Among the many sometimes contradictory signs that the economy is/may be/is not recovering from the financial crisis of the past few years is this report from the Huffington Post whose headline states "Small Businesses are Having an Easier Time Getting Loans, Fed Survey Finds"

http://www.huffingtonpost.com/2010/08/17/small-businesses-are-havi_n_684480.html

According to this article, which reports on a recent Federal Reserve survey of bank lending practices, "Banks have eased lending standards for small businesses for the first time in nearly four years...Banks had been reporting relaxed credit standards for big corporations. But the new survey marked the first indication that credit was beginning to ease for smaller companies."

While this is certainly welcome news, such a headline seems to be grasping at whatever snippets of good news there is out there in the finance sector...certainly an understandable impulse.  But while credit conditions may be easing somewhat for some small and medium sized businesses, are they easy?  That is, have conditions returned to a normal level where smaller businesses can access the credit they need to support and expand their businesses as their customers increase orders?

I have had conversations with suppliers on the Ariba Network and with business owners around the country who indicate to me that, for the most part, they are not seeing liquidity sources open up and are still struggling to achieve the cash flow levels they need to support their business growth.  Indeed, a blog that I follow (TRE Observer, by Charles Lightener, treobserver.blogspot.com) recently commented on the same situation while giving anecdotes that seem to contradict the contention that credit conditions are much better.  Specifically, he was commenting on the fact that so many suppliers are seeing their receivables being paid late, or their terms extended by their customers, but the result of that is the need for credit/liquidity to cover that cash flow gap...and suppliers he spoke with were having a very difficult time finding it in traditional markets.

But while traditional credit sources (i.e. banks) may or may not be making things easy on small and medium sized businesses, there are new sources of liquidity that have emerged in the crisis and are becoming more mainstream.

One of which is Ariba Receivables Financing (powered by The Receivables Exchange), a tool available to suppliers on he Ariba Network to offer their approved receivables up for sale to the best bidder on a scure, online auction where they can receive funds in as little as 2-3 days (Click this link to learn more about this: http://www.ariba.com/programs/tre/).

Another tool is Ariba Discount Pro which gives Buyers and Suppliers the ability to collaborate over early payment of approved invoices.  Using this tool, Buyers can use their excess cash to inject liquidity into their supply chain by paying suppliers early at an agreed upon discount, resulting in lowered supply chain risk and greater return on idle cash reserves. (http://www.ariba.com/solutions/workingcapital.cfm)

Bottom line, there are very good ways for suppliers/SMBs to access the liquidity and cash flow they need to support and grow their business as the economy recovers, but they aren't necessarily to be found in the traditional sources of credit.  While there is someeasing of credit from some banks, the Huffington Post article quotes Mark Zandi, chief economist at Moody's Analytics as saying "Credit conditions are still incredibly tight..."

Easier for small and medium sized businesses to access bank credit?  Maybe.  But EASY?  No.

How about for you?  If you are a small or medium sized business, I am very interested in hearing your story around accessing credit and cash flow.  If you would be willing to share your experience, please comment below.

The article that appeared in today’s Chicago Business.com on the digital receivables auction highlights the value of a business network to suppliers that can’t tap traditional credit sources for needed cash.

Ariba partner The Receivables Exchange is providing a valuable source of financing for small and medium-sized businesses. The longer it takes for these businesses to get paid, the more valuable this type of funding option becomes.

Receivables financing is an example of how organizations are exploring new ways to better manage their working capital. In today’s business environment, shoring up working capital management processes has become a priority for organizations of all sizes.

The recently published APQC study, “Working Capital Management: New Strategies for Maintaining Financial Strength through Economic Cycles,” documents actions that leading companies are taking. The report includes survey findings and interviews with CFOs and other senior finance executives on strategies for improving working capital performance. In it, you may find ideas that your organization can put to good use.

The revised 2010 Tax Compliance Country Guide V33 includes a new chapter for Malaysia.  As with previous versions, these updates were written and signed by KPMG.  Ariba has now made 11 country specific updates or additions in calendar year 2010.  

What is interesting about Malaysia is as follows:

• Malaysia currently does not have a GST      or a VAT regime. 
• Instead, Malaysia has a Sales Tax which is a tax      on imported taxable goods and taxable goods that are manufactured in Malaysia and a Service Tax which tax on      the provision of prescribed taxable services by taxable persons.  The      Malaysian Government is proposing to implement GST by mid 2011 and the law      was scheduled for second tabling in the Parliament in March 2010.       However, the Malaysian government has postponed the second reading of the      GST Bill indefinitely on 21 March 2010 and as at to date, there is      still no rulings or guidelines issued in respect of e-invoicing in Malaysia. 
• For now, all forms of e-Invoicing are allowed in Malaysia, provided that the Director      General of Customs (“DG”) has given its approval in writing and subject to      any conditions as determined by the DG. 

To supplement a customer's need to obtain DG approval, see the following blog entry "What confirmation is available that the Ariba process and infrastructure are tax compliant?"  We attached a sample letter sent to a Tax Authority which can be retooled for Malaysia or any other country.....

http://exchange.ariba.com/community/solutions/finance/blog/2009/10/19/what-confirmation-is-available-that-the-ariba-process-and-infrastructure-are-tax-compliant

Depending on what the Malaysian Tax Authority wants to do after receiving letter, Ariba provides the following additional tools to support the DG's review process:

• 2010 Tax      Compliance Country Guide V33
• CEN Compliance Matrix - Another tool, that helps customers      communicate the controls in place with the Ariba soltuoin is CEN Compliance Matrix.  Having      a compliant solution is ultimately about having the right control points      as part of a customer’s end to end solution.  The CEN did a great job pulling      together a framework and standards for defining these types of      controls.  In the matrix, we defined the control points and      cross reference specific chapters of the Country Guide where more      elaborate explanation is necessary in this matrix.  Although      these are standards are defined by Europe, I think the structure for      defining control points is a good one and the work can be leveraged for      any geography. See http://www.cen.eu/cen/News/PressReleases/Pages/eInvoicing.aspx for more information on the CEN.

See Ariba's Country Guide for more details on how the Ariba solution maps to the Malaysian requirements.

If you are interested in e-Invoicing in Malaysia, please contact your Ariba representative for the latest version of Ariba's Country Guide or to obtain the Ariba control points as defined in the CEN Compliance Matrix.

From a compliance and risk mangement standpoint, the strength of the Ariba solution in Austria is very similar to other European countries;  it's that we have the right end-to-end controls from enrollment through preparation, receipt, and processing of invoice data.

The following are a subset of such controls which set Ariba apart from other e-Invoicing service providers:

See Ariba's Country Guide for more details on how the Ariba solution maps to the Austrian requirements. If you are interested in e-Invoicing in Austria, please contact your Ariba representative for the latest version of Ariba's Country Guide.

I had the pleasure recently to watch two customers go live and to spend a day talking about e-Invoicing with another.  After reflecting on those meetings I thought I would post to the Exchange about one theme that we spent much of our time discussing, "Non-PO Invoice Management".

  Today, the reality is that many companies have a relatively large number of non-po invoices coming into their AP department.  These invoices are on the higher end of the scale relative to total invoice cost because of the following reasons:

1. Non-PO by definition is an invoice that was based on shipping goods to a buyer without the supplier having been given a Purchase Order.  Therefore there is no Purchase Order available to use the Ariba Network based Supplier Feature, PO-Flip(TM).  Without an orginal PO many issues can come up that are just simply subtotal accuracy, line item price compliance, and even just Vendor match against the Vendor Master File, etc.

2. Non-PO is by definition not based on pre-spend approval so in most cases a Non-PO Invoice must be workflowed after receipt to the business unit and person that ordered the items or services being invoiced.  This opens a few challenges.  First if the supplier doesn't accurately put reference to the business organization then AP must chase down what part of the business needs to approve the invoice.  Even worse, if the supplier puts down either no "purchaser" or puts down the wrong person's name then the invoice could be stuck in review for weeks finding a home.

3. Non-PO invoices may end up on blocked and hold reports because they have triggered "Exceeds Budget" or "Vendor Mismatch".  This can, after all the work of gathering approval, cause again another exception handling activity that can waste time and delay payment.  When a supplier calls AP asking about the status of an invoice and it is a Non-PO invoice the call typically runs longer than a normal inquiry.

  So, what to do about Non-PO?  Well, if you break down the problem into it's pieces you can actually successfully achieve a reasonable STP %, Straight Through Processing Percentage, for your Non-PO invoices.  Especially if you are the type of company that purchases more on budget than based on Purchase Orders.  What are the key steps to take?  First, don't take Non-PO invoices and try to enter them directly into your ERP.  Second, attempt to implement a policy where the Vendor MUST enter the requestor's email address on the Non-PO Invoice.  This will allow your workflow solution to pick up on the email and route the Invoice directly to the business unit that ordered the services or products.  Set your business policies to immediately reject Non-PO invoices back to a supplier if they have not provided the employee's email address.  If you are based in Europe, especially Germany, you may want to use something other than email address depending on your privacy policy and if your email address shows employee names.  Finally, you should establish a Non-PO approval flow in your worklfow that allows for procurement to get visibility into the vendors, commodity types, etc. that are being purchased Non-PO as a feeder into the typical processes for consolidating vendor master/suppliers, make them aware that this kind of purchase may be a good candidate for Purchase Order Spend, and to give them insight into potential one-time Vendors who may be creating leakage in negotiated pricing for a given commodity.

So, if you find yourself with a reasonable amount of Non-PO Spend, I suggest you consider breaking down the issues you have with Non-PO Invoices and put in solutions and procedures to remove the negative impact and maybe even add Non-PO invoices to your STP based invoices.  Remember the Ariba Network can be configured to require suppliers to provide an employee email on Non-PO Invoices so if you have not turned this on you should consider looking at configuring your Business Rules on the Ariba Network to help you with getting approval of invoices that don't have Purchase Orders.

I would invite you to add comments to the posting to share with the Ariba Exchange other ways that your organization addresses the challenge of Non-PO Invoices.

Regards,

Joe

With the economy still in shaky recovery stage and companies doing everything they can in a tight credit environment to free up their cash flow, attention has turned to the area of working capital management.  I am finding that many companies have begun giving serious attention over the past year to this area, which previously flew well under the radar in headier days.  Now many of my customers are looking at their payables, receivables and inventory (the 3 pillars of working capital -- Receivables + Inventory - Payables = Working Cap.) to ensure that they are as nimble as possible with as small a working capital need as possible.

Which brings me to the question, do you know where your working capital is?  How do you stand in general and against your peers in particular?  Are your payment terms optimal, or is there room to move them out?  What about your receivables?

Well, in case you are curious about where your company's performance stands compared to industry and competitive benchmarks, I thought I would pass along a very interesting working capital profiler I came across recently from Booz & Co. (one of the world's premier working capital consultancies). Click on this link and type in your company's name to see how you stand in comparison to your industry:

http://workingcapital.booz.com/

So, how well are you managing your working capital (or is it managing you)?  If you are falling short of your industry's best practices, particularly in the area of Days Payable or Days Receivable, I'd love to have a dialogue with you about some options for improving your standing.  Ariba's Working Capital Management suite of solutions offers a variety of tools to help you positively impact those measures and maximize the value of your working capital.

Drew Hofler

Sr. Product Manager, Working Capital Management Solutions

Last week, James Tucker - Director of Product Marketing for Ariba's Financial and Network Solutions - held a webinar on "The New Normal in Payables Outsourcing" to discuss the latest trends in outsourcing AP.  Since finance organizations are under pressure to find areas to cut costs, outsourcing the manual AP processes is a logical first step.  However, only 34% of surveyed executives reported they gained any important benefits and 49% would like to start their outsourcing project over.* 

What is the cause for the dissatisfaction of their outsourcing project?

As James discusses in the webinar, executive’s propensity to focus on cost cutting and reducing head count and without emphasizing the need for overall optimization is the key problem – unrealized potential and lost opportunity to innovate.  Successful programs have focused on not only cost reduction, but a solution and partnership that is flexible, innovative

For the entire webinar and to learn more about the best practices in payables outsourcing - go to:  http://www.ariba.com/resourcelibrary/views/resource_library_asset_brief.cfm?asset_id=672

*“Outsourcing Programs Hampered by Poor Planning and Narrow Focus on Cost Savings” – Deloitte, February 2008