2 Replies Latest reply on Oct 29, 2012 4:53 AM by James Lambert

    Payment terms - how do you handle them?

    James Lambert Novice

      New to Ariba, I'm struggling how to capture working capital impact. I need to be able to have changes in payment terms included in optimisation scenarios and have those optimisation scenarios show the overall value equation. i.e. impact to year on year spending, impact to working capital. Is this even possible?

        • Re: Payment terms - how do you handle them?
          David Morel Master

          You can include the impact of their payment terms via a total cost formula. The supplier can choose the payment term via a question in the event, the options for that question can be mapped to different impact values...say .95, .98, 1.0, 1.03, 1.05 and the impact included in the total cost. Then you can optimize to minimize cost.

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            • Re: Payment terms - how do you handle them?
              James Lambert Novice

              Thanks David - that's a great start. As a follow on, could you answer these addtional questions?


              1. To take account of working capital impact in any sourcing event, it will be necessary to always use the total cost RFP. Correct?
              2. Am I correct in thinking we can set up the baseline payment terms in each item (expressed in days) and then use a formula based on the numeric value for payment terms selected by a participating supplier in the event?
              3. Is it possible to separate the working capital impact from the year on year savings impact?


              Thanks in advance for your additonal input!