Visibility and Control Actionable information to identify and act upon discount opportunities

Collection Cost and TimingReduce the cost and effort required for collections. Lower DSO through process optimization and receivables acceleration

Improve Cash Flow Control the invoices you want accelerated in exchange for an agreed upon discount rate

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Discount Pro – Supplier Perspective

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What’s New in Past Year

• Calendars Holiday Calendars Payment Processing Schedule

• Enhanced Notifications• Enforced Standing Terms• Reporting Enhancements


Discount Pro Demo


WCM Roadmap Themes

• Enhanced Discount Discovery and Collaboration PO Flip and eForm Early Pay Requests Notification Push

• Buy-Side Cash Flow Analysis Tools Real-time Discount Performance Tracker Forecasting Tools Cash Flow Dashboard

• Discount-Only Easy Integration to ERP


Customer StoriesBest PracticesBenchmarks


Increasing discount capture to >90%

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CompanySports equipment manufacturer

ProfileOne of the world’s largest sports equipment manufacturers with global direct and channel retail outlets

Ariba Commerce Cloud Features Ariba invoice Automation Ariba Discount Pro

Challenges Solutions Results

• $600 million spend across 260 suppliers

• Complex services spending (marketing, retail stores …)

• Broad inability to take advantage of early payment discounts

-̶Few negotiated agreements-̶Low capture rate (35%) -̶No opportunity for discount after initial discount day (i.e. day 15 for a 2%/15 net 45 term)

• Unable to capture ad-hoc discounts

• Ariba technology to automate manual processes and capture discount opportunities

• Ariba services to speed implementation, optimize processes, and improve ability to act on discount capture

• Automated discount-related supplier interactions

-̶ “Always Accelerate” and ad-hoc features-̶Accelerate terms to every supplier-̶Pro-rated term sliding scale to maximize capture

• Increased early payment discount capture from 35% to > 90%

• Increased supplier discount participation by 20%,

• Increased average discount to 1.5% (24% APR)

• Capturing dynamic discounts on 4% of targeted spend

• Over $1 million in projected annual savings


© 2011 Ariba, Inc. All rights reserved. 17

Enabling thousands of suppliers for PO automation, e-invoicing, remittance delivery and dynamic discounting

CompanyGlobal entertainment leader

ProfileLeading diversified international family entertainment and media enterprise

Ariba Commerce Cloud Features Ariba Buyer Ariba invoice automation Ariba discount Pro

Challenges Solutions Results

• Manual invoice processing led to excessive costs, large number of supplier inquiries

• Limited invoice-payment-cash flow visibility

• Difficulty managing vendor master data

• Low discount capture rates

• Automate PO creation, approval and delivery

• Ariba Network for supplier profile management and transmission to SAP master vendor file

• Working capital management solutions, including Ariba Discount Pro, for enabling dynamic discounting with suppliers

• Ariba Adapter for SAP integration

• Reduced AP headcount by nearly 30%

• Thousands of suppliers enabled for PO delivery and PO status, invoice management and remittance delivery

• Leveraging Ariba dynamic discounting feature for all suppliers.

• Ariba Network for supplier profile management and transmission to SAP master vendor file

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Supplier Results from Ariba Network: Big-Giant

• Challenge with Paper No visibility Invoices processed in

weeks or months Delayed payments

• Results with Ariba Network

Real-time status visibility Invoices paid as quickly

as four days Improved cash flow

forecasting

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“I love the Ariba service. When we submit paper invoices, it can take a long time to get our invoices approved. With Ariba electronic invoicing, we get our invoices paid as quickly as four days, and the visibility into payment

status is like gold.”

Joy Stoelting, Studio Manager, Big-Giant


Supplier Results from Ariba Network: Photo Craft

• Challenge with Paper Too many exceptions Poor on-time payment

performance Inability to reliably forecast

cash flow• Results with Ariba Network

Virtually eliminates invoice exceptions

Accelerate collections from improved process, early payment discounts

“Really helps our DSO”

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"By processing invoices over the Ariba Network, we have improved our cash flow forecasting and seen a dramatic increase in prompt payments. The substantial DSO improvement from the Ariba Network has strengthened our finances, and that’s a huge

advantage in this difficult economy." Trish Jackson, Accounts Receivable, Photo Craft


Best Practices• Readiness

Set clear goals (# suppliers, discount income, etc.) Align the organization

– Early Payment Program Champion– Involve Treasury, Procurement, Finance/AP

Define a terms strategy• Program

Closely align early payment program with supplier enablement High-value campaign Define early payment offer strategy

– Pro-Rated Terms– Supplier Selection– Simple Segmentation

• Measurement Choose a few KPIs to align with goals/objectives

– # Discount Suppliers– $ Discounts Earned– Avg. % APR earned

Learn from experience…and adjust approach


Appendix


Invoice Approval Efficiency Foundational to Working Capital Value

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1%

Dis

cou

nt

Rat

e

Days

2%

20

10

30

Pap

er In

voic

e

Ap

pro

vals

60

3%e-

Invo

ice

Ap

pro

vals

Reduce your invoice approval cycle and

Unlock working capital opportunities

Capture discount savings

Maintain strong vendor relations

Reduce Cycle Time

Reduce Cycle TimeAriba Prorated Terms


Questions


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“Safe Harbor” and Confidential Information Statement

This information reflects the status of Ariba solution planning as of January 2011. All such information is the Confidential Information of Ariba (per the contract between our companies), and must not be further disclosed, as stated in the confidentiality clause of that contract. This presentation contains only intended guidance and is not binding upon Ariba to any particular course of business, product strategy, and/or development. Its content is subject to change without notice. Ariba assumes no responsibility for errors or omissions in this document. Ariba shall have no liability for damages of any kind including without limitation direct, special, indirect, or consequential damages that may result from the use of these materials.


UC

Ariba Working Capital Management

Becoming a Discount Pro!


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UC Ariba Working Capital Management Becoming a Discount Pro! © 2011 Ariba, Inc. All rights reserved