2016 Purchase to Pay for Indirect Spend Report

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The modern day solution to ensure savings and compliance is Purchase-to-Pay (P2P) automation. The 2016 Purchase to Pay for Indirect Spend Report by PayStream Advisors and GEP, explores the current trends in indirect P2P. It also explains how you can streamline indirect spend management with advanced P2P automation tools and solutions. Learn more about procure-to-pay software at https://www.smartbygep.com/procurement-software/procure-to-pay?utm_source=authorstream&utm_medium=pdf&utm_campaign=purchase+to+pay

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© 2016 PayStream Advisors Inc | www.paystreamadvisors.com | infopaystreamadvisors.com Underwritten in part by 2016 P2P for Indirect Spend Report Streamlining and Controlling Company Spend with Purchase-to-Pay P2P Automation Q2 2016 | Featuring insights on... » Current Market Trends in Organizations’ Indirect Spend Processes » The Benefts of P2P Automation for Managing Indirect Spend » Features and Functionalities of P2P Software » A Leading P2P Software Provider

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Q2 2016 © 2016 PayStream Advisors Inc | www.paystreamadvisors.com | infopaystreamadvisors.com 2 Introduction 3 Purchase-to-Pay Concerns in Indirect Spend 4 P2P Software Features and Benefts 11 Adoption Road Map 14 GEP 16 About PayStream Advisors 19 Contents

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Q2 2016 © 2016 PayStream Advisors Inc | www.paystreamadvisors.com | infopaystreamadvisors.com 3 Introduction In indirect Purchase-to-Pay P2P organizations must manage complex procurement accounting supplier and payment data across a wide range of processes departments and users. When purchasing indirect goods and services most organizations deal with a larger supplier base a diferent range of products and higher invoice volumes with lower invoice amounts than in direct spend. Indirect purchasing is usually more at risk of maverick or fraudulent spend than direct goods purchasing as indirect purchases are more often made outside of sourced contracts and tend to be placed by employees across many diferent roles and departments. Procurement and AP managers must keep careful watch over indirect purchasing activity in order to ensure all spend is in compliance with budgets and company policies. Controlled and streamlined indirect spend management is very important for a company’s success as failure to maintain complete control of P2P processes leads to high processing costs late payments supplier dissatisfaction and non-compliant or fraudulent spend. One of the greatest factors afecting control in indirect P2P is manual-based procedures. Fortunately P2P automation tools are tailored specifcally to the requirements of indirect spend management. These solutions provide organizations with fexibility visibility and control throughout the P2P process. This report explores trends in indirect P2P among today’s organizations. It also highlights the features and benefts of advanced P2P automation tools including eProcurement eInvoicing supplier information management and ePayables solutions.

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Q2 2016 © 2016 PayStream Advisors Inc | www.paystreamadvisors.com | infopaystreamadvisors.com 4 Purchase-to-Pay Concerns in Indirect Spend In order to identify indirect P2P trends among North American organizations PayStream Advisors surveyed over 200 back-ofce employees across several industries and market segments. Research shows the majority of organizations are operating P2P processes with manual-based methods. For example when asked if their companies were using an eProcurement solution most organizations reported that they were not see Figure 1. The trend continues in other P2P solutions: only 41 percent of organizations are using invoice workfow automation 22 percent are using eInvoicing and most businesses 63 percent are using checks for over 50 percent of their payments. Figure 1 Most Organizations Do Not Automate Procurement “Does your organization utilize an eProcurement solution” ORGANIZATIONS’ RESPONSES REGARDING EPROCUREMENT USAGE Yes No 34 66

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Q2 2016 © 2016 PayStream Advisors Inc | www.paystreamadvisors.com | infopaystreamadvisors.com 5 Under manual procurement AP supplier management and payments organizations do not have a controlled environment in which they can manage and collaborate on purchasing activity and transaction information. These P2P departments are typically dealing with high volumes of paper POs invoices checks etc. and they have limited access to real-time information that is vital for strategic purchasing decisions. These departments are also using inefcient manual- based methods to route P2P documents between employees and departments often leading to misplaced or overlooked invoices and late payments. In all research shows that organizations under manual P2P have little ability to control processes or securely manage data and experience high processing costs. When asked where they would like to see the greatest improvement in their procurement processes most organizations listed cost control and supplier negotiations visibility into spend and AP and procurement synchronization as their top goals see Figure 2. Cost control and supplier negotiations Spend visibility 30 20 15 Integration of AP within the procurement process Contract compliance Data accuracy Off-contract spend reduction 14 13 8 ORGANIZATIONS’ TOP PROCUREMENT IMPROVEMENT GOALS Figure 2 Most Organizations Want More Control Visibility and Synchronization in Indirect Goods Purchasing “In what area would you like to see the greatest improvement to your procurement process”

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Q2 2016 © 2016 PayStream Advisors Inc | www.paystreamadvisors.com | infopaystreamadvisors.com 6 When organizations were asked which factors would motivate them to consider an invoice automation solution most reported they want to improve cost control and visibility see Figure 3. Purchase-to-Pay for indirect spend comes with a unique set of challenges issues and requirements and some industries are afected by these challenges in diferent ways. For example in the education industry organizations’ top motivations for automating procurement are to streamline requisition and procurement processes create shorter cycle times and increase visibility across procurement. PayStream believes this is due to the education industry’s decentralized indirect purchasing and payment processes most organizations’ procurement occurs across many departments and locations. TOP FACTORS DRIVING INVOICE AUTOMATION ADOPTION Reduction in labor / processing costs Fewer lost or missing invoices 18 15 14 Quicker approval cycles Better visibility across the transaction lifecycle Reduction in exceptions / discrepancies Increased on-time payments 11 10 10 Increased ability to capture discounts Fewer supplier inquiries Improved vendor satisfaction 10 6 5 Figure 3 Most Organizations Want to Improve Processing Costs Invoice Control and Cycle Times “What are the top three factors driving your organization to consider electronic invoicing and/ or an invoice workfow solution”

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Q2 2016 © 2016 PayStream Advisors Inc | www.paystreamadvisors.com | infopaystreamadvisors.com 7 A similar trend is seen in the healthcare industry which tends to have widespread diverse and non-PO-based purchasing paired with complex approval workfows. The industry’s challenges revolve around controlling costs and increasing visibility into spend and organizations’ reasons for automating include streamlining requisition to procurement and increasing security and data accuracy. This last item is especially important to healthcare as these organizations are constantly subject to changing federal regulations on how they must process medical records POs and supplier payments. In the manufacturing industry on the other hand organizations’ operations and supply chains depend heavily on direct goods and companies are less concerned with streamlining indirect spend processes. The industry’s challenges revolve less around streamlining AP and procurement and more on controlling costs negotiating with suppliers and reducing maverick spend. In addition PayStream’s benchmarking research has found that manufacturing organizations tend to have shorter requisition and invoice approval times than organizations in healthcare and education even though the manufacturing industry has a lower rate of eProcurement and invoice automation adoption. This is most likely because manufacturing organizations’ departments and locations are typically not as spread out as in education and healthcare.

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Q2 2016 © 2016 PayStream Advisors Inc | www.paystreamadvisors.com | infopaystreamadvisors.com 8 Other indirect P2P challenges that arise across all industries include: » Supplier Management – Indirect P2P often involves more suppliers than indirect goods purchasing and organizations’ vendor databases are often very complex. P2P departments must not only maintain accurate and up-to-date supplier information but also must monitor suppliers’ legal validity and compliance— especially when working with overseas companies. A lack of automation in P2P processes prohibits companies from properly managing supplier information or from properly communicating with suppliers during a P2P lifecycle. In turn these issues put a major strain on supplier relationships see Figure 4. » Competitive Pricing Contract Compliance and Budgeting – Organizations foster strategic relationships with their suppliers by establishing competitive pricing and mutually benefcial business contracts. Manual-based processes often make it much more difcult for managers to ensure that contracts remain up to date with their organizations’ budgeting needs and with fair market prices and that all purchases are compliant with contract agreements preferred vendor lists and budgets. CHALLENGES TO ORGANIZATIONS’ SUPPLIER RELATIONSHIPS Poor supplier dispute / query response times 31 36 33 Late payments Problems arising from poor supplier data management Figure 4 Poor Data Management Can Weaken Organizations’ Supplier Relationships “What is the pain that causes the most damage to your organization’s supplier relationships”

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Q2 2016 © 2016 PayStream Advisors Inc | www.paystreamadvisors.com | infopaystreamadvisors.com 9 » Process Synchronization – This involves maintaining data and document synchronization across all P2P departments—especially the information between the original purchase and the fnal payment. This requires communication between Procurement and AP departments matching requisitions and POs against receipts and invoices and gaining all correct approvals before payment. Streamlining processes between AP and procurement keeps a company from overspending or paying an incorrect invoice and it also improves cycle times and future auditing. Unfortunately survey results reveal that most organizations do not have a fully integrated P2P process see Figure 5. Common leadership but separate functions with some shared functions They are completely separate 33 31 19 Completely integrated Shared leadership and metrics but emerging integration 17 ORGANIZATIONS’ P2P PROCESS INTEGRATION Figure 5 Most Organizations’ P2P Processes Are Not In Sync “How would you describe the process fow between procurement AP and payments”

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Q2 2016 © 2016 PayStream Advisors Inc | www.paystreamadvisors.com | infopaystreamadvisors.com 10 » Payment Control and Efciency – AP professionals must balance payment speed with payment control and security especially when it comes to maintaining legal compliance. Manual P2P processes lead to lengthy approval times and late payments which cause organizations to miss early payment discounts see Figure 6. Paying supplier invoices with manual methods such as with checks also limits the payments’ data security. » Auditing – Compliance is largely dependent upon the proper recording of all P2P activity including transaction information from requisition to reconciliation and payment. When it comes to auditing manual- and paper-based processes can make it difcult to keep track of all B2B documents and fnancial records and can put a company at risk for steep legal fnes. Missing information on invoices 57 Manual routing of invoices 62 55 Large number of exceptions 46 Lengthy approval cycles 43 Lost invoices 38 Decentralized invoice receipt Leading causes of missed early payment discounts Figure 6 Lengthy Approval Cycles Manual Procedures and Invoice Errors Are the Leading Causes of Missed Discounts “What are the top three problems that lead to late payments and missed discounts at your organization”

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Q2 2016 © 2016 PayStream Advisors Inc | www.paystreamadvisors.com | infopaystreamadvisors.com 11 P2P Software Features and Benefts PayStream attributes the low adoption rate of P2P software to a lack of awareness of the benefts of P2P automation. These benefts include improvements in both process efciency and cost savings more control over spend faster cycle times and healthier supplier relationships. P2P automation involves requisitioning purchasing receiving paying for and accounting for goods and services see Figure 7. » eProcurement and Order Management – Procurement technology’s main features include requisition creation and workfow in-house and punch-out catalogs featuring product information from thousands of suppliers PO creation and an order management interface that allows for full visibility into all order activity. These solutions often support PO fip to invoice and integration with AP as well. P2P PROCUREMENT ACCOUNTS PAYABLE SUPPLIER MANAGEMENT SPEND MANAGEMENT ORDER MANAGEMENT EPAYMENTS Figure 7 The Purchase-to-Pay Platform

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Q2 2016 © 2016 PayStream Advisors Inc | www.paystreamadvisors.com | infopaystreamadvisors.com 12 » Accounts Payable – AP automation involves paperless invoice processing through electronic invoicing and/or the scanning of paper invoices and data capture invoice matching and exception management approval workfow and integration with electronic payments tools. Most P2P solutions are capable of integration with AP software facilitating seamless movement from requisition to payment. Many AP solutions also come with working capital tools including Dynamic Discounting and Supply Chain Financing SCF oferings to improve DPO increase revenue and promote faster supplier payments. » Electronic Payments – Many solutions either ofer in-house payment capabilities or directly integrate with leading payment solution providers. Leading ePayments strategies include ACH wire and commercial card payments. Commercial cards come in a variety of types including corporate cards traditional purchasing cards ghost cards and Virtual Account VA programs. » Supplier Management – Most solutions ofer some level of supplier management—either through self-service supplier platforms or simply via a searchable supplier directory. Other features include supplier data management supplier risk assessment and supplier analytics and reporting tools for insights and auditing. » Spend Management – Reporting and analytics tools allow purchasing AP and legal departments to pinpoint inefcient spend activity and identify areas for improvement. Features include out-of-the-box and/or ad-hoc reporting interactive reporting dashboards with drill-down capabilities integration with other analytics tools and industry benchmarking for data analysis. Besides process automation P2P automation also brings many benefts that impact the efcient management of indirect spend. These include: » Control – P2P solutions ofer built-in purchasing controls that can be customized to each organization’s unique business policies. A company can designate diferent requirements restrictions and workfows for spend according to its characteristics such as spend category user and PO or invoice amount. The solutions facilitate complete real-time visibility into all spend activity and many ofer budgeting components that promote consistent budgeting

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Q2 2016 © 2016 PayStream Advisors Inc | www.paystreamadvisors.com | infopaystreamadvisors.com 13 compliance for both general and project-based purchasing. Many solutions also provide support for non-PO spend to ensure that these items are under the same level of control. This support can include special rules and workfows for non-PO invoices as well as straight-through processing and automatic payment options for certain recurring invoices such as utility bills. Today’s P2P solutions also improve control through back-end analytics audit trails and fnancial process support that automates accruals and postings. » Confgurability – P2P solutions allow customization of more than just internal controls—a company can customize the solution to ft with any business process or requirement including approval workfows industry-specifc requirements and IT specifcations. In addition P2P solutions can adapt to any ERP system and are usually ofered either in holistic end-to-end suites or through modular standalone units. This allows organizations to easily integrate solutions with existing systems piece by piece moving towards automation at a pace that suits their budgets. » Collaboration – Today’s solutions allow procurement and AP managers to maintain consistent communication with both their staf and the company’s stakeholders through real-time collaboration tools. Users can discuss spend activities at any time during the P2P process through email and chat boxes and they can collaborate on P2P documents via authoring tools and comments. Mobile technology further promotes this collaboration by allowing strategic P2P professionals to stay in communication on the go by using the software’s mobile application.

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Q2 2016 © 2016 PayStream Advisors Inc | www.paystreamadvisors.com | infopaystreamadvisors.com 14 Adoption Road Map A P2P solution allows businesses to control company spend improve processes and potentially save millions each year. When selecting a P2P solution organizations should: Build a selection checklist. Not every solution works with every organization as company size industry and unique business processes and requirements can greatly afect a solution’s suitability. Companies should develop a selection checklist in order to choose a provider that complements their own internal strategies and business needs including the organization’s business process fows unique industry requirements IT needs and fnancial parameters. Look at a variety of providers. There are many diferent types of P2P providers some ofer more generic solutions that can easily plug into any business type while others have more experience in a few specifc industries such as healthcare or professional services. In addition many solutions are built diferently according to the market segment the provider caters to there are solutions with features and pricing options designed for small medium and large organizations. A buying organization should evaluate the solution against both of these distinctions. Look at the numbers. It is important to look beyond the initial ticket price of a P2P system especially when it comes to buying a holistic end-to-end suite. Organizations should consider the total cost of ownership for the solution which includes implementation and integration costs change management costs ease of use and scalability. They should compare these costs against the potential savings they will gain by reducing maverick spend and processing times and speeding up the payment cycle. To help calculate the total cost of ownership TCO PayStream has created an easy-to-use TCO calculator. This tool is free to use and can help an organization decide which solution is the most cost-efective for its needs. It can be accessed at www.paystreamadvisors.com Gain internal buy-in and enthusiasm. For an automation overhaul to be successful the entire organization must be in agreement about the value need and primary use of the software. Although procurement AR and AP professionals must be on board—as they will have the most

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Q2 2016 © 2016 PayStream Advisors Inc | www.paystreamadvisors.com | infopaystreamadvisors.com 15 contact with the software—it is vital that senior management also be optimistic and enthusiastic about the new system. Gaining corporate buy-in is the surest way of creating a successful automation initiative. Those proposing the implementation of new software should present a detailed plan for implementation highlighting the long-term benefts of the solution in both hard and soft costs. In all Purchase-to-Pay solutions bring spend into one unifed transparent system and allow organizations to improve control over their spend fnancial health and competitive advantage. The following profle summarizes the oferings of a leading Purchase-to-Pay software provider.

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Q2 2016 © 2016 PayStream Advisors Inc | www.paystreamadvisors.com | infopaystreamadvisors.com 16 GEP GEP is a procurement technology developer with over 15 years of experience in deploying Purchase-to-Pay and Source-to-Settle solutions. With its P2P/S2S platform SMART by GEP® GEP has made it possible for all tasks in the purchasing and payables processes to be carried out in one system and from any device. The unifed platform is designed to automate and accelerate the management of a strategic indirect spend program with automation for spend management procurement sourcing contract management order management supplier self-service and invoice processing. Founded 1999 Headquarters Clark New Jersey Other Locations London Prague Mumbai Shanghai Number of Customers 1400 Number of Employees 180 Target Verticals All verticals Awards / Recognitions Top supplier 2015 EPIC Procurement Excellence Awards HfS Blueprint Winner’s Circle Supply Demand Chain Executive Magazine Top 100 Everest Group’s PEAK Matrix for Procurement Star Performer Solution Overview SMART by GEP is a highly secure cloud-based procurement platform hosted on the Microsoft Azure Cloud. All of GEP’s development data handling and operational facilities and systems are certifed to SSAE16 standards. GEP uses a web-based methodology to integrate with its customers’ third-party systems. The solution is mobile-enabled and works on any browser and platform. Purchase-to-Pay SMART by GEP’s procurement ofering covers requisitioning PO management receiving and reconciliation. The solution features many types of purchasing catalogs including punch-out supplier- hosted managed and internal buyer-side managed. The solution also includes multi-variable and multi-stage requisition approval

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Q2 2016 © 2016 PayStream Advisors Inc | www.paystreamadvisors.com | infopaystreamadvisors.com 17 workfows with failover delegation and escalation controls. Purchase requisitions are fipped into orders upon approval and the POs can then be processed through additional workfows if necessary. POs are submitted directly to the suppliers through the SMART by GEP portal. SMART by GEP’s accounts payable functionality allows users to handle all P2P documents in one place. SMART by GEP natively accepts invoices originating from suppliers through the SMART by GEP portal. SMART by GEP also integrates with supplier systems for the purpose of order and invoice transmission using EDI and/or cXML standards. After invoice submission GEP’s platform and Invoice Reconciliation solution conduct feld-level matching based on business rules automatic re-routing of incorrect invoices back to suppliers and PO fip on validated invoices. Due to SMART by GEP’s comprehensive platform the matching function can handle requisition order delivery note receipt and invoice matches. The platform also provides compliance tools to match invoices to contracted prices or prices bid at the sourcing stage. GEP’s Invoice Reconciliation features allow for the routing revision matching and management of invoices that fail automatic matching. SMART by GEP includes access to the GEP Nexus supplier network for customers that wish to have access to a global supplier base. To address suppliers that are not yet registered for the GEP Nexus network GEP ofers a managed supplier onboarding service tailored to each customer’s need. With SMART by GEP suppliers have access to the platform’s entire P2P oferings as well as a robust set of supplier self-service and B2B collaboration tools. This includes profle management certifcate management procurement catalog information management and the ability to handle order-to-invoice processes. SMART by GEP is built upon a data warehouse model for reporting and dashboards providing the end user with access to all data across the procurement landscape. Its reporting services include dashboards and drag-and-drop ad-hoc reporting functionality that allow users to create reports based on any parameter captured within the system. Users can create custom reports which can then be added to the dashboard viewed in graphical format exported in multiple fle formats and scheduled at a desired frequency. The SMART by GEP platform supports customization of dashboard views per individual users’ requirements.

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Q2 2016 © 2016 PayStream Advisors Inc | www.paystreamadvisors.com | infopaystreamadvisors.com 18 Implementation and Pricing Implementation of SMART by GEP solutions includes confguration to the client’s business processes and robust customer support to drive end-user adoption. Post-implementation GEP provides phone and web-based support. GEP’s global customer support staf is based out of three regions US Europe and APAC and is available 24/5. SMART by GEP is an annual subscription-based service priced on a function-by-function basis largely according to the number of users of each function for each year of the contract. The diferent factors considered for pricing include number and type of users interface languages contract and template confguration requirement and support services.

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Q2 2016 © 2016 PayStream Advisors Inc | www.paystreamadvisors.com | infopaystreamadvisors.com 19 About PayStream Advisors PayStream Advisors is a technology research and consulting frm that improves the way companies plan evaluate and select emerging technologies to achieve their business objectives. PayStream Advisors assists clients in sorting through the growing complexities of IT applications related to business process automation with the goal of making objective analytical and actionable recommendations. Wherever business process automation technology is an issue PayStream Advisors is there to help. For more information call 704 523-7357 or visit us on the web at www.paystreamadvisors.com

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