February 12, 2015

Bryan DeGraw, Senior Director

Hackett Advisory Webcast“How AR Can Show Invoicing Love to AP”

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Agenda

Who is The Hackett

Group?

What does AP and AR

have in Common?

AR Best Practices that

can help the AP

Process?

Benefits and

Challenges of

Automation

Process

Considerations

© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 8

The Hackett Group – IntroductionLifecycle support bringing intellectual capital and seasoned practitioners together to yield sustainable benefits to our clients

We are the global leader in operations

improvement strategies, implementation know-

how, and G&A agility

We address both efficiency and effectiveness

improvements to enable strategic business

objectives

Our insights are fact based, from over 7,500

performance improvement consulting

engagements

Our Best Practices Intelligence Center™ is a

significant differentiator and enabler. It contains:

– 20,000+ performance metrics updated annually

– 1,500+ best practices across 95 business processes

– 1,000+ best practice-based process maps,

requirements and configuration guides

– 1,000+ case studies, implementation examples and

research

We deliver results through a global team of senior

practitioners using a consistent methodology and

best practice-based toolset

Hackett Value Grid™

We help companies

establish and implement

business performance

improvements.

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Agenda

Who is The Hackett

Group?

What does AP and AR

have in Common?

AR Best Practices that

can help the AP

Process?

Benefits and

Challenges of

Automation

Process

Considerations

10© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

What do Accounts Payable and Account Receivable have in Common?

At first thought….absolutely nothing

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On Second Thought….Let’s Consider How Each Team Measures Performance

Sample Key AP Performance Metrics:

• Cycle Times (to process a supplier

invoice)

• On Time Payment Rates

• First Pass Match Rates

• Process Cost

• Cost per Transaction

• Rework/Error Rates

• DPO and Weighted Average

Payments Made relative to

Weighted Average Terms

Sample Key AR Performance Metrics:

• Cycle Times (to generate a customer

invoice and to apply a customer payment )

• Unbilled Revenue

• Auto Payment Posting Match Rate

• Process Cost

• Cost per Transaction

• Rework/Error Rates

• DSO, ADD, and % Payments

Received($) to Promised Made($)

12© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Agenda

Who is The Hackett

Group?

What does AP and AR

have in Common?

AR Best Practices that

can help the AP

Process?

Benefits and

Challenges of

Automation

Process

Considerations

13© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Generating and Delivering Invoices to Customers Electronically is a “win-win” Best Practice

95% 98%

Peer Group World Class

Percent of Customer Invoices Generated Electronically But Manually Distributed (mail, e-mail, manual post to portal)

34%45%

Peer Group World Class

Percent of Customer Invoices Generated And Distributed Electronically (No manual intervention)

This is the solution

that drives the

greatest benefit!

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Average Time to Bill (Days from Order Fulfillment to Bill Being Sent)

2.9

2.0

Peer Group World Class

Automation improves efficiency and effectiveness of the Customer Billing Process

Hackett 2014 Finance Benchmark

Percent of Customer Invoices Corrected for Billing Errors

2.7%

1.4%

Peer Group World Class

Inquiry Response | 15© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

$7.83

$2.40

$1.24 $1.11

0% 1% - 25% 26% - 75% Greater Than 75%

Customer Bills Generated and Distributed Electronically

Source: Hackett FN Benchmark

Automation Drives Down The Customer Billing Process Costs

Inquiry Response | 16© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

16

14

10

7

None Low Medium High

Customer Billing Automation is also correlated to improved receivables management metrics

Source: 2014 Hackett Finance Benchmark

Invoice Automation Scale:

None = 0%

Low = 1-25%

Medium = 26-75%

High = >75%

Average Days Delinquent correlated with

percent of automated customer invoicing

9 Days

Business Advisory Services | 17© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Percent of electronic supplier/vendor invoices

World Class organizations reflect higher levels of automation in the Accounts Payable Process

Percent of Electronic AP Payments

68%

87%

Peer Group World Class

Source: Finance 2014 Functional Benchmark

22%

56%

Peer Group World Class

Inquiry Response | 18© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

$8.49

$5.87

$3.59

$1.54

0% 1% - 25% 26% - 75% Greater Than 75%

Receiving Supplier Invoices Electronically Drives Down the AP Process Cost per Invoice

Electronic invoices as a percent of total transactions

Source: Hackett FN Benchmark

Accounts Payable Process Cost per Supplier invoice

Business Advisory Services | 19© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

$32.90

$22.26

Peer Group World Class

AP Process Cost Per Electronic Payment

Increasing AP Automation for Payments Also Drives Cost Savings (AP Process Cost - Electronic Vs. Manual Payments)

The data clearly highlights the cost opportunities of electronic transactions

The significant aspect is that World-Class organizations who implement payments

via electronic mode have still a lower cost per payment than World-Class

organizations who have manual payments.

$39.52$36.96

Peer Group World Class

AP Process Cost Per Manual Payment

Source: Finance 2014 Functional Benchmark

Business Advisory Services | 20© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

43%

66%

Peer Group World Class

World-Class organizations are partnering with Suppliers to receive payments electronically

Percent of customer remittances that are electronic Automatic remittance posting match rate

Hackett 2014 Finance Benchmark

65%

86%

Peer Group World Class

The Cash Application process challenge is not just payment automation but also electronic receipt of remittance advice (coupled is ideal)

Inquiry Response | 21© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

$6.44

$5.27

$3.47

$1.26

0% 1% - 25% 26% - 75% Greater Than 75%

Receiving Customer Payments Electronically Drives Down the Cash Application Process Cost per Remittance

Cash Remittances that are Electronic

Source: Hackett FN Benchmark

Cash Application - Process Cost per Remittance

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@OPENSCAN #OPENUP2014

Cash Remittance Automation Improves Cycle Times Which in turn has a positive influence on Working Capital

2

4

7

Percentile25

Median Percentile75

4

9

12

Percentile25

Median Percentile75

Up to one Day1 - 2 Day(s)

Average Time to Apply Cash Correlated with Average Days Delinquent

23© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Agenda

Who is The Hackett

Group?

What does AP and AR

have in Common?

AR Best Practices that

can help the AP

Process?

Benefits and

Challenges of

Automation

Process

Considerations

Inquiry Response | 24© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Almost Three Quarters of Organizations Have A Goal of Achieving a Paperless Environment

74%

60%

49%

25% 23%

Organization has a goal of achieving a

"paperless" environment

Invoice data is validated for errors or

missing information prior to passing to the

accounts payable application

Recurring payments are setup in system for

automatic approval for payment if within pre-

approved limits

Organization is pursuing a strategy to

replace the use of EDI via VAN with newer

forms of Internet-based electronic networks

Organization has online check request

capability

Process Automation Practices(Percent of all Participants)

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AP’s Perspective - Driving Supplier Adoption to an Electronic Strategy is the Biggest Hurdle Organizations Face

Barriers to e-Invoicing and e-Payment Adoption

Inquiry Response | 26© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

AP's Perspective: Fee Structure and Supplier Enablement Capabilities of Provider Will Also Likely Impact Supplier Adoption Success

14%

29%

21%

36%

Fee Structure for Electronic Invoicing

Our organization pays allthe fees

Fees are split betweensuppliers and company

Suppliers pay all the fees

There are no fees 71%

29%

How Beneficial were the Supplier Enablement Services of Provider?

Moderately Useful

Minimum Useful

54% of Organizations

Leveraged Supplier

Enablement Services

Hackett AP Performance Study, 2008

Inquiry Response | 27© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Buyers and Suppliers must be equal partners in the process

Buyers need to treat their suppliers as partners in the EIPP or other forms of invoice

and payment automation solution

Buyers (AP) must communication the benefits of automation solutions to suppliers (AR)

in the following ways:

– Increased visibility / predictability to payment receipt

– Resolve exceptions collaboratively with buyers online

– Checking invoice status and payment details in real-time

28© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Agenda

Who is The Hackett

Group?

What does AP and AR

have in Common?

AR Best Practices that

can help the AP

Process?

Benefits and

Challenges of

Automation

Process

Considerations

29© 2015 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

Automation reaps benefits but AR can benefit further by understanding the needs of the AP payment process

How will needs for goods/services be

communicated (requisitioned)?

Are reviews and approvals required?

Should the Buy be supported with a Purchase

Order?

Are Receipt Acknowledgements Required?

Buy Considerations

Pay Considerations

How will payments be triggered?

Are supplier invoices required?

What controls are required?

What matching requirements are necessary to

manage risks?Are you providing what your customers

need in order to pay you on time or

resolve a dispute in your favor?

The AP Buy/Pay Process

AP is requesting more ways to receive bills

Increased requests to send bills to AP Systems

AP is sending payments through multiple channels

AP is sending “de-coupled” (naked) electronic payments

EDI

= ?

WIRE

=

I. Understand your customer’s expectations

II. Provide your customers with choices

III. Integrate with AP systems

IV. Create efficiencies in accepting payments

Consolidator Sites

Phone IVR

Print & Mail

Online Portal (EIPP)

Email

Collection Systems(API)

AP Systems

Fax

Inefficient Ways to Process Receivables:Lockbox processing

In-house processing

Manual electronic payment processing

Technology Helps World-Class Corporations Achieve:Savings

100% elimination of data entry costs

50-75% resource reallocation

70% reduction in exceptions

1-3 days receivables outstanding reduction

Process Improvements

Cash application

Deduction management

Collections

More timely and accurate data into ERPs

Why the slow adoption?

Coupled payments and remits don’t follow a standard and are not human-readable.

Heavy IT overhead to map EDI820s.

Processed manually.

Most remits are decoupled from the payment.

Apply technology to:

Automate the ingestion of EDI820’s and decoupled remits.

Intelligently match and correct data before it flows into the ERP.

Process all payments in the same workflow.

Eliminate the majority of the manual tasks done today.

I. Provide a range of integrated paper and electronic invoice presentment

channels

II. Integrate into leading AP Systems

III. Open API to support linkage with other applications

IV. Best in breed integrated presentment and payment portals

V. Automated Cash Application across payment methods