Speed Invoice-to-Cash by

Integrating SAP Dispute

Management and
SAP Collections Management

Karen Hartnett
SAP
Todays business issues

SAP Dispute Management

SAP Collections Management

Wrap-up
Todays business issues

SAP Dispute Management

SAP Collections Management

Wrap-up
 Transaction Processing Time

1960s Today

Order 4 - 7 days Today

Delivery 14 - 21 days Next day

Invoice 4 - 7 days Same day?

45 - 60 days
Payment 45 - 60 days
(or more!)

Source:Killen&Associates, Inc.

SAP AG 2005, 4
 The Dispute Dilemma

! 20% of all sales transactions have one or more data issues that
cause reconciliation problems and delay payment *

! It costs between 14 to 162 USD to process a receivables

transaction **

! Over 61% of accounts receivable are over 50 days outstanding ***

! 5-15% of a consumer product companys sales revenue ends up as

payment deductions****

! Payment deductions are on the rise! (growing at 20% per year)*****

We believe that collectors spend more than 50% of their

time on dispute resolution.
(Meta Group, 2002)

* CRF 1998 Management Reports

** National Association of Purchasing Management
*** University of Tennessee
**** Credit Research Foundation survey
*****
SAP Grocery
AG 2005, 5
Manufacturers of America survey
 The Dispute Disease

Company A

Annual sales: $200M $10M annual deductions

Deduction rate: 5%

Typically, 85% allowed; $1.5M still in disputed receivables

Result:
o 5-10 days more in DSO
o 75% of credit and collection, A/R, and customer service resources spent
on deduction resolution
o Strained customer relations

Source: BusinessFinanceMag.com

SAP AG 2005, 6
 Top Five Deductions Industry-Wide
Pricing errors
Advertising and promotional allowances Lost or damaged goods
Returned and refused merchandise Concealed shortages

70%

60%

50%

40%
% of respondents

30%

20%

10%

0%
Pricing Errors Advertising & Returns & Lost or Concealed
Promotional Refused Damaged Shortages
Allowances Merchandise Goods
Source: Credit Research Foundation

SAP AG 2005, 7
 Types of Deductions

Intentional:
# Promotional or advertising related (for example, coupons, stocking
fees, quantity discounts, rebates)
# Anticipated, simply need better dispute management

Preventable:
# Pricing discrepancies, processing errors, disputes over terms,
confusion over promotions
# Identify root causes and address

Unauthorized:
# Unearned discounts, duplicate claims, unsupported short payments
(typically 10-20% of claims)
# Act quickly and aggressively with notification rejecting deduction;
repeat offenders need to be addressed

Source: BusinessFinanceMag.com

SAP AG 2005, 8
 Can You Ever Eliminate Deductions?

! No, 80-90% of all deduction claims are legitimate

! For Consumer Packaged Goods (CPG) companies, and a
growing number of industries, deductions are preferred, or
even demanded, by customers
! More than 90% of invoices deducted in CPG, approximately
22% for high tech

15%

Legitimate
Deductions
Illegitimate
Deductions

85%

Source: Credits Worst Nightmare, Rob Hand

SAP AG 2005, 9
 Its Not Over Yet

Post-audit claims: a vicious cycle

# Audit firms look for previously unnoticed billing

discrepancies, discounts, or credits due to their clients

# Vendors need to review old documentation

# Audit firms work on a contingency basis and target

companies that cannot challenge post-audits due to poor
systems and recordkeeping

# Inability to defend company affects the bottom line!

SAP AG 2005, 10
 What to Do

Get Review
Recognize the
problem and executive your
determine its buy-in to dispute
severity, as address the resolution
systems dispute process
permit management
area

Identify a
solution to Determine
meet your your goals
goals for
improvement
(Hint: SAP)

SAP AG 2005, 11
 Collections Shows the Whole Picture

Collections management according to Meta Group is

Customer-centric receivables management

Collections management supports

! Evaluation, identification, stratification, and prioritization of accounts
$ From a risk-management perspective
$ From a customer-relationship perspective
! Proactive collection of receivables
$ Payment reminders
$ Promise-to-pay arrangements
$ Follow-ups

! Process optimization and automation for high volumes of open items

! Workforce management

SAP AG 2005, 12
Todays business issues

SAP Dispute Management

SAP Collections Management

Wrap-up
 SAP Dispute Management Is ...

%A tool to track and process reduced payments while streamlining the

dispute resolution process

%A component in SAPs new financial solution suite, Financial Supply

Chain Management (FSCM); available in FSCM 3.0 as of July 2004

SAP AG 2005, 14
 Dispute Management an Example

1. Purchase is made and order is fulfilled and shipped

2. Invoice
Billers ERP 3. Reduced payment (without reason) Customer

4. Automatic
creation 5. Email, letter
7. Posting
of a dispute
6a. Payment information
case
(telephone call, fax)
Real time

Dispute FSCM Biller Direct 6b. Access to

Management (Web Portal) Dispute Management
(payment information)
(integration with Biller Direct
available in FSCM 3.0)
SAP AG 2005, 15
 SAP Dispute Management An Example

Direct
Postprocessing NO Open and assign a Assign, import the relevant data
clearing
bank statement possible dispute case such as invoice, billing document,
master data, etc.

YES

End
End
NO Reason
Determined by dispute
code
accounting clerk
known

YES
Workflow message to
Dispute case clarified and status set to clarified. person responsible
Info on the steps taken is stored in the Notes History

Dispute accounting clerk Dispute accounting clerk Dispute

Dispute case
case then
then
subsequently checks this changes status to closed updated
updated and
and closed
closed

SAP AG 2005, 16
 SAP Dispute Management

Customer
Customer AR-Clerk
AR-Clerk Sales
Sales Manager
Manager Quality
Quality Mgt.
Mgt. ...
...

Input Input Input Input Input

SAP Dispute Management

Integration Integration Integration Integration

Receivables
Production

Analyze
Campaign

Shipment

Billing
Order

Pay

Cash
Business process is managed within:

CRM SCM MM SD FI-Accounts Receivable Business Analytics ....

Or FI-Contracts Accounting
SAP AG 2005, 17
 How Does SAP Dispute Management Help?

SAP Dispute Management controls and streamlines the dispute

case process

As central component for handling dispute cases, SAP Dispute

Management enables cross-department dispute resolution

SAP Dispute Management is integrated in financial but also in

logistical processes

SAP Dispute Management organizes and stores all information

and documents related to a dispute case

SAP Dispute Management includes sophisticated reporting

$ Detect quality issues
$ Control workload
$ Track dispute process

SAP AG 2005, 18
 Dispute Management Screens

Case organizer #Creating and

processing cases

#Search cases

#My cases
#List of all cases where
the user is the processor

#Favorites

#Resubmission

#History
#List of objects that were
most recently processed
SAP AG 2005, 19
 Basics of Dispute Management

Components of a case...
#Case attributes
#Title, processor, status,
reason, amount,

#Case notes
#for the documentation
of the processing of the case

#Case log
#History of actions performed
on the case

#Case record/linked
objects
#Customer, residual item,
word document,
transactions
SAP AG 2005, 20
 Attributes of a Dispute Case

The case attributes

contain...

# Header, case ID
# Processor, coordinator,
responsible person
# Reason, status, priority,
escalation reason

# Planned close date

# Amount fields
# Created/changed/
closed by/at

SAP AG 2005, 21
 Amount Fields of Dispute Case

Original disputed
amount

Disputed amount

Amount Paid
fields
Credited

Cleared manually

Automatically written
off

SAP AG 2005, 22
 Case Notes

In the case notes, the user documents the processing of the

dispute case

#Different types of
Case Notes
(description, internal
memo, answer ...)
#Customizable

SAP AG 2005, 23
 Case Record

The case record contains links to objects that are related to

the case

The case record can

contain links to...

# Business objects
# Office documents
# ArchiveLink
documents
# Transactions

SAP AG 2005, 24
 Folder Structure of Linked Objects

Business partner

Disputed objects

Resolved objects

Items assigned during clearing

Other objects

Miscellaneous

SAP AG 2005, 25
 Case Action Log

Date Time Activity User Attribute Value old Value new

21.04.2003 11:45:12 Display Case MILLER

18.04.2003 09:12:45 Access Case BROWN

Notes

18.04.2003 09:10:20 Attribute BROWN PROCESSOR BROWN MILLER

Change

SAP AG 2005, 26
 Dispute Case Locator

With the dispute case locator, the user can search for cases

SAP AG 2005, 27
 My Cases

My Cases provides the user a list of all cases for which he is the
processor

SAP AG 2005, 28
 Creating a Dispute Case

Can take place from different screens

& From display and change FI document (FB02, FB03)

& From line item display (FBL5N)

& From clearing with residual item creation (FB05)

& From post-processing of bank account statement (FEBAN)

& New: from lockbox processing and Biller Direct

SAP AG 2005, 29
 Create Dispute Cases from FBL5N

From the open item list, all marked items will be taken into the
dispute case
Items from different customers or companies and with different
currencies can be selected

SAP AG 2005, 30
 Create Case from Financial Transaction

Process integration
! Update amount field Original Disputed Amount
Financial ! Link FI document to folder Disputed Objects
transaction ! Automatic derivation of field content

Create dispute
User action
case ! Enter data for a few fields
! Write a note

SAP AG 2005, 31
 Create Dispute Case in Case Organizer

SAP Dispute Management

Record and Case Record Models

Cases

Dispute Case

Find
Create
Dispute Case - Search
Information

My Dispute Cases

Documents

SAP AG 2005, 32
 Display Dispute Cases from FBL5N

Attributes of the dispute case can be added to the line item display
Dispute data can be accessed from the list

SAP AG 2005, 33
 Update Case by Financial Transactions

Amount fields
! Original disputed amount
Financial ! Disputed amount
transaction ! Credited amount
! Paid amount
! Amount manually cleared

Update Dispute
Folders
Case
! Resolved objects
! Items assigned during clearing

SAP AG 2005, 34
 Effect of Clearing a Disputed Item

A partial payment
is received
for a disputed item...

... before clearing

SAP AG 2005, 35
 Effect of Clearing a Disputed Item (cont.)

A partial payment
is received
for a disputed item...

... after clearing

SAP AG 2005, 36
 Splitting Dispute Cases by FB05

The user can split the amount of a residual item from the dispute
case and create a new case for this item:

Result

Original amount
of old dispute case
will be reduced and
the two dispute cases
are linked together

SAP AG 2005, 37
 Correspondence

Correspondence can be created

! Automatically by events like
$ Create dispute cases
$ Close dispute cases
$ Events that can be defined on project level

! Manually by the user when processing the dispute case

SAP delivers standard customer correspondence for

! Fax, email, and letter
$ Notification that a dispute case has been created
$ Notification that dispute case has been closed
$ Query regarding dispute case
$ Information about dispute case

! Customers can create their own correspondence

$ Use smart forms
$ Data available for correspondence
& All attributes
& External notes
& Object keys of objects stored in the dispute case folders (case record)
&

SAP AG 2005, 38
 Example of Manual Correspondence

Customer contact person

Select communication type

Select
correspondence

Select
external notes

SAP AG 2005, 39
 Reporting

Ad hoc reporting in Dispute Management

! List-based reporting
$ Flexible layout
$ Search, filter functionality
! Data available for reporting
$ All attributes of dispute case
! Editing of dispute cases from list possible

Integration with SAP Business Information Warehouse (BW)

! Online Analytical Processing (OLAP) reporting
$ Drilldown
$ Slice and dice
! Available data for reporting
$ All attributes
$ Linked business partner
$ Disputed and resolved items (history)
$ Cross-component data, for example, master data of business partner

SAP AG 2005, 40
 Example: Time Grid for Disputes

SAP AG 2005, 41
 Implementation

R/3 release required

! 4.6c or higher release of FI-AR. FI-CA is possible backend for FSCM 3.0.

Resources required
! Dispute Management/Accounts Receivable consultant
! ABAP consultant
! Basis consultant

Estimated time frame

! Depends upon amount of customization: approximately three months
! Possibilities exist to extend functionality via BAdIs (i.e., setting defaults)

Key actions to take before implementation

! Map out processes desired
! Obtain statistics on current processes and determine goals for
improvement

SAP AG 2005, 42
 Customer Enhancements for Default Values

Case Type

Category

Reason

Priority

External Reference Find default Create

value for Dispute Case
Processor

Coordinator

Person responsible

Title

Case notes Accounts receivable

SAP AG 2005, 43
 Customer Enhancements

BAdI: Change cases during initialization

BAdI: Change cases before validation

BAdI: Customer-specific validation of cases

BAdI: Change cases before saving

BAdI: Customer-specific validation before saving

BAdI: Save customer-specific data when saving cases

BAdI: Mass activities on dispute cases

SAP AG 2005, 44
 Deployment for mySAP ERP 2004 (1 System)

SAP Dispute
SAP ECC 5.0 Management
(FI-AR) 3.0

SAP Web Application Server (Web AS)

6.40

SAP AG 2005, 45
 Deployment for SAP R/3 Enterprise 4.7*

ALE SAP Dispute

SAP R/3 Enterprise
Management
4.7
3.0

SAP Web AS 6.20 SAP Web AS 6.40

*Deployment for 4.6c would look similar

SAP AG 2005, 46
 SAP Dispute Management Demo

SAP AG 2005, 47
Todays business issues

SAP Dispute Management

SAP Collections Management

Wrap-up
 SAP Collections Management

% Solution to optimize collections by providing collectors with work lists,

collections information, and related functionality

% High customer interest in this area

% First release was in FSCM 3.0 July 2004

SAP AG 2005, 49
 The Functionality

SAP Collections Management comprises a new possibility to

process and view open items per customer account for
cash collection
! All open invoices and their statuses at a glance
! Invoice history
! Actions for one or several invoices can be directly taken
! Tight integration with SAP Accounts Receivable

SAP Collections Management offers work lists that can be created

manually
! Search criteria to select customer accounts
! Criteria to prioritize customer accounts
! Direct access to customer account from worklist

SAP Collections Management offers new collection procedure

! Promise-to-pay agreements
! Automatic integration with payments and clearing postings

SAP AG 2005, 50
 SAP Collections Management

Collections process

Process
Select Prioritize Prepare
receivables
customer customer receivables
per customer
accounts accounts for collection
account

Selection by Prioritize by Prepare by Process account by

Company code Total open amount Sorting Creating promises to pay
Account no. Due today Filtering Renewing promises
Clerk Amount promised Viewing history Creating dispute cases
Sales area Amount broken pr. Assigning contact
Total open amount Amount dunned
...

SAP AG 2005, 51
 Prepare Customer Contact

Collection agent gets the following information on customer

account level
! All open invoices of customer account (invoice view)
! Open promises to pay navigation to detail view possible (promise-to-pay view)
! Open dispute cases navigation to detail view possible (dispute case view)

Collection agent gets the following information on invoice level

! Invoice history
! Promises-to-pay list per invoice navigation to detail view possible
! Dispute case list per invoice navigation to detail view possible

Collector can define layouts that allow him to view status of invoice at a
glance like
! Invoiced amount
! Open amount
! Paid
! Credited
! Promised

SAP AG 2005, 52
 Prepare Customer Contact: Invoice View

SAP AG 2005, 53
 Create Dispute Case: Example

SAP AG 2005, 54
 Promise to Pay

Customer promises to pay one or several invoices

! Collection agent creates promise to pay
$ Creationpossible for one or several invoices
$ Promise is traced on single invoice level
! Collection agent renews promise to pay
$ Existing
promises can be renewed
$ Renewed promises get higher promise level

Promises to pay are updated by incoming payments

! State kept if incoming payment equals promised amount
! State partially broken if payment amount is smaller than promised amount
! Promises that are not kept are labeled broken
! Partially broken and broken promises can be followed up

For invoices that have been fully cleared, promises to pay can be
closed automatically

Collection agent can create, change, renew, withdraw or void promises

to pay

SAP AG 2005, 55
 Create Promise to Pay: Example

Selected invoices

Sum is taken over as default value for promised amount

If promised amount is smaller than total open amount ' distribution

SAP AG 2005, 56
 Deployment for mySAP ERP 2004

SAP Dispute and

SAP Enterprise
Collections
Core Component
Management
(ECC) 5.0
3.0
(FI-AR)

SAP Web AS 6.40

SAP AG 2005, 57
 Deployment for SAP R/3 Enterprise 4.7

SAP Dispute and

SAP R/3 Enterprise ALE Collections
4.7 Management
3.0

SAP Web AS 6.20 SAP Web AS 6.40

SAP AG 2005, 58
 SAP Dispute Management Demo

SAP AG 2005, 59
Todays business issues

SAP Dispute Management

SAP Collections Management

Wrap-up
 FSCM Roadmap

mySAP ERP 2004

(incl. SAP FSCM 3.0) mySAP ERP 2005
SAP
(incl. SAP FSCM 6.0)
FSCM 2.0
Ramp-Up
Q2/2004
Planned
Q3/2005
Release to Customer
Q3/2003

Focus: Focus:
Biller Direct Biller Direct
Dispute Management integration, collection authorization
Dispute Management
Dispute Management
Credit Management*
Automation and prioritization, workflow integration, correspondence
Credit manager portal, credit rating,
credit rules engine
Collections Management
Manual worklists, promises to pay, integration with Dispute Management
Treasury and Risk Management
Parallel valuation area, position monitor, Credit Management
new instruments Credit Limit Check, Credit Analysis, Credit Eventing, Workflow
In-House Cash
Prima Nota, Integration with Cash and Treasury and Risk Management
Treasury and Risk Management
New instruments for foreign exchange and derivatives, Hedge Accounting,
* Pilot customers only
SAP AG 2005, 61 enhancements in Market and Credit Risk Analyzer
 Resources

' Web site:

www.sap.com/fscm
Brochures
White papers
News and events
Customer success stories

' Direct contact:

Contact your SAP Account Executive or

Karen Hartnett, FSCM Product Manager

(Biller Direct, Dispute Management, Credit
Management, Collection Management)
karen.hartnett@sap.com

SAP AG 2005, 62
 7 Key Points to Take Home
( Dispute and Collections Management is an important focus area for
most companies today

( Poor dispute resolution diverts company focus, worsens customer

relations, and negatively affects profitability

( Most companies are still using a manual, paper-based process with

no standardization to address disputes

( Deductions are not avoidable, but the associated pain is

( SAP Collections Management lets you manage collections at the

customer level, while Dispute Management is at the individual
dispute or line-item level. The two solutions together provide a
comprehensive solution to improve collections and customer
satisfaction.

( Implementations of Dispute and Collections Management are

relatively fast

( Integration within FSCM and with other SAP solutions is key

SAP AG 2005, 63
 Your Turn!

Questions?

How to contact me:

Karen.Hartnett@sap.com
SAP AG 2005, 64
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SAP AG 2005, 65