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Buyer and Supplier Collaboration:Key to the Success of an Electronic Invoicing Initiative

September 2016

Mike WeissChief Technology OfficeOildex

Invoice ReceiptManual Sorting

Of Invoices

Accounts PayableData Entry &Verification

Operations/ApproversManual Routing

& Approval

Accounts ReceivableNo Visibility into

Transaction Status

Finance DepartmentImpact on

Cashflow forecasting

Invoice SubmissionManual Mailing

Of Invoices

SUPP

LIER B

UYER

Paper-Based Processes Add Cost and Complexity

– Increase operational efficiencies

– Improve visibility into invoice and payment status

– Improve accuracy of cash flow forecasting

– Reduce Days Sales Outstanding (DSO)

– Increase operational efficiencies

– Improve visibility into spend real-time

– Reduce manage non-contract spend

– Increase early pay discount capture

• THERE CAN BE MORE:– Connect operational and financial data

– Coding and approval all in one system– Increase value add of Operations staff

– Focus on strategic tasks instead of invoice processing

– Expand beyond basic invoice transactions

– Purchase orders, field tickets, receipts– Increase collaboration with the supplier

base– Faster resolution of disputes; fewer

vendor inquiries

BUYER SIDE SUPPLIER SIDE

• THERE CAN BE MORE:– Enhanced account reconciliation

– Solution tracks progress on invoice at every stage

– Increased on-time or early payments– Faster processing of invoices and

resolution of disputes– Reduction in AR staff time spent on

tracking invoices– Easy access to invoice status online

– Improved customer satisfaction– Positive impact on relationships with

the customer base

Move to eInvoicing – Positive for Buyers and Suppliers

FIELD OPERATORS ACCOUNTS PAYABLE

SENIOR MANAGEMENT SUPPLIERS

§ Ensure work performed matches information provided on the field tickets

§ Validate coding provided on field tickets

§ Reduce time spent on reviewing and approving field tickets

§ Reduce time spent on identifying, reconciling and following up on exceptions/duplicates

§ Increased visibility into real-time spend through the entire process

§ Improved ability to analyze data and make key decisions

§ Reduce number of exceptions and services that don’t match existing contracts

§ Reduce days sales outstanding

Automating Field Tickets Adds another Level of Benefits

Best Practices for Invoice Management

5

§ Validation against budgets

§ Electronic transmission of POs

§ Validation of coding elements on field tickets

§ Electronic submission and receipt of invoices

§ Validation of invoice data elements

§ Business rules to automatically route invoices

§ Smart coding to reduce manual entry and errors

§ Electronic receipt of POs

§ Integration into sales order systems

§ Electronic signature on field tickets

Order Received

Purchase Order

Created

Goods or Services Delivered

E-INVOICINGECOSYSTEM

Field TicketGenerated

Invoice Received

Invoice Matching

Or Approval

Key Performance Indicators (KPIs) to Measure

6

KeyMetricforBuyers Indicator

Percentageof invoicesbeingreceivedelectronically ­

Percentageofsuppliersthataresendingelectronicinvoices ­

Percentageofinvoicesthathaveanerrororexception ¯

Percentageofavailablediscountsthatarecaptured ­

Averagetimetoprocessaninvoicefromreceipttopayment ¯

Averagecosttoreceiveandprocessaninvoice ¯

Percentageofpaymentsthatarelate ¯

Numberofinvoicesprocessedpermonthper APFTE ­

KeyMetricforSuppliers Indicator

Percentageof invoicesbeingsubmittedelectronically ­

Percentageofbuyersthatarereceivingelectronicinvoices ­

Percentageofinvoicesthathaveanerrororexception ¯

Averagedayssalesoutstanding(DSO) ¯

Averagetimetoprocessaninvoicefromsubmissiontopayment ¯

Averagecosttosubmitandprocessaninvoice ¯

Percentageofpaymentsthatarelate ¯

Numberofinvoicesprocessedpermonthper ARFTE ­

Buyers and suppliers are tracking the same metrics on the two sides of the equation –collaboration is key to have a positive impact on these KPIs that count

Terry Thomas, Global eCommerce ManagerSchlumberger

eInvoicing from a Supplier’s PerspectiveBenefits and Challenges

The eCommerce Perspective & Promise

The Promise of eCommerce to Schlumberger clients, partners, and employees is a set of business practices that promote efficiency, mutual cost reduction, and the highest quality services for all parties - customers, trading partners and Schlumberger. This promise is best realized when based upon mutually accepted industry standards and processes, security, confidentiality, data integrity and ownership.

Benefits from Electronic Commercial Transactions versus Paper

Oil Company Buyers§ Reduce administrative costs

and improve efficiencies(Reduced AP Costs, duplicate paperwork,etc.)

§ Capture and analyze spend§ Manage commitments and

contract compliance§ More “real-time” view and

transparency of spend § Operations benefits

(Engineers drilling wells - not shufflingpaper)

Product & Service Company Suppliers§ Reduce administrative costs

and improve efficiencies(Reduced duplicate paperwork)

§ Reduced AR (Accounts Receivables) and collection costs

§ Speed of payment

Customers Moving to Electronic Invoicing

Follow Industry Accepted Standards

(PIDX XML standards) Mutually acceptablebusiness processes

Trading Partner AgreementBuyer & Third party

(Acceptable T&C’s data Ownership, usage, confidentiality,

fees ….)

IndustryStandards

The“e-Envelope”

MiddleWare

ERP System

MiddleWare

Buyer SupplierInternet

ERP System

Oilfield Supplier Portal § Over 250 Buyer Agreements§ Over 30 Network and Service

Provider Agreements``

Middleware§ Business Rules§ Routing§ Messaging /

Acknowledgements§ Automated, no manual,

browser-based?

Reducing Transaction Costs

Buyer § Cost reduction in Accounts

Payable (AP) Resources§ Example: Large Independent

O&G company§ Role of 35 FTEs performing data

entry eliminated, FTEs reassigned

Suppliers§ Large Global IOC: DSO

reduction = 15 Days § Large NOC: DSO Reduction =

20 Days§ For each $1B in invoiced revenue

where DSO is decreased by15 Days§ $41M in increased liquidity§ $3.2M Annual interest saved on

increased liquidity (Assumed Cost of Capital = 8%)

Ongoing and Future Challenges

§ ERP’s and Networks don’t Support Uniqueness of Upstream Oil & Gas procurement process or Industry (PIDX) standard

§ Customer specific routing and coding data 1-7 per customer (20+) unique attributes§ (PO, WBS, Cost Center, GL, Dept

code, Charge to, Approver, Property, Field code, ….)

§ Dispute notifications and resolution § Further adoption of PIDX invoice

response message vs. email or portal browsing

§ PO, SO, WO value exceeded, closed or invalid § Customers role in timely resolution

§ Requirements for backup and field stamps in an increasingly automated and mobile world

§ Systematic rate validation§ Field Ticket Proforma Invoice

business process

Key Factors to the Success of an eInvoicing Initiative

Electronic Invoicing is More than Just Technology

Order Received

Purchase Order

Created

Goods or Services Delivered

E-INVOICINGECOSYSTEM

Electronic invoicing is a process with multiple steps and two equally vested participants

Field TicketGenerated

Invoice Received

Invoice Matching

Or Approval

§ It is equitable and mutually beneficial to all participants§ Both parties are looking to collaborate to increase efficiencies§ There is clear agreement on ownership and use of data§ The processes are compatible with specific policies and procedures

of both parties§ Requirements and processes are clearly understood and

documented§ There is minimal impact and change for the end users§ Both parties leverage opportunities to optimize the process§ There are clearly defined processes governing the initiative

An eInvoicing Initiative is successful when…

QUESTIONS