e-Invoicing: Don't let your business case embarrass you, the Delhaize Story
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Transcript of e-Invoicing: Don't let your business case embarrass you, the Delhaize Story
E-Invoicing
Don’t Let your Business Case Embarrass YouThe Delhaize Belgium Story
Thierry ClaesStF Consulting
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 2
IntroductionDelhaize Belgium
Delhaize Group is a Belgian food retailer present in 8 countries on three continents with a sales network consisting of 2,673 stores (2008);
Delhaize Group posted EUR 19.0 billion in revenues (2008) and EUR 410.1 million (USD 562.1 million) in net profit for 2007.
At the end of 2007, Delhaize Group employed approximately 138,000 people. Delhaize Group’s stock is listed on Euronext Brussels (DELB) and the New York Stock Exchange (DEG).
* Source AC Nielsen
As part of Delhaize Group, Delhaize Belgium’s sales network consisted of 775 stores (730 in Belgium, 40 in Luxembourg, 4 in Germany and 1 in France).
In 2008, Delhaize Belgium posted EUR 4.4 billion in revenue, presented a market share of 25,7%* and employed approximately 18.000 people
More than 3.000 suppliers
Around 650.000 vendor invoices per year
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 3
What will be covered in this presentation ?
• Real questions for Real project !
– What’s e-invoicing ?
– Why should you go for e-invoicing ?
– What are the benefits AND the costs of an e-invoicing project ?
– What are the key elements for your RFP ?
• Sharing of experience from on real case !
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 4
1. Define Vision
2. Business Case
3. Solution 1. E-invoicing Model Selection2. Service Provider(s) Selection (RFP & Contract)3. Selected Solution
4. Critical Success Factors
Agenda
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 5
Digital Mail Room
Vision DefinitionUnderstand E-Background
• As in every projects, you will have to start by Defining your Vision
• You will be confronted with the “e-vocab”
• Let’s put some conventions …
E-BillingScanning
OCR
E-Invoicing
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 6
Vision DefinitionUnderstand E-Background – E-invoicing
• What’s e-invoicing ? – E-invoicing is used in a “buyer centric” model to
describe the vendor’s invoice.
– Vendor’s paper invoice is replaced by an electronic message => replacing the legal paper vendor invoice
– The electronic message is seamlessly recorded in the AP system …
– Sending a PDF invoice by mail is NOT e-invoicing !
– Vendor’s paper invoice was never created => never received by buyer
– When using the term e-invoicing, we usually consider the AP process
BUYERVENDOR
E-invoicing
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 7
Vision DefinitionUnderstand E-Background – E-invoicing
• Scanning/OCR is NOT e-invoicing !– Digital Mail Room, OCR, Scanning are “just” a way to encode paper into your (AP)
system
– Vendor’s paper invoice still exists and (most of the time) remains the legal invoice
– Manual and low added value tasks are still present in the process, so are the handling costs !
=> it will not be part of this presentation
OCROCRDeliveryDelivery ScanScanOpenOpenIsolateIsolate ValidateValidate IntegrateIntegrate
PaperArchiving
PaperArchiving
APWorkflows
APWorkflows
Low Added Value tasks
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 8
Vision DefinitionUnderstand E-Background – E-invoicing
• What’s E-Billing then ? – E-Billing is used in a “biller centric” model to describe
the bills/invoices sent to the customers.
– Same characteristics as e-invoicing
– When using the term e-billing, we usually consider the AR process
• Today, we will talk about e-invoicing !
VENDORCustomers
E-Billing
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 9
Vision DefinitionStarting point - Does it look familiar ?
Mislaid and lost invoicesMislaid and lost invoices22
Unnecessary duplicatesUnnecessary duplicates33
Manual encoding and poor productivityManual encoding and poor productivity11
A/P people chasing approversA/P people chasing approvers55
Missed supplier discounts or Missed due datesMissed supplier discounts or Missed due dates66
Poor control of approvalsPoor control of approvals44
Managers spending time on invoice handlingManagers spending time on invoice handling77
Painful Compliance Processes (SOX,…)Painful Compliance Processes (SOX,…)88
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 10
Vision DefinitionDrivers & Objectives
Direct cost savings of XFTE by eliminating manual encoding, paper
copies/image scan, archiving and decrease volume of disputes
Direct cost savings of XFTE by eliminating manual encoding, paper
copies/image scan, archiving and decrease volume of disputes
From a daily challenge to an usual & easy procedureFrom a daily challenge to an usual & easy procedure
From blocking factor to enabler for increasing cash discounts
and cashflow management initiatives (eg. reverse factoring)
From blocking factor to enabler for increasing cash discounts
and cashflow management initiatives (eg. reverse factoring)
From lost in banana box to perfect audit trailFrom lost in banana box to perfect audit trail
Upgrade and valorise AP people and activitiesUpgrade and valorise AP people and activities
Direct cost savingsDirect cost savings
Payment on time
& Better Service
Payment on time
& Better Service
Working Capital ManagementWorking Capital Management
Compliance & VisibilityCompliance & Visibility
Eliminate non value added tasksEliminate non value added tasks
Paperless strengthen Company’s “green” imagePaperless strengthen Company’s “green” imageCorporate ResponsibilityCorporate Responsibility
Provide necessary flexibility for FutureProvide necessary flexibility for FutureEnabler for sourcing or centralize AP operations
Enabler for sourcing or centralize AP operations
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 11
Vision DefinitionWhy should you implement E-invoicing ?
E-invoicing will help you to achieve your objectives by reducing the timing of
transactional processing
Today’s competitive environment requires optimal cost structure
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 12
“NON LEGAL” E-ARCHIVING
LEGAL PAPER ARCHIVE
Vision DefinitionScope of e-invoicing
SUPPLIERS
PAYMENTPAYMENTBOOKINGBOOKINGMATCHING(WORKFLOWS)MATCHING(WORKFLOWS)
ENCODINGENCODINGINVOICE
RECEIPT & HANDLING
INVOICERECEIPT & HANDLING
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 13
Vision DefinitionE-invoicing Solutions Models
Buyer Centric (direct model)– Buyer driven– Order-to-Payment– A/P and Procurement optimization– B2B custom features– Extendable to other message streams
(logistics,..)
Consolidator– Roll-out efficiency : Community, Translation, on-boarding
services, interoperability– Legal Compliance– Cost- and time-efficient roll-out if standardized way is OK– Works for Buyer and Sender centric models (mostly)
Buyersupplier
supplier
Consolidator
Company
Company
Company
Company
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 14
Vision DefinitionModels - Direct vs Consolidator
• “New” but emerging• Works for multiple inbound- and
outbound invoicing• Compliance certifications
• “New” but emerging• Works for multiple inbound- and
outbound invoicing• Compliance certifications
• Degree of standardization vs customer features required,
• Contractual guarantees on compliance
• Degree of standardization vs customer features required,
• Contractual guarantees on compliance
+ -
+ -• Roll-out dynamic• Compliance management for
dematerialized invoices
• Roll-out dynamic• Compliance management for
dematerialized invoices
Direct – Point2Point
Consolidator
• “legacy” EDI communication hub• Buyer Centric • Customization capabilities• Other business transactions supported
(logistics, procurement,..)
• “legacy” EDI communication hub• Buyer Centric • Customization capabilities• Other business transactions supported
(logistics, procurement,..)
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 15
Vision DefinitionInhouse vs Outsourced
ONBOARDING RESOURCES
DECISION :OUTSOURCING !
• Telesales & community care centers
• Functionality to cope with various supplier/customer segmentations
• Telesales & community care centers
• Functionality to cope with various supplier/customer segmentations
• Know how• Investment in Audit certificates – Insurance – Dialogue with
Tax administration• Capability to monitor and adapt if any regulatory change
• Know how• Investment in Audit certificates – Insurance – Dialogue with
Tax administration• Capability to monitor and adapt if any regulatory change
• IT Resources (not) available • IT Resources (not) available
MITIGATING THE COMPLIANCE RISK
ADVISORY ROLE
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 16
Vision DefinitionUltimate Project Objective
Replace 90% of our paper supplier invoices by e-invoices within the next 3 years.
Outsource the Compliance “headache” and the onboarding management to a service provider
Increasing our productivity and decreasing our operational costs by …
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 17
1. Define Vision
2. Business Case
3. Solution 1. E-invoicing Model Selection2. Service Provider(s) Selection (RFP & Contract)3. Selected Solution
4. Critical Success Factors
Agenda
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 18
Business Case What are the elements to consider
• Benefits – Costs Reduction Opportunities– Tasks elimination– Productivity Gain – Storage costs reduction – Working Capital Improvement
• Project and Process Costs– Training and Communication Costs– IT and Business Change Requirements– E-invoicing processing costs– E-Archiving costs– On-boarding costs (resources,…)
• Timing– Timing for your business case will depend on your on-boarding timing
• Volume of invoices converted
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 19
Business Case - BenefitsWhere will be the cost savings ?
Draw up invoice Send Solve
issuesManage disputes
Financial impact
approval Make payment Archive Manage
disputes
Inbound –Buyer: A/P process
Outbound – Supplier: A/R process
Archive Follow-upunpaid
Handling Process(key-in)
Prepare Reconcile
Matching
Source Isabel
“The average cost for a customer bill is 5 USD, of a dispute is 20 USD” – Gartner (Research Note, B2B invoicing, Cash is King)
Methis study: “substituting all paper bills into epaper, contributes 0,7% of Kyoto norm for Belgium”
1,2 € 2 € 5,6 € 3 € 1,4€ 1,8 € =15 *€ *averageAP cost accordingBillentis/Certipost
paper
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 20
Business Case Where will be the cost savings ?
Draw up invoice Send Solve
issuesManage disputes
Financial impact
Matching Approval Make payment Archive Manage
disputes
Archive Follow-upunpaid
Handling Process(key-in)
Prepare Reconcile
Source Isabel
Outbound – Supplier: A/R process
Inbound –Buyer: A/P process
•A/P Aberdeen Group estimates that digital invoice processing at A/P side saves up to 80% of encoding, archiving and dispute costs
•A/R: Gartner estimates that typical saving is 3,35 USD per invoice and 10 USD per dispute – Gartner Research Note, B2B Invoicing, Cash is King
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 21
Business Case Complexity - How hard can it be ?
22
11
Complexity
• Company with low maturity AP processes : lots of manual transactions, paper based, non efficient workflows, low visibility on process performance …
BUSINESS CASE IS EASY
• Company with high maturity AP processes : already using EDI (eg) or digital mail room and OCR, approval/exception workflows are efficent, payment are made on time
BUSINESS CASE IS CHALLENGING
AP
Matu
rity
11
22
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 22
Business Case Elements to consider based on AP maturity
Complexity
AP
Matu
rity
Mail Room Staffing, Data entry Staffing, Reduced costs of storage, Reduced costs of managing paper
Optimization of Exception Processing and Supplier Services
Optimization of Working Capital : Capture of discount, decrease of late payment penalties, early VAT claims, Dynamic discounting, Enabler for other projects (eg Reverse factoring initiatives …)
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 23
Business Case – Project and Process Costs Business Requirements & Developments
• Data Capture of E-invoicing– Where should the e-invoice message be integrated ?
– Initial process started with the paper receipt (also for EDI invoices)
– How to make the difference between non legal EDI invoice and legal EDI invoice ?
• Pre-Controls on e-invoicing plateform– Where controls should be performed ? In E-invoicing platform or in
company’s processes
– What about the master data exchanges ?
– When E-invoice is created, it may not be cancelled => credit notes is to be created if changes are required
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 24
Business Case – Project and Process Costs Business Requirements & Developments
• Archiving– Where do you need to have the invoice image and for which task?
– Visualisation versus Hyperlink
– Connection or Copy-pasting the database
– You always can have 2 archiving databases but there is always only one “legal”
• Vendor Portal (legacy) – status of invoice– Do you already have a “vendor Portal” ?
– Build or outsource
– New functionalities
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 25
Business Case – Project and Process Costs Training and Internal/External Communication
• Focus on External Communication – Rely on communication package provided by service providers but “one size does
not fit all”
– Your communication needs to be aligned with your suppliers segmentation and has to :
– Be Enriched with your company’s style
– Be in phase with your ambitions and project steps
– Combination of targeted mailings, workshops and personalized communication through Procurement department
• Do not underestimate the Internal Communication and Training– Every people in contact with suppliers needs to be aware of the project basics
– Training depending on audience
– Do not underestimate the profile shift needed and the education required to go along with this shift
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 26
Business Case – Project and Process CostsWhat does e-invoicing cost ?
• The cost per invoice is depending on the service providers and the volume of invoice
• A quick market review showed for a volume of 500.000 invoices an average between 0,5 eur and 1 eur
• These costs will indeed depend on the additional services to be included such as :
– The onboarding activities
– The archiving
– The technical assistance
– Etc
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 27
Business CaseOnboarding Timing
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Y1 Average 16%
Y2 Average46%
Y3 Average76%
90%
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 28
Business Case Delhaize specifics
• Assumption : Delhaize is outsourcing the e-invoice generation
=> For our business case we took a conservative approach of 1 eur (including legal archiving)
=> Onboarding was to be done by Service provider
• Our business case has been firstly build on the very conservative approach of only considering the direct payroll cost on :
– Mail Room
– Data Entry (manual & scanning)
– Storage and data retrieval in case of Supplier enquiry
• The option of outsourcing the scanning of all the remaining paper invoice as from day 1 has been rejected during the vision definition but is still an option to consider when drafting your business case
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 29
Business CaseThe preliminary results
P/L Impact without outsourcing remaining paper invoice
0
100.000
200.000
300.000
400.000
500.000
600.000
Y1 Y2 Y3 Y4 Y5
#Inv
oice
s
0,00 €
200.000,00 €
400.000,00 €
600.000,00 €
800.000,00 €
1.000.000,00 €
1.200.000,00 €
1.400.000,00 €
1.600.000,00 €
Volume DEMAT Salary Cost Savings Cost (Transactional +OTC) Profit
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 30
1. Define Vision
2. Business Case
3. Solution 1. E-invoicing Model Selection2. Service Provider(s) Selection (RFP & Contract)3. Selected Solution
4. Critical Success Factors
Agenda
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 31
Solution1. E-invoicing Model Selection – The Drivers
• Standard for Retail Industry is EDI (PO, DESADV, RECADV, INV, …)
• Already more than 30% of our invoice through EDI (but still with paper)
• Strategic Decision to select an EDI solution for Direct Goods
• Standard for Retail Industry is EDI (PO, DESADV, RECADV, INV, …)
• Already more than 30% of our invoice through EDI (but still with paper)
• Strategic Decision to select an EDI solution for Direct Goods
DIRECT GOODSDIRECT GOODS
• No existing standard• Roll out complexity • Mitigating Compliance risk• Suppliers segregation – specific approach & tools are
required
• No existing standard• Roll out complexity • Mitigating Compliance risk• Suppliers segregation – specific approach & tools are
required
INDIRECT PROCUREMENTINDIRECT PROCUREMENT
Point2Point - EDIPoint2Point - EDI
•Strategic Decision to select an EDI solution for Direct Goods
•Strategic Decision to select an EDI solution for Direct Goods
Any2Any FormatAny2Any Format
•Strategic Decision to have 1 specific solution for each channel•Consolidator Model –relying on the Any2Any business model
•Strategic Decision to have 1 specific solution for each channel•Consolidator Model –relying on the Any2Any business model
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 32
Solution2. Selection of Service Providers – The RFP
• Service Provider’s profile and shareholder structure
• Technical aspects (interfaces used, supported format, …)
• Compliance :
– Authorized E-invoicing Method used (EDI, AES, Other)
– Certifications obtained
– SAS 70 & Other comfort letters
– Ruling with local tax administrations
• Liability cap (if any)
• Onboarding :
– Method and guarantees
– Languages capabilities
– Interoperability
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 33
Solution2. Selection of Service Providers – The RFP
• SLA’s towards the client AND the supplier
• Setup and maintenance costs
• Pricing
• Optional Services : Scanning, dynamic discounting, portal …..
• YELLOW PAGES (% match between the supplier community and the suppliers on the plateform)
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 34
Solution2. Selection of Service Providers – The Contract
General Attention Points
• Do not underestimate the time you will take to validate the contract and convince people internally
• Complex versus “New and Unknown”
• Have your Tax and Legal Department on board
• Set your objectives straight and have clear Risk Assessment :
– Do we already have this risk ?
– Do we want to keep the same risk level as today or do we want to decrease the risk ? (eg VAT rate validation)
• Conceptually, e-invoicing implementation means “replacing the Postal Service” :
– But do you want to outsource/add some more controls ?
– Do you just want to replace the “mail guy” ?
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 35
Solution2. Selection of Service Providers – The Contract
Compliance Roadmap
1. Be careful : Technical Compliance versus full coverage of the compliance
– Does the Service provider fulfill only the “e-invoicing” law (European Directive)?
– Does the Service Provider warrant that the e-invoicing that you will receive fulfills any “Any applicable laws” : EU Directives, laws, binding rules, or regulations issued by a governmental authority of the relevant country” (VAT –Commercial Tax)
– Cross Border Compliance – outside Europe/ Intra-Europe/ Local
2. Have the SAS 70 and read it !
– What’s the timing for deficiency resolution ?
– What type of deficiency is for you critical ? (eg Compliance, Archiving,…)
3. Certifications/Comfort Letter
– From a reputed auditor …
– As always, be careful on the wording of the comfort letters
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 36
Solution2. Selection of Service Providers – The Contract
Compliance Roadmap
4. Insurance
– Warranties are nothing without any insurance
– What’s the content of the insurance policy
– Is it only for you ?
– What’s the covered amount ? What do you want as coverage ? What is reasonable ?
– VAT penalty amount (10% of total yearly expenses)
5. Right to perform your own audit
– Do not limit the scope of the authorized audit
– What’s the guaranteed support of Service provider during this audit ? Is it free of charge ?
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 37
Solution2. Selection of Service Providers – The Contract
Worst Case Scenario
• SLA’s– SLA for service availability
– Archiving and data losses
– Onboarding campaign
• When are you entitle to break the contract ?
• What if service level is not in line with expectations and SLA and that you decide to break the contract ?
• Consequences …. Are you covered for this ?
• Search for new Service Provider, Processing of the paper invoice, communication to suppliers …
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 38
Solution2. Selection of Service Providers – The Contract
Tasks Distribution
• What’s the support expected from the company ?
• What are the resources required ?
• Is it sufficiently described in the contract/Service Manual ?
• Are the answers to the RFP part of the contract ?
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 39
Solution Choosen : Direct Goods EDICOM
PO
DESADV
AP System
SUPPLIERSWith EDI
SUPPLIERSWith WebEDI
SUPPLIERSW/o EDI
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 40
Preferred Solution : Indirect ProcurementThe Consolidator model
A/PSystem
Checkor
ACH
Payment & Remittance
Financial System
Auto Match
Work Flow Approval& G/L Allocation
Image/Invoice
InvoiceData in Buyer
Format
Archive
Data Transformation
- Validate- Enhance- Re-format
PO Transaction
Non POTransaction
Requisitioner
Supplier
Supplier
Supplier
Supplier
Supplier
Web
For
mSupplier
* Picture from OB10
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 41
1. Define Vision
2. Business Case
3. Solution 1. E-invoicing Model Selection2. Service Provider(s) Selection (RFP & Contract)3. Selected Solution
4. Critical Success Factors
Agenda
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 42
Critical Success Factors for an Easy Selection
• Sponsorship from Finance and IT Departments… and Supply Chain
• Tax and legal department on board and understanding the project
• Managing compliance risk on a practical way – Good view on risk involved
– Outsource to professionals (service providers, insurance, ….)
• Have a clear view on your internal resources and on task distribution between Service Provider and Your organization
• Do you have a fall-back scenario ? What would be the cost of it ? Who would bear the cost of it ?
© StF Consulting - Shared Service Link - London 19-03-200916-Mar-09 43
Critical Success Factors for an Easy Business Case
• Do not make your business case more complex than it is !
• Be clear on your objective ! Replace the “mail guy” vs AP process Re-engineering
• Take into account the Supplier’s perspective in your business case (Win-Win Solution)
• E-invoicing as the starting point for new Working Capital initiatives (Intangible benefits)
• Identify carefully the required changes (legacy system, archiving, master data) to work paperless
• Do not underestimate the training and communication costs in your business case
• E-invoicing will only mean additional costs if you do not convert your efficiency gain (task redistribution, downsizing, volume increase, …)