A Fortune 500 company wanted to develop working capital saving strategy by improving the existing payment terms. However, it did not have any quantitative data points to back the existing payment term strategy and which supplier to target. They wanted to identify the top spend suppliers who had lowest payment term and which supplier to target to achieve maximum working capital benefit.
KEY CHALLENGES
Single Source of Truth – Lack of a unified portal to access payment term information.
Actual Payment Term – Limited visibility in spend data to calculate actual payment term.
Invoices Data – Different sources to extract insights on contractual vs. actual payment term.
Correlation with Spend – Challenging to connect spend with invoices considering volumes.
Varying Supplier Attributes – Supplier attributes different in spend and invoices data.
Payment Term Calculations – Need of standardizing payment terms calculations.
APPROACH
Actual vs. Contractual – Robust methodology formulated to drive automated calculations.
Early/ Late/ On-time – Classification of payments based on actual vs. contractual.
Site Level Insights – Analyzing site level insights on payment terms.
Payment Release – The analysis showed irregularities in payment release from agreed payment term days which prompted action in improving the process by identifying key bottlenecks.
Category Strategy – Citing the key insights from payment term strategy analysis, the procurement team was able to develop a robust category strategy document for better cost savings.
Savings Potential – USD 63 million of working capital saving opportunity identified.
Payment Term Recommendation– From existing average of 28 days to 60 days which lead to supplier negotiations.
Refresh & Maintenance – Seamless refresh with final output hosted on Power BI Service and continuous tracking of Payment Terms in concluding periods.
