5 Proven Strategies to Improve Working Capital

July 9, 2014

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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 forWorking 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 DaysInvoice

15 DaysApprove

60 DaysDue 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%

MoneyMarket

AA Debt30 Days

U.S. Treasury30 Days

Early PayDiscounts

8-40%*

*Early pay discounts yield .5-3% over 10-60 days risk free

today’s treasuryCash Return options

Early PayDiscounts

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

LongerNet 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 coreAP 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)

KickoffOutreach

BeginsInitial

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 100%

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

Buyerbank

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

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 PLATFORMDocument Transmission, Statuses, Messages, Integration, Security, API

SupplierBuyer

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 suppliers

Large 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 EnterpriseCloudScan 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 invoice

s

# Of supplier

s

12

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

$3.6MEarly 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

ProcessAutomation

Total Business Case Benefit

s

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

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July 9, 2014

5 Proven Strategies to Improve Working Capital