Integrating ERP with P2P to Boost Business Process Efficiency

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1 Integrating ERP with P2P to Boost Business Process Efficiency

2 Overview Procurement functions, such as contracting, spend analytics, sourcing and vendor management, are all important. But in the end, there is always an invoice to be paid. And this particular payment needs to be processed to ensure that it reaches the right supplier and for the right goods and services. For any organization this function means having an efficient Procure-to-Pay (P2P) solution that integrates seamlessly with the already installed financial structure, which in most cases is an ERP (enterprise resource planning) software. Most procurement executives know that a positive business case can be made out of invoice automation. They also understand that automation improves productivity, efficiency and visibility with higher accuracy. But few have aggressively pursued this potential improvement because they continue to leverage their existing ERP systems. However, the ERP systems do not provide the same level of sophistication that a P2P solution can to manage the procurement process. These barriers can be overcome if the ERP is integrated with P2P software. Successfully integrating these two systems has become easier than in the past. However, it requires careful consideration on aspects like the data format that should be followed or which processes can work together. As the use of cloud-based solutions has increased, the risk of integrating ERP with P2P has lessened. Integrating ERP with P2P can also deliver the substantial advantage of long-term scalability. Spend Matters research suggests that the rising need for connectivity and integration between systems touching on procurement mirrors four current business needs that many companies are looking for from procurement and finance organizations: Flexibility : Focused on the ability to integrate new systems quickly while adapting to the changing business environment Control : Influencing and controlling spending decisions on the front lines of the business Visibility : Insight into both spending activity and decisions, plus broader budgets and the ability to proactively manage cash more efficiently and effectively Forecasting : Using procurement intelligence for finance-driven forecasting, scenario building, budget building, etc. In these four areas, business leaders are the ones who benefit the most by integrating procurement and enterprise application software. One can also mention that for both procurement and finance teams P2P and related system integration has become the glue to establish effective e- procurement and e-invoicing processes.

3 Integration Linkages In this white paper, we will discuss core ERP integration, which is basically a cloud integration scenario with a company's core financial system. Typical fields that organizations map for integrations are often highly dependent on the specific ERP and business application packages to be integrated. In order to integrate the core ERP with an external P2P system, businesses must know not only which field to map and integrate, but also which system relays information to suppliers. The complexity of potential P2P integration into ERP is limited only by one's imagination or specifically, the imagination of the IT and finance departments that originally deployed the system. For example, for internal cost allocations, one might opt for simple integration based on standard fields configured within a third-party (or ERP) eprocurement system with ties into inventory systems. Developing the integration strategy According to spend matters, a few scenarios need to be addressed before starting the integration process: Define processes owned by the P2P solution and the ones managed by the ERP system Define integration approaches for ERP and technologies used based on business drivers Define integration approaches for suppliers and technologies used Determine data needs for the integration, and how to address different ERP or other systems Define the mapping structure determine initial loading structure Define the maintenance process Once these questions are answered the integration can be designed. The primary objective of P2P integration is to drive more granular and accurate cost accounting and charge-backs to stores on a location-by-location basis while simultaneously enhancing visibility into overall spending and tying orders to delivery. The integration strategy needs to focus on three systems financial, warehouse management and logistics. If real-time linkage is enabled across these three platforms, ordering, tracking and visibility and can be achieved through one single interface. Refer to the diagram below: Figure 1 Finance Warehouse Logistic P2P Ordering + Tracking + Visibility Supplier1 Supplier2 Supplier

4 The grid suggests that there needs to be an integration data interchange tied to the P2P, which splits orders between providers and internal inventory. Through this method, the orders between suppliers, the workflow, and physical movement of goods would all follow an order depending upon the type of goods. Like office supplies would be directed to a store of the office supplies vendor, and so on. And while all this happens, the process must remain transparent to the users. For this particular integration the business objective should take precedence over technology preferences. The process must be well coordinated with all stakeholders and not just the IT department. Integration Scenarios We are going to see three integration scenarios in this whitepaper: Procure to pay in Zycus solution P2P with ERP (ERP generates the PO) Requisition to PO in P2P / invoicing in ERP Integration Scenario 1: Procure to pay in Zycus solution ERP Zycus P2P 1 Requests 2 Suppliers Client Requestor 6 Maching 4 ERP Financial Tax Engine 5 Approved 7 Tax Calculation 8 Payments 2 All Requests & Pos Originate in Zycus and are optionally sent back to ERP.

5 Once the master data is integrated from ERP to P2P, POs can be exported from P2P to ERP. Approved requisitions will create POs in P2P, which will further be sent to suppliers via XML, EDI, Supplier network or . The invoice will be received from the suppliers via the same tools. These invoices can also be sent to a tax engine for tax calculations (optional). The entry of the invoice will trigger the requester to confirm receipt of goods and services. -way PO/ invoice/pr matched and approved for payment will be directed to ERP, while non-matched will be sent through the invoice approval flow. Payment will be made from ERP and will be posted back to P2P for each invoice. Integration Scenario 2: P2P with ERP (ERP generates PO) ERP Zycus P2P 1 2 Requests Suppliers Client 4 Requestor 7 Maching 5 ERP Financial Tax Engine 6 Approved 8 Tax Calculation 9 Payments Here master data is integrated from ERP to P2P. Requisitions are exported from P2P to ERP for PO generation. ERP POs are exported back to P2P. Then the POs are sent to suppliers vie XML, EDI, etc. The invoices from the suppliers are received into P2P. Tax is calculated on the invoice, the requestor is notified to confirm receipt. -way match is completed and payment is made from ERP and posted back to P2P.

6 Integration Scenario : Requisition to PO in Zycus P2P/ ERP for invoicing ERP Zycus P2P 1 Requests Maching 2a Client 6 Maching Suppliers 2b 9 5 Requestor ERP Financial Payments Tax Engine Tax Calculation 8 Here, once the master data is integrated from ERP to P2P, POs are exported from P2P to ERP. POs are sent to suppliers and then invoices are received. ERP calls the tax engine to verify taxes. And then ERP signals the requester to verify invoices and confirm receipt. Then a -way match takes place in ERP and the payment is also made through ERP. Payments are then posted back to P2P for each invoice.

7 Integration Touch Points While integrating different systems, various touch points, like master data touch points, transaction touch points, supplier touch points, are created for exchange of information. Here's the reference of a typical master data touch point Master Data Touch Points Integration Touch Points Source System Target System Cost Center SAP Zycus P2P GL accounts SAP Zycus P2P Projects SAP Zycus P2P Budgets Spreadsheet Zycus P2P Tax Table SAP Zycus P2P Addresses SAP Zycus P2P Locations SAP Zycus P2P Benefits of Integration: ERP is limited when it comes to flexibility. The solution cannot really handle any strategic functions. P2P, on the other hand, is cloud-based, it's mobile, drives compliance, allows spend visibility and increases user adoption When integrated, P2P can work as the front end manager and exchange data with ERP. The process is streamlined and seamless. The integration will eliminate the need for duplicate data entry and master data maintenance It can build an integrated business process while leveraging the best of breed systems It will also synchronize the master data to retain certain business structures Recommendations: Find out the form of integration you need to use industry-specific or company- specific Prioritize integration capability when making a P2P decision by considering a vendor's track record for integration scenarios, while simultaneously considering absolute capability and usability Trust and validate vendor claims on past P2P experience Use integration in specific business areas to get better returns

8 Zycus is a leading global provider of complete Source-to-Pay suite of procurement performance solutions. Our comprehensive product portfolio includes applications for both the strategic and the operational aspects of procurement - eprocurement, einvoicing, Spend Analysis, esourcing, Contract Management, Supplier Management and Financial Savings Management. Our spirit of innovation and our passion to help procurement create greater business impact are reflected among the hundreds of procurement solution deployments that we have undertaken over the years. We are proud to have as our clients, some of the best-of-breed companies across verticals like Manufacturing, Automotives, Banking and Finance, Oil and Gas, Food Processing, Electronics, Telecommunications, Chemicals, Health and Pharma, Education and more.