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5 Proven Strategies for Working Capital

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Tradeshift
Tradeshift

This document summarizes a webcast about improving working capital through various payment strategies. It discusses 5 proven strategies: 1) faster invoice approval through automation, 2) improving payment terms through supplier onboarding, 3) enabling more early payment discounts through dynamic discounting, 4) capturing rebates through buyer-initiated payments, and 5) expanding available cash through supply chain financing. Technology plays a key role in enabling these strategies through features like collaborative workflows, financial solutions, and connecting all parties. The webcast highlights how these strategies can save millions through increased working capital compared to traditional AP automation alone.

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5 Proven Strategies to Improve Working Capital July 9, 2014 Hi, thanks for joining us! We will begin the webcast shortly but in the meantime, please keep in mind: • Questions or comments should be entered into the chat box • Use #tradeshift when tweeting • Presentation and recording will be sent after
Agenda  Introductions  The BIG value in Payables  5 Proven Strategies for Working Capital Savings  Putting it all together  Technology’s Role in Working Capital Optimization  Q&A
Introductions Rinus Strydom  VP Alliances & Solutions Consulting, Tradeshift  15 years using, deploying, and marketing enterprise procure-to-pay solutions Tom Glassanos  President Bavelos Group  Over 10 years Early Payment Program experience  “Dynamic Discounting” inventor  3 times Supply Chain Executive Magazine “Pro to Know”
Bavelos Group Profile  Early Pay Programs  Supply Chain Financing  Best practice consulting Advisory Services for Working Capital Optimization
Firms the Bavelos Team Has Helped Bavelos methods for working capital have benefited over 50 global corporations and more than $1 trillion in spend.
Big Value in Payables
The Big Value in Payables Financing the supply chain to strengthen trade and save millions 0 Days Invoice 15 Days Approve 60 Days Due Date The Opportunity $9 Trillion Global Investment Opportunity* *Main Street Advisors
The Early Payment Opportunity * Actual Bavelos EPD experience Over 80% of suppliers surveyed will consider discounts for accelerated cash 0.2% 0.3% 0.15% 3% Money Market AADebt 30 Days U.S. Treasury 30 Days Early Pay Discounts 8-40%* *Early pay discounts yield .5-3% over 10-60 days risk free today’s treasury Cash Return options Early Pay Discounts
What Can Be Achieved?  Up to 1/2% of savings on all spend  Over 30% APR on use of cash  Increase in cash via longer DPO  Efficiency - 99% paperless AP 2% 15 net 45 ASAP Day 10 Day 30 Day 45 Early pay discounts Rule of thumb: $3-$5 million of savings for every billion of spend!* *Data from over 50 major corporations; >250k vendors; >$1 trillion spend
How to Enable the Working Capital Opportunity  Longer net terms – more need for cash  Faster approval – more early payments Day 10 Day 30 Day 45 Day 60 Faster invoice approval Longer Net Terms
5 Proven Strategies for Working Capital Savings
1. Faster Approval – Core Automation  Electronic invoicing  Workflow approval  Pre-matching (PO Flip) Shorten the approval time with core AP automation tools
2. Improve Terms – Supplier Onboarding  Leverage on-boarding  Extend net payment terms  Propose early payment terms  Document this in the enrollment 2% 15 net 45 ASAP Day 10 Day 30 Day 45 “Transform Terms” when you onboard suppliers for electronic invoicing The Foundation of an Early Pay Program
Components of a “Terms Transformation” Analytical assessment – Which suppliers to target – Number of days for approval – Optimal discount terms to offer Discount oriented terms policy – Extended net terms – Explicit hurdle rate Compelling vendor proposition – Choice of early pay options – Electronic payment 2% 15 net 45 ASAP Day 10 Day 30 Day 45 A process of analytics & telesales
Terms Transformation - Speed to Benefits Typical campaigns are 90-120 days in length (Can take place prior to automation or the same time) Kickoff Outreach Begins Initial Results >75% Results 4 weeks 4 weeks 8 weeks
3. Enable More Discounts - Dynamic Discounting  How it works – APR rate is fixed – Discount varies  Benefits – Discounts on any approval up to net date – Picks up large savings for earlier payment Invoice approval time Day 10 0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% Day 30 Day 45 Day 60 2% 10 ASAP 45 Discounts >2% All invoices qualify for a discount Use of ASAP (sliding slope) Terms
Dynamic Discounting  How it works – Presents “ad hoc” early pay offers – Two methods: POs or email  Benefits – Skims incremental savings at key times – Offers based on supplier end of month & quarter cash needs – No pre-existing discount terms needed Enables opportunity for discounts on every invoice Pay Me Now Offer • $3,200 approved to pay • Pay today for 1% discount • Click “here” to approve Use of “ad hoc” early payment terms
4. Capture Rebates - Payment Automation  “Buyer Initiated Payment” (BIP)  Works on mainstream ERP spend  Suppliers pays interchange fee (equivalent to early pay discount)  Bank rebates % of fee to buyer (share of the discount)  Buyer gains 30 days of cash Rebates as much as 1% on 25% of spend 1 Buyer ERP approves payment & initiates authorization DIRECTLY to card network. 2 Supplier sends invoice to buyer 3 Card network authenticates and transfers funds Supplier bank Buyer bank Use of Buyer Initiated Payment (BIP) Cards
5. Expand Available Cash - Supply Chain Finance  Bank financing for extended DPO – Finances cash to supplier on “buyer approved” invoices – Low cost credit – buyer approval limits risk (typically LIBOR+ rates) – Most valuable for investment grade buyers – Generates free cash for buyers by pushing out DPO  Treated as a factoring transaction – Bank establishes factoring relationship with supplier – No credit impact on the buyer  Targets the biggest suppliers who can impact DPO
Case Example: Proctor & Gamble “P&G Stretches Payments to Suppliers” To Free Up $2 Billion in Cash
5 Proven Strategies for Working Capital 1. Faster approval – core AP automation 2. Transform terms – supplier on-boarding 3. Expand discounts – dynamic discounting 4. Capture rebates – buyer initiated payment cards 5. Expand available cash – supply chain financing
Optimizing All The Tools Maximizing payables-related CASH and SAVINGS
5 Proven Strategies for Working Capital
What is Technology’s Role in Working Capital Optimization?  Faster approval of Invoices  Enable dynamic discounting and SCF in-business-process  Access to early pay programs for all suppliers
Tradeshift’s Open Platform Approach TRADESHIFT PLATFORM Document Transmission, Statuses, Messages, Integration, Security, API Supplier Buyer Order Management Electronic Invoicing Business Firewall CloudScan® (Paper) Collaborative Workflow Financial Solutions Build Your Own App Supplier Management Ability to expand functionality as needed
Enabling Supplier Participation Through Electronic Onboarding # Size of suppliersLarge Medium Small (Long Tail) Supplier Integration Supplier Integration Supplier Integration Supplier Validated CloudScan Supplier Validated CloudScan 60-70% (invoice volume) Tradeshift Web ApplicationPlug & Play connectors like Quickbooks Plug & Play connectors Plug & Play connectors CloudScan EnterpriseCloudScan Enterprise CloudScan Enterprise 100% (invoice volume) Supplier Validated CloudScan Supplier Validated CloudScan CloudScan EnterpriseCloudScan Enterprise CloudScan Enterprise Plug & Play connectors like Quickbooks Plug & Play connectors Plug & Play connectors Tradeshift Web Application Tradeshift is 12x faster than the competition at onboarding suppliers 100% (suppliers ) # of invoices # Of suppliers 12
5 Proven Strategies for Working Capital
In-Business-Process Simple Messaging
Tradeshift’s balanced value proposition Supplier Buyer Communicate & collaborate directly with your buyers. Lower costs for your entire supply chain.Manage and track POs, invoices, pmnts, and more. Connect via web, integration or any accounting software. Free. No supplier fees. Ever. Communicate and collaborate with suppliers. Innovate past invoicing on top of an open platform. One platform for all your business needs. Reduce cost and friction for your entire supply chain.
Summary: Early Pay Discount Benefits Dwarf Those of AP Automation Process Automation • Eliminate paper invoices, reduce invoice approval cycle time, and improve visibility and overall AP processes The Typical Accounts Payable Business Case $450K $1.5M $3.6M Early Payment Discounts Discount program management and dynamic discounting resulting in increased discounts and >20% return on cash Reduction in Invoice Exceptions Shared supplier portal enabling suppliers to view and resolve invoice exceptions and reduce supplier inquiry calls Process Automation Total Business Case Benefits Early Payment Discounts Reduction in Invoice Exceptions Automation Based Discounts $1.5M $150KAutomation Based Discounts Reduction in invoice approval cycle time and dynamic discounting capabilities enables additional early payment discounts
Q&A
Thanks for joining us! • Register for our next webcast: tradeshift.com/suppliervalidation • Stay relevant, visit blog.tradeshift.com • Presentation and recording will be sent soon July 9, 2014 5 Proven Strategies to Improve Working Capital

More Related Content

5 Proven Strategies for Working Capital

  • 1. 5 Proven Strategies to Improve Working Capital July 9, 2014 Hi, thanks for joining us! We will begin the webcast shortly but in the meantime, please keep in mind: • Questions or comments should be entered into the chat box • Use #tradeshift when tweeting • Presentation and recording will be sent after
  • 2. Agenda  Introductions  The BIG value in Payables  5 Proven Strategies for Working Capital Savings  Putting it all together  Technology’s Role in Working Capital Optimization  Q&A
  • 3. Introductions Rinus Strydom  VP Alliances & Solutions Consulting, Tradeshift  15 years using, deploying, and marketing enterprise procure-to-pay solutions Tom Glassanos  President Bavelos Group  Over 10 years Early Payment Program experience  “Dynamic Discounting” inventor  3 times Supply Chain Executive Magazine “Pro to Know”
  • 4. Bavelos Group Profile  Early Pay Programs  Supply Chain Financing  Best practice consulting Advisory Services for Working Capital Optimization
  • 5. Firms the Bavelos Team Has Helped Bavelos methods for working capital have benefited over 50 global corporations and more than $1 trillion in spend.
  • 6. Big Value in Payables
  • 7. The Big Value in Payables Financing the supply chain to strengthen trade and save millions 0 Days Invoice 15 Days Approve 60 Days Due Date The Opportunity $9 Trillion Global Investment Opportunity* *Main Street Advisors
  • 8. The Early Payment Opportunity * Actual Bavelos EPD experience Over 80% of suppliers surveyed will consider discounts for accelerated cash 0.2% 0.3% 0.15% 3% Money Market AADebt 30 Days U.S. Treasury 30 Days Early Pay Discounts 8-40%* *Early pay discounts yield .5-3% over 10-60 days risk free today’s treasury Cash Return options Early Pay Discounts
  • 9. What Can Be Achieved?  Up to 1/2% of savings on all spend  Over 30% APR on use of cash  Increase in cash via longer DPO  Efficiency - 99% paperless AP 2% 15 net 45 ASAP Day 10 Day 30 Day 45 Early pay discounts Rule of thumb: $3-$5 million of savings for every billion of spend!* *Data from over 50 major corporations; >250k vendors; >$1 trillion spend
  • 10. How to Enable the Working Capital Opportunity  Longer net terms – more need for cash  Faster approval – more early payments Day 10 Day 30 Day 45 Day 60 Faster invoice approval Longer Net Terms
  • 11. 5 Proven Strategies for Working Capital Savings
  • 12. 1. Faster Approval – Core Automation  Electronic invoicing  Workflow approval  Pre-matching (PO Flip) Shorten the approval time with core AP automation tools
  • 13. 2. Improve Terms – Supplier Onboarding  Leverage on-boarding  Extend net payment terms  Propose early payment terms  Document this in the enrollment 2% 15 net 45 ASAP Day 10 Day 30 Day 45 “Transform Terms” when you onboard suppliers for electronic invoicing The Foundation of an Early Pay Program
  • 14. Components of a “Terms Transformation” Analytical assessment – Which suppliers to target – Number of days for approval – Optimal discount terms to offer Discount oriented terms policy – Extended net terms – Explicit hurdle rate Compelling vendor proposition – Choice of early pay options – Electronic payment 2% 15 net 45 ASAP Day 10 Day 30 Day 45 A process of analytics & telesales
  • 15. Terms Transformation - Speed to Benefits Typical campaigns are 90-120 days in length (Can take place prior to automation or the same time) Kickoff Outreach Begins Initial Results >75% Results 4 weeks 4 weeks 8 weeks
  • 16. 3. Enable More Discounts - Dynamic Discounting  How it works – APR rate is fixed – Discount varies  Benefits – Discounts on any approval up to net date – Picks up large savings for earlier payment Invoice approval time Day 10 0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% Day 30 Day 45 Day 60 2% 10 ASAP 45 Discounts >2% All invoices qualify for a discount Use of ASAP (sliding slope) Terms
  • 17. Dynamic Discounting  How it works – Presents “ad hoc” early pay offers – Two methods: POs or email  Benefits – Skims incremental savings at key times – Offers based on supplier end of month & quarter cash needs – No pre-existing discount terms needed Enables opportunity for discounts on every invoice Pay Me Now Offer • $3,200 approved to pay • Pay today for 1% discount • Click “here” to approve Use of “ad hoc” early payment terms
  • 18. 4. Capture Rebates - Payment Automation  “Buyer Initiated Payment” (BIP)  Works on mainstream ERP spend  Suppliers pays interchange fee (equivalent to early pay discount)  Bank rebates % of fee to buyer (share of the discount)  Buyer gains 30 days of cash Rebates as much as 1% on 25% of spend 1 Buyer ERP approves payment & initiates authorization DIRECTLY to card network. 2 Supplier sends invoice to buyer 3 Card network authenticates and transfers funds Supplier bank Buyer bank Use of Buyer Initiated Payment (BIP) Cards
  • 19. 5. Expand Available Cash - Supply Chain Finance  Bank financing for extended DPO – Finances cash to supplier on “buyer approved” invoices – Low cost credit – buyer approval limits risk (typically LIBOR+ rates) – Most valuable for investment grade buyers – Generates free cash for buyers by pushing out DPO  Treated as a factoring transaction – Bank establishes factoring relationship with supplier – No credit impact on the buyer  Targets the biggest suppliers who can impact DPO
  • 20. Case Example: Proctor & Gamble “P&G Stretches Payments to Suppliers” To Free Up $2 Billion in Cash
  • 21. 5 Proven Strategies for Working Capital 1. Faster approval – core AP automation 2. Transform terms – supplier on-boarding 3. Expand discounts – dynamic discounting 4. Capture rebates – buyer initiated payment cards 5. Expand available cash – supply chain financing
  • 22. Optimizing All The Tools Maximizing payables-related CASH and SAVINGS
  • 24. What is Technology’s Role in Working Capital Optimization?  Faster approval of Invoices  Enable dynamic discounting and SCF in-business-process  Access to early pay programs for all suppliers
  • 25. Tradeshift’s Open Platform Approach TRADESHIFT PLATFORM Document Transmission, Statuses, Messages, Integration, Security, API Supplier Buyer Order Management Electronic Invoicing Business Firewall CloudScan® (Paper) Collaborative Workflow Financial Solutions Build Your Own App Supplier Management Ability to expand functionality as needed
  • 26. Enabling Supplier Participation Through Electronic Onboarding # Size of suppliersLarge Medium Small (Long Tail) Supplier Integration Supplier Integration Supplier Integration Supplier Validated CloudScan Supplier Validated CloudScan 60-70% (invoice volume) Tradeshift Web ApplicationPlug & Play connectors like Quickbooks Plug & Play connectors Plug & Play connectors CloudScan EnterpriseCloudScan Enterprise CloudScan Enterprise 100% (invoice volume) Supplier Validated CloudScan Supplier Validated CloudScan CloudScan EnterpriseCloudScan Enterprise CloudScan Enterprise Plug & Play connectors like Quickbooks Plug & Play connectors Plug & Play connectors Tradeshift Web Application Tradeshift is 12x faster than the competition at onboarding suppliers 100% (suppliers ) # of invoices # Of suppliers 12
  • 29. Tradeshift’s balanced value proposition Supplier Buyer Communicate & collaborate directly with your buyers. Lower costs for your entire supply chain.Manage and track POs, invoices, pmnts, and more. Connect via web, integration or any accounting software. Free. No supplier fees. Ever. Communicate and collaborate with suppliers. Innovate past invoicing on top of an open platform. One platform for all your business needs. Reduce cost and friction for your entire supply chain.
  • 30. Summary: Early Pay Discount Benefits Dwarf Those of AP Automation Process Automation • Eliminate paper invoices, reduce invoice approval cycle time, and improve visibility and overall AP processes The Typical Accounts Payable Business Case $450K $1.5M $3.6M Early Payment Discounts Discount program management and dynamic discounting resulting in increased discounts and >20% return on cash Reduction in Invoice Exceptions Shared supplier portal enabling suppliers to view and resolve invoice exceptions and reduce supplier inquiry calls Process Automation Total Business Case Benefits Early Payment Discounts Reduction in Invoice Exceptions Automation Based Discounts $1.5M $150KAutomation Based Discounts Reduction in invoice approval cycle time and dynamic discounting capabilities enables additional early payment discounts
  • 31. Q&A
  • 32. Thanks for joining us! • Register for our next webcast: tradeshift.com/suppliervalidation • Stay relevant, visit blog.tradeshift.com • Presentation and recording will be sent soon July 9, 2014 5 Proven Strategies to Improve Working Capital