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Part III: Customer story - Improve supplier payment
This blog post is part of the blog series “Unleash your procurement transformation potential with SAP Signavio for SAP Ariba”. To get an overview of the SAP Signavio capabilities for analyzing processes across SAP ERP and SAP Ariba, check out the first blog post from @dianakveit.
To make these capabilities more tangible for you, we started to examine a concrete customer example in our second blog post from my colleague @Katharina_Minninger. After analyzing and improving the process from purchase requisition to supplier invoice, we'll now continue with the invoice-to-pay process as a second improvement area.
Identify issues in the invoicing process
Let’s jump to the invoicing process analysis and check what the process looks like based on the data. We'll deep dive into our variant analysis to do this.
You can see on the right that there are 13 variants, and you can choose which variants you’d like to investigate, and investigate which steps are included. For example, you can identify how the invoices are handled from different channels, such as SAP Ariba, SAP SRM, or the BAPI interface.
Even in the variant most used, we can clearly see that it takes more than 8 weeks for the payment to be made.
If we switch to the hot spot mode of our process variant, we can see to what extent the activities are executed in our end-to-end process. The green and red boxes show what's recommended based on leading SAP practices. This is also a basis for our best-run score calculation.
The green bubble on the red box indicates that a quarter of your invoices are in processes involving a dialog user in a manual and time-consuming fashion, even using non-standard transactions.
We want our process to be efficient and to automate as many activities as possible. But what can we do with this situation? Where do we start? Let’s check the value potential of the possible improvements.
Prioritize by potential value savings and industry benchmark
Let’s jump to the value analysis feature in SAP Signavio Process Insights.
Based on specific input values that you can add, you can see your potential value. We can see that this is more than 10 million behind the supplier invoice clearing that you can aim for if you step up when it comes to increasing your automation rate.
Industry benchmarks greatly support you in putting your automation rate into perspective. You can see that your industry median is 81% and that, with 54%, your organization is in the lowest quartile.
Based on the benchmark and the value behind it, this is clearly something to investigate.
“Drink your own champagne” – use best practices from your internal best-run entities
Considering the value, it would be interesting to know how this looks across your organization. You can use internal benchmarking to identify your best-running entities.
We can see that there's one company code that runs best. All metrics are marked in green across invoice creation, payment, and early and late payments. Other company codes, marked in red, show a high improvement potential.
Next, let’s deep dive into concrete process variants to understand how well harmonized we execute our flows.
Let’s take our benchmark company code (2700) and compare it with the one we see as a potential priority for improvement (company code 2800).
From the comparison, we can clearly see some potential for company code 2800 and check on best practices that we could potentially reuse from our benchmark company.
If you also look at the company code analysis, you might already notice that there’s an improvement potential for late payments.
Analyze your payment behavior
To make sure we get our materials on time and minimize any risk of damaging the relationship with our main suppliers, or even worse, having to pay penalty interest, let’s switch to our analysis ‘Improve on-time payment performance’ in SAP Signavio Process Intelligence.
By looking at the overall situation, we can conclude that we need to have a closer look at the payment behavior.
You pay on average 11 days later than what's agreed in the payment terms. This affects more than a third of your invoices, which account for almost 3B USD. The impact of this – so your potential to quickly change – is more than 1.6M USD.
But why are invoices being paid so late? You can determine this by using the out-of-the-box root cause analysis.
We see that most of the value is paid late due to a high volume of manual activities. We also see that a third of all late invoices are posted or payment blocks are released after the net due date.
What does this mean? Let’s see what the detailed root causes tell us.
Deep dive into root causes of inefficient payments
We see that approval is made after the net due date, which means that there might be an issue with three-way matching. The invoice verification team needs to check the deviations with involved parties and approve them first.
The fact that invoices are being posted after the net due date means that we might need to check the blocking reasons that cause your invoices to be blocked for payment. While there might be valid reasons to block invoices, these blocks negatively impact supplier satisfaction. This seems to be a fundamental problem that needs more long-term adjustments.
If you would like to learn more about how to improve your invoice-to-pay process using the plug and gain approach, check out the following blog post: How to improve your invoice-to-pay process using plug and gain by SAP Signavio.
Get long-term process improvement strategies recommended by SAP
Having pinpointed the primary reasons for late payments, you may be interested in suggestions on how to enhance your processes in the long term. The innovation recommendations in SAP Signavio Process Insights list potentially unutilized SAP solution features and advancements.
For instance, to optimize the source-to-pay process, SAP Signavio Process Insights recommends the SAP Business Network for fully automated and vetted supplier collaboration from purchase requisition until invoicing.
How to get it?
In case you think the demonstrated analyses in our blog series would provide value to you and your organization, you might ask yourself how you can get those. These analyses are part of the plug and gain by SAP Signavio approach. It leverages the capabilities of the SAP Signavio Suite and provides unique out-of-the-box analyses for both continuous improvement and transformation projects sparing you long implementation projects.
Reach out to your SAP counterpart to learn more about how you could benefit from plug and gain by SAP Signavio!
Where to find further information
- The following note explains the prerequisites and scope of plug and gain by SAP Signavio: https://me.sap.com/notes/3340986/E
- Blogs on Best-Run scores, process house, transaction scores and process flow variants
- Plug and gain approach: https://www.signavio.com/plug-and-gain-approach/
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