There have been a number of key changes in the B2B eCommerce Software Markets over the last 5 years and eInvoicing is one of the new and fastest growing spaces.  Ariba's Financial Solutions including Invoice Management, Payment Management and Working Capital Manager are leading the way toward removing paper from the day today financial process.  Accounts Receivable initiates almost all paper invoices today and many of these organizations are looking for ways to convert completely to paperless invoice processing.  Platforms like the Ariba Network are proven to provide small, medium and large suppliers the ability to move quickly off of paper invoice processing.

  There are a number of key factors driving this rapid change in the eInvoice market.

1. Buyer Demand - Many of our suppliers have been asked by their customers to adopt an eInvoice policy when sending request for payment

2. Market Deman - The competitive nature of the current global market is causing suppliers to adopt eInvoice to better compete and to stand out in an RFP or sourcing exercise.  Saying you are Ariba Ready for eInvoicing is the best way to stand out.

3. Cost Savings - Suppliers are finding their cost per invoice is droping by greater than 50%

4. Acceleration of Cash - Cash is king and not only are Suppliers being paid faster but they are gaining new ways to accelerate collection of cash directly tied to the value of eInvoicing.  With Ariba they can also leverage discount management and receivables auctioning with The Receivables Exchange, to open up additional sources of capital.

  It is becoming clear that the sellers desire to meet the needs of their customers and many of the other above value drivers is creating a fast growing set of solution providers.  All you need to do is go to google and type in search for eInvoice and you get eleven companies paying for placement.  Many of which noone has heard of in the past.  Ask the analysts what they think of eInvoicing and they quickly get into the challenges for suppliers to navigate the large number of offerings and the needs of their customers.

  It's important when looking at an eInvoice solution as a large buying organization to think about the fact that your seller is probably more motivated to move to eInvoicing than you are and that your solution platform and approach you pick for removing paper processing should take into consideration not only the value drivers for the suppliers but the operational needs of the suppliers.  One good example of how Ariba provides value to the seller is our PO-FLIP trademarked feature which makes it fast for a seller to generate an accurate invoice and to track invoices to the originating purchase order.

It's really important as you choose how you respond to your Sellers request for eInvoice that you consider how your Procurement organization and Operational groups want to work with the Sellers.  Many decentralized Procurement groups own the relationships with the Sellers and can help you navigate the increasing requests that Sellers are making to move to paperless processing.

Who are the players in the eInvoice Space?  Here is a sampling.

EDI VAN's:

   - Sterling, www.sterlingcommerce.com, http://www.google.com/search?hl=en&q=Sterling+commerce&aq=f&aqi=&aql=&oq=&gs_rfai=

   - GXS, www.gxs.com, http://www.google.com/search?hl=en&q=GXS&aq=f&aqi=g2g-s1g4g-s1g2&aql=&oq=&gs_rfai=

   - and others in EDI solution space that just allow sending of a document but with no other compelling features

Invoice Only Providers:

   - OB10, allows suppliers to send invoices, www.ob10.com, http://www.google.com/search?hl=en&q=OB10&aq=f&aqi=g10c1&aql=&oq=&gs_rfai=

   - Basware, buyer side tools set that can take eInvoices from other networks, www.basware.com, http://www.google.com/search?hl=en&q=Basware&aq=f&aqi=&aql=&oq=&gs_rfai=

   - Transcepta, great group of guys who allow sellers to more easily create invoices, www.transcepta.com, http://www.google.com/search?hl=en&q=Transcepta&aq=f&aqi=g10&aql=&oq=&gs_rfai=

  - JPMC Xign, an early provider of electronic invoice with much more focus now on Pcard opportunities. www.xign.net , http://www.google.com/search?hl=en&q=Xign&aq=f&aqi=&aql=&oq=&gs_rfai=

  - Bottomline, focused on payment but some basic invoice, www.bottomline.com, http://www.google.com/search?hl=en&source=hp&q=Bottomline&aq=f&aqi=g10&aql=&oq=&gs_rfai=C0yt_gu2cTNmZD4W8NqL3wOYIAAAAqgQFT9DSYhw

  - QuickBooksOnline, small supplier capabilities, www.quickbooksonline.com, http://www.google.com/search?hl=en&source=hp&q=Quickbooks+Online&aq=f&aqi=n1g10a1&aql=&oq=&gs_rfai=CO4atRu6cTPi-F4yYoASi0d3_CgAAAKoEBU_QNZVf

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I encourage you to talk to your suppliers to discuss what platforms they use, where they get value and what their needs are.  It is becoming very clear that Sellers are driving the adoption of eInvoice globally.  China, India, Japan and other Eastern Regions are also quickly moving away from paper.

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

We all know that Buyers want to hold on to cash and Suppliers want to be paid early.  It's the age old problem, but what to do?  Find Tools to not only reduce your "Working Capital Days", but balance that with lowing your cost of captial.  It's not just about DPO and DSO anymore.  You must re-think these based on "The Time Value of Money"

The "Time Value of Money" tools on the Ariba Network can drive an answer to today's most serious business problem - Low Cost Liquidity.  Cash Management isn't just important, it is now the difference between survival and bankruptcy.  A very smart CFO told me just a few days ago, before this economic down turn most people were not looking at cash management so closely and if they needed capital they would go to their bank or to Wall Street.  But, he said, today the doors at Wall Street are closed and the Banks have almost forgotten how to lend.  So what to do?  First start re-learning how to manage your cash and your cash tied up in your receivables.  Second, shift your thinking to "The Time Value of Money".

My 15 year old daughter came to me and said, "Dad, can I have my allowance early this month?"  Like typical fathers, I said, "Why?"  She said there is a sale at the mall on jeans and she doesn't want to miss out.  She knows me so she said, "Dad, if I buy the jeans now, I can save money.....20%"  I thought for a second and responded, "Ok, I'll give you your money early but I get to keep 5% of the allowance for giving it to you early!"  She paused and looked at me like I was an alien.  I asked her, how much are you willing to give up to get your money early?  She paused again as her brain started processing the concept of giving up a little money to get a bunch of cash early and how this would help her get her discount.  She was learning, "The Time Value of Money".  What did she decide, she took the money less 5% and bought the jeans on sale.

My daughter is like many suppliers in the market today, if they could get liquidity earlier they could invest it back in their business and either take advantage of a discount in inventory they were already going to buy, or to invest in growting their staff as is critical to many consulting, services and contingent labor businesses.  It isn't wrong to look for early payment and it is natural to exchange this for a small discount based on a reasonable cost of capital.  Why did my daughter come to me?  Because the banks won't lend her money.  Why do suppliers come to their buyers for early payment or to services like the Receivables Exchange?  Same reasons, the banks won't lend them money.  Start thinking "Time Value of Money" and stop thinking about just simple price and cost.  The supply chain needs you.  One estimate has the current capital tied up in US base corporations as greater than $1 Trillion.  Wow, image what would happen if this was unlocked in exchange for a discount.  Buyers would drop the cost savings to their bottom line and suppliers/sellers would be able to grow again, hire, make stuff.

There is only one tool today for my daughter and it's called Dad's wallet.  But for small to medium sized suppliers, there are a number of working capital solutions at your disposal.  Early payment discounting and Receivables Financing being two of the most efficient tools today.  So, I'll give my daughter her $50 less $2.50 which will go to my bottom line this month.   I suggest you strongly consider moving to Early Payment Discounting and Receivables Financing like The Receivable Exchange.  See a great description of what they do and how they help here at CNN.COM -

Buyers and Suppliers come in all sizes and find themselve in many different liquidity situations.  Large Buyers in today's economy are looking to extend payment terms by establishing new pre-negotiated payment terms, Net 45 or Net 90, with their suppliers.  Buyers are looking to grow their float and increase their DPO - Days Payables Outstanding.  It makes them look good on their books.  This is causing huge problems in the supply chain and world economy as it is locking up huge amounts of cash within buying organizations.  Everything slows.  Small to Medium size supplier talk to us every day when they call our Ariba Supplier Network team.  They are struggling to keep their doors open.  All they need is short-term liquidity.  The liquidity held by their customers because of extended payment terms. 

So, how do you solve this.  Here is how.  You give the small to medium size suppliers an alternative to cash, at a low cost and in an very efficient way.  So, buyers if you are going to keep your long payment terms, or you have plans on pushing your payment terms out to your suppliers it is in your best interest to offer you suppliers to very powerful tools.  Tools that are good for them and good for you.  Discount Management tools like thos from Ariba which allow you to pay your supplier early in echange for a discount on the amount due.  We provide a hurdle rate setting to ensure this savings always exceeds your current cost of capital, so it gives you a better return than if you hold on to your cash.  Second, and maybe the most simple way is to provide them a second tool.  Offer them The Receivables Exchange, which gives them an independent way to sell their receivables which offers them a low cost way to get liquidity and allows you to still hold onto your cash.  Both solutions are even more efficient and more valuable to both buyers and suppliers if you join the Ariba Network since we speed up the PO to Invoice to Pay cycle you will have a greater "Time Value of Money" equation working in your favor.  A faster and more efficient supply chain on the Ariba Network means a lower cost of doing business and a greater ability to manage your Working Capital needs.

You have seen a few other blogs from me around "The Time Value of Money", which focuses on efficient Cash Management.  I'll continue to share that I feel the tension between buyers and suppliers, buyers wanting to hold onto their cash and suppliers wanting to be paid early, will never go away.  But it will become more efficient and benefitial as you adopt key techologies like Discount Management and Receivables Auctioning both available now on the Ariba Network.

Ariba offers some White Papers to learn more: http://www.ariba.com/solutions/workingcapital.cfm

Transforming A/P Managers into Working Capital Heroes

http://www.ariba.com/resourcelibrary/views/resource_library_asset_brief.cfm?asset_id=572

Strategies for High-Yield Working Capital in Today's Economic Environment

http://www.ariba.com/resourcelibrary/views/resource_library_asset_brief.cfm?asset_id=487