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Managing the Financial Supply Chain

with SAP

L’offre SAP FSCM

Gilles Deguillaume, Solution Expert, SAP France

June 3rd, 2009


Agenda

1. The Need to Optimize the Cycle


2. Value Proposition of SAP’s Solution
3. SAP Credit-to-Cash Solution Components
4. Achieving Results with SAP
5. Summary

© SAP 2007 / Page 2


Typical barriers of the credit-to-cash cycle

„ Independent functions „ Fragmented and inefficient

„ No coordination in collections/ „ Paper-based and labor-


dispute resolution intensive

„ Inconsistent credit Result: „ Lack of Standardization


policies across divisions
High Cost of
Finance Operations
„ Poor Insight into High Bad Debt Risk „ Fragmented stand-alone
customer Credit risk systems
High DSOs
„ No insight into process „ No workflow or data
bottle necks management

„ Lack control over processes, „ No integration with GL


workflow or prioritization or AR systems

© SAP 2007 / Page 3


Overcoming Barriers in the Financial Supply
Chain Becomes a Competitive Differentiator

Financial Institutions

Suppliers
Customers

Sources of Cash Managing Cash Uses of Cash


Credit2Cash Treasury Invoice2Pay

Financial Supply Chain


Physical Supply Chain

“ Leading organizations will use the Financial Value Chain to improve the efficiency of the
Finance function and to optimize working capital.

© SAP 2007 / Page 4


John E. Van Decker, Gartner, 2006
What it takes to optimize the financial supply
chain

Key requirements to overcome barriers in the


financial supply chain:

„ Integrated systems and processes

„ Standardization and greater automation

„ Streamline manual, paper based processes

„ Electronic bank integration to minimize reconciliation time,


reduce fees

„ Global visibility into cash positions and payments

„ Consistent, global customer credit policies

„ Systematic, collaborative approach to collections and


disputes

© SAP 2007 / Page 5


Agenda

1. The Need to Optimize the Cycle


2. Value Proposition of SAP’s Solution
3. SAP Credit-to-Cash Solution Components
4. Achieving Results with SAP
5. Summary

© SAP 2007 / Page 6


SAP integrates and streamlines the financial
supply chain
Financial Analyst Treasurer
“We know exactly which customers SALARIES
“We have complete insight into our
are high credit risks and our policies daily cash positions which lowers
control our exposure” borrowing costs and maximizes returns
on cash”
Accounts Receivable
“Our customers receive their
„ Reliable Cash and Liquidity Forecasts Credit Manager
invoices online which reduces “Our global credit exposure is
„ Aligned Approach for Collections and Disputes
our costs” based on a harmonized
„ Global Credit Management customer database”
Account Manager „ Electronic Invoicing and Payment
“Our face to the customer „ Standardization and Automation Sales Clerk
is more professional “Customer credit limit is
„ Integrated Systems and Processes checked automatically
since our AR and
collections are aligned” when the purchase order
is processed”

Customer Customer

… the bottom-line:
Lower costs and DSOs, lower risks and free cash for financing company growth
© SAP 2007 / Page 7
Optimizing the Credit-to-Cash Cycle with SAP

Barriers Finance Strategies SAP Solutions

„ Monitor performance of financial processes „ SAP CPM


Insight & „ Implement financial controls and fraud „ SAP GRC
Control detection mechanism
Optimizing the Credit to Cash Cycle

„ SAP Credit Management


„ Control global credit risk

„ Establish greater cross-functional coordination


„ SAP ERP Financials
„ Define global customer credit policies
Organization „ SAP Credit Management
„ Establish clear lines of ownership and
escalation policies „ SAP Dispute Management

„ Organize unstructured data and collaborate


via workflows „ SAP Collections & Dispute Mgmt

Processes „ Streamline labor-intensive processes via „ SAP Biller Direct


standardization and automation
„ SAP Accounts Receivable
„ Straight-through payment processing

„ Enterprise Service Bundles


„ Utilize open standards to connect financial
systems with customers, suppliers and banks „ SAP Biller Direct
IT Systems
„ Integrate collections / dispute systems with „ SAP ERP Financials
accounting and AR systems
„ SAP NetWeaver/SWIFT integration

© SAP 2007 / Page 8


Agenda

1. The Need to Optimize the Cycle


2. Value Proposition of SAP’s Solution
3. SAP Credit-to-Cash Solution Components
4. Achieving Results with SAP
5. Summary

© SAP 2007 / Page 9


SAP Financial Supply Chain Management
Seamless Integration with the Core Accounting System

Financial Institutions

Suppliers
Customers

Credit2Cash Treasury Procure2Pay


Check Resolve Collect Payment Transmit Settle
eInvoice
Credit disputes cash Run Payments Payments

Accounts Receivable Manage Manage Accounts Payable


cash Risk

Financial Supply Chain


Physical Supply Chain

© SAP 2007 / Page 10


Streamlining Credit2Cash with SAP
Comprehensive Solutions to Accelerate Receivables and Collections

SAP Credit SAP Bank


management SAP Biller Direct Communication
Management

Check
credit- Issue Settle
& pay Reconcile
worthiness invoice

Resolve Disputes
and Collect Cash

SAP Dispute SAP Collections


management management

© SAP 2007 / Page 11


SAP Financial Supply Chain Management
Solutions for streamlining the credit-to-cash cycle

„ Reduce risk through global evaluations and policy


SAP Credit Management Check
Credit
„ Set and monitor credit limits, reduce bad debt
expense

„ Reduce billing costs through electronic invoicing


SAP Biller Direct eInvoice
„ Offer payment services (Credit Card, Direct Debit)

Resolve
„ Streamline dispute management and reduce costs
SAP Dispute Management disputes „ Faster resolution and lower DSOs

SAP Collections Collect „ Streamline collections and improve success rates


Management cash
„ Lower collections costs and bad debt write-offs

SAP Bank Communication „ Receive bank statement electronically via SWIFT


Management * and Receive
SAP ERP FI - AR Payments „ Integrate with Accounts Receivable Settlement

* SAP Bank Relationship Management is available with SAP ERP Enhancement Package 2 as part of Treasury applications from SAP

© SAP 2007 / Page 12


SAP Credit Management

Customer Challenges
„ Takes too long to evaluate credit
„ Inconsistent methods and policies
„ No global view of exposure
„ Evaluations hold up sales orders

SAP Functionality Benefits


„ Analyze risk and set policy quickly „ Faster credit decisions
„ Consistent evaluation and policy „ Lower costs and resource
demands
„ Global view of credit exposure
„ Reduce bad debt write-offs
„ Automatically update exposure
throughout customer lifecycle „ Reduce sales order delays

© SAP 2007 / Page 13


Credit Manager Portal

Functions
„ Role-based portal providing
comprehensive view for
quick credit decisions
„ Single point of access for all
relevant credit information
„ Provides global view of
exposure to each customer

Business Benefits
„ Improves user productivity
by consolidating of multiple
information sources
„ Improves communication
between sales, credit and
accounting departments
„ Sales people can access
customer profile from the
field

© SAP 2007 / Page 14


Customer Credit Profile

Functionality
„ Fast, consistent rating of
business partners via
scoring
„ Utilizes broad range of
internal and external data for
usage in credit scoring
„ Credit reports are stored in
the customer master data
„ Profiles are dynamically
updated with new
information as relationship
evolves

© SAP 2007 / Page 15


SAP Biller Direct

Challenges
„ High billing costs
„ Paper-based processes increase errors
and drive up costs
„ Mail delays bill delivery
„ High DSOs

Functionality Benefits
„ Customers receive bills quicker via web „ Lower billing costs and resource
demands
„ View balances and payment history
„ Receive payments faster
„ Make payments online
„ Decrease DSOs
„ Log dispute cases
„ Improve customer satisfaction

© SAP 2007 / Page 16


SAP Biller Direct: list of open invoices

„ Customers can see


all of their bills and
credit notes
„ Display the
documents as PDF,
HTML or XML
„ Download bill data
as PDF, XML or
CSV
„ SAP Biller Direct is
tightly integrated
with SAP AR
(common database)

© SAP 2007 / Page 17


Customizable look and feel

Easily adapt the look


and feel to match your
company’s branding

© SAP 2007 / Page 18


SAP Dispute Management

Challenges
„ Disputes take too long to resolve, tie up
liquidity
„ High cost and effort to resolve disputes
„ High DSOs
„ Impact customer satisfaction

Functionality Benefits
„ Greater automation, workflow and „ Faster dispute resolutions and at
collaboration lower cost
„ Centralized information repository „ Reduce DSOs
„ Automatic escalations based on time „ Improve customer satisfaction
„ Customers can log dispute cases via
Biller Direct

© SAP 2007 / Page 19


Dispute case: single source of all relevant
information

Reason, Status & Roles

Amount Fields

Customer
Contact Person

Notes and Log

Linked Objects

© SAP 2007 / Page 20


Dispute case

„ Summarizes all dispute-related


data for efficient access and
retrieval
„ Can be accessed and processed
by all authorized employees
„ Quickly updated-users can create
notes, change an action log or
link business objects to the case
„ They can also create
correspondence

© SAP 2007 / Page 21


Workflow example

2 „ John reads the e-mail 3 „ Tom assigns the account manager


„ He accesses the workflow inbox Sally as next processor
and executes the work item „ He asks Sally to decide about dispute
„ He confirms late delivery „ Work item is created and
„ He returns dispute case to Tom e-mail is sent to Sally
John
Shipping Clerk

1 „ Tom assigns shipping clerk John


as next processor
„ He asks John to confirm late
delivery
„ Work item is created and Sally
e-mail is sent to inform John Account Manager

Tom 4 „ Sally reads the e-mail


Dispute Manager „ She accesses the workflow inbox and
executes the work item
„ She decides that credit memo should be
granted
„ She returns dispute case to Tom

6 „ Hans reads the e-mail 5 „ Tom assigns the receivables


„ He accesses the workflow inbox manager Hans as next
and executes the work item processor
„ He posts the credit memo „ He asks Hans to post credit
„ He returns the dispute case to memo
Hans „ Work item is created and
Tom
Receivables Manager e-mail sent out to Hans
© SAP 2007 / Page 22
SAP Collections Management

Challenges
„ Inconsistent account prioritization
„ Labor intensive and long cycle times
„ Inconsistent collection strategies
„ High costs of collections
„ Increase bad debt risk

Functionality Benefits
„ Rules-based collections strategies „ Improved collections rates
„ Prioritization via work lists „ Reduced bad debt expense
„ All relevant information at a glance „ Streamline collections and reduce
operating costs
„ Proactive targeting of “late pays”
„ Reduce DSOs

© SAP 2007 / Page 23


More efficient collections – the worklist

Each collection specialists gets a daily worklist containing all customers that should be contacted.
Customers are prioritized according to collection rules as part of broader collections strategy.

Aging of receivables per Detail valuation of customer


selected customer per collection rule

Link to business partner Fetch next worklist items

My Worklist

Bus. Partner Name Priority Curr. Open To Be Collected Promised Disputed Dunned Level Dun. Date Last Pmt. Last Contact Credit Limit Exposure Risk Class

400200 Electronics Corp. Very high USD 12,534 5,455 2,544 1,874 2,688 3 03/03/05 15/01/05 03/15/05 20,000 76 % C1
102300 Media Tronics Very High USD 9,765 8,566 589 8,566 2 03/03/05 01/29/05 03/02/05 15,000 90 % B2

312045 Trade Markets Int. High USD 35,458 21,369 4,890 2,561 15,697 2 03/03/05 02/02/05 03/04/05 40,000 88 % B1

536211 Contilia Enterprise High USD 25,566 11,368 11,368 2 03/03/05 02/21/05 03/10/05 25,000 61 % A3

168999 Happy Camper High USD 12,687 8,512 2,566 8,512 1 03/03/05 02/15/05 50,000 20 % A2

Summarizes information concerning


„ Customer account in Accounts Receivable
„ Past collection activities
„ Credit Management data
© SAP 2007 / Page 24
SAP Collections Management: worklist and
drilldown
To contact the customer, the collection specialist navigates from the selected worklist item to the function
‘Process Receivables’. This function offers detailed customer information and supports various collection
activities.

Navigation

© SAP 2007 / Page 25


Function process receivables

Collection specialists can drill down into list detail of all open invoices which are populated by SAP-AR
ensuring every role working the case has the most up-to-date information.

View invoice history View promises to pay View dispute case(s)


of selected invoice per selected invoice per selected invoice
„ Overview of all
customer’s open
invoices
„ Up-to-date status
information on
each invoice
„ Creation of
promises to pay
and dispute cases
possible
„ Navigation to other
tab pages gives
overview of past
payments, past
customer contacts,
open
resubmissions etc.

© SAP 2007 / Page 26


Key Functions of SAP Cash and Liquidity
Management

Cash Management Decisions based on:

Cash Position Liquidity Forecast

Bank accounts Bank Memo Treasury Earmarked Disputes Customer/Vendor- Purchase requisitions
clearing records Deals funds open items
In-House Cash Purchase orders
accounts Intra-day
banks Real estate Blocked items
bank Sales orders
Payments
statements … Down payment
in transit …
… requests

Financials Industry Financials Logistics


Solutions

Non- Non- Non-


SAP SAP SAP

© SAP 2007
2008 / Page 27
27
SAP In-House Cash

Customer Challenges
„ Fragmented global cash balances
„ Lack visibility and control
„ Complex and high cost cash transfers
„ Currency translation losses

SAP Functionality Benefits


„ Centralized control over cash and „ Improved operating efficiency
payments „ Achieve greater control over cash
„ Automate incoming and outgoing „ Optimize liquidity and cash
payment processing availability
„ Internal netting and pooling, external „ Reduce FX losses and bank fees
payments on behalf

© SAP 2007 / Page 28


SAP Bank Communication Management

Challenges
Accounts SAP

Bank Relationship Management*


payable
„ Many costly point-to-point connections Exchange
Infrastructure

with banks Accounts


receivable
SWIFTNet
„ Cumbersome matching of payments with Treasury
SAP
SWIFTNet
interface
invoices Other
Integration
Package
for SWIFT*

„ High efforts for following exceptions

Corporate Client

Functionality Benefits
„ Receive bank statement electronically via „ Saved costs via standardization
SWIFTNet of all bank connections
„ Automatic reconciliation of incoming „ Saved efforts by automation
payment with customer invoice „ Streamlined straight-through-
„ Monitoring of exceptions and processing processing of incoming payments
status

© SAP 2007 / Page 29


Agenda

1. The Need to Optimize the Cycle


2. Value Proposition of SAP’s Solution
3. SAP Credit-to-Cash Solution Components
4. Achieving Results with SAP
5. Summary

© SAP 2007 / Page 30


New means of managing the financial value
chain

SAP FSCM Delivering Value


Full Suite Adoption-Dispute Management Live
„ Implemented disciplined dispute resolution process
„ Automatic escalations if not resolved within specific time
„ Reduced DSO from 58 days to “around 45 days”
„ Lowered amount of disputes—reduced bad debt allowance

Runs Credit Management


„ Automated credit assessment and limit setting
„ Reduced working capital and bad debt
„ Enables faster sales order turn-around
„ Deployed across subsidiaries for standardized policy

Runs Biller Direct


„ Electronic invoicing via Arcor customer portal
„ Reduced staffing levels and billing costs
„ Nearly complete billing automation
„ Increased customer satisfaction

© SAP 2007 / Page 31


Estimated benefits of an integrated SAP
solution
Tangible Benefits* % Impact
Operating Costs
„ Reduce Accounts Payable/Receivable invoice processing & re-work 15% - 40%

„ Reduce Uncollectible Accounts - Bad Debt 5% - 15%


„ Reduce costs via use of Electronic Bill Presentment & Payment (bill 60% - 80%
creation/receipt/settlement, postage, printing/distribution)

„ Reduce reconciliation costs 50% - 80%


„ Reduce term discounts lost 15% -40%
„ Improve dispute management (reduce costs) 10% - 15%
„ Improve credit scoring efficiency & application transaction processing 5% - 15%
„ Reduce administrative overhead and bank fees (bank accounts, payment 15% - 25%
transactions, bank communications)

„ Improve Cash Forecasting and Reporting 10% - 15%

Working Capital
„ Reduction in Days Sales Outstanding (DSO) (increase on-time payments) 10% - 25%

„ Reduce receivables (improved forecast accuracy) 10% - 15%

Revenue
„ Increase revenues with risk-free accounts (decreased rate of credit refusals) 0.5% - 1.0%

* Benchmarks from SAP’s Case Studies/Success Stories and industry sources

© SAP 2007 / Page 32


Customer success: Sandvik

Sandvik runs SAP Credit Management


„ Automation of credit limit and credit assessment processes
„ Delivery of sophisticated key figures in reporting
„ Important contribution to reduction of working capital
„ Roll-out to various subsidiaries and business lines

“ We plan to reduce bad debt risk by 20-50 percent. We will speed information
access by 20-40 percent for sales and credit staff. We will reduce the time needed
to collect credit information and enter data into the system by 10-20 percent.
Tim Ziert, Senior Credit Manager

© SAP 2007 / Page 33


SAP FSCM at Dow Corning

Dow Corning runs SAP Dispute Management


„ Used in conjunction with scorecards—everyone measured on number of open disputes,
resolution rates, etc.
„ Automatic escalation after specific time
„ Significant reduction in DSO from 58 days to “around 45 days”
„ Lowered dispute dollar amount by 75%--allowed reduction in allowance for doubtful accounts
„ SAP Treasury implemented, planning Biller Direct, Credit and Collections Management

“ SAP (Dispute management) has been a great enabler and strategic advantage for
us...it facilitates teamwork and collaborations to get disputes resolved quickly Tim Ziert,
Senior Credit Manager
Ritch Cushway, Global Customer Financial Services Manager

© SAP 2007 / Page 34


SAP FSCM customers

© SAP 2007 / Page 35


Agenda

1. The Need to Optimize the Cycle


2. Value Proposition of SAP’s Solution
3. SAP Credit-to-Cash Solution Components
4. Achieving Results with SAP
5. Summary

© SAP 2007 / Page 36


The bottom line…

Integrated Solution…
„ Manage the Financial Supply Chain seamlessly embedded into the related
processes of Logistics, Financial Accounting and Treasury Management
„ End-to-End Connections with Suppliers, Customers and Banks

The Ability to Optimize according to Particular Pain Points


„ Reduced Risk of Bad Debt
„ Streamlined Collections and Dispute Management, reduced DSO
„ Reduced Costs of Invoicing with Biller Direct

The Power to Enable Financial Transformation


„ Strong platform for centralization of tasks as shared services
„ New insights into operational business performance for better decision
making

© SAP 2007 / Page 37


Thank you!

© SAP 2007 / Page 38

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