Category Archives: Procurement Innovation

Has Coupa Settled on a Coupe? Part I

Has Coupa, which opened the Cabana Cafe a little over four years ago with the goal of enabling Procurement Independence for all with it’s Rails-driven cloud-based EC2 platform, given up its quest for a coupasonic flying car and instead settled for a mini-cooper?

Now, while the original goal of Coupa, that wanted to fill your e-Procurement gas tank, was to bring e-Procurement to the masses, it would seem that they are now content with the fact that you can buy anything you want in The Coupa Store as it would appear that they are no longer charging ahead on the innovation front. While it’s true that they’ve been quite busy ever since they enabled QuickDraw Procurement with QuickStart, what they’ve accomplished since then isn’t all that spectacular compared to their historical rate of innovation … and they’ve missed most of the opportunities for innovation that could take their platform to the next level with their latest release. And while it’s true that you don’t need a very powerful solution if you’re selling fertilizer to farmers (and can get by with a simple cart and a good old-fashioned hoe-down), you’re never going to get the design engineers. (i.e. You’ll get the tactical buyers requisitioning office supplies, but never the strategic buyers trying to order a bill of materials for engineering.)

Basically, besides revamping the UI for the upteenth time (which seems to be a waste of resources to me as it was already [among] the easiest enterprise procurement solution out there and as easy to use as Amazon.com), all Coupa appears to have accomplished in the last eighteen months is:

  • improved ERP integration through upgraded APIs and Boomi,
  • drag-and-drop expense management,
  • transaction metadata for OLAP reporting,
  • a new inline spend dashboard,
  • real-time budget-based alerts during requisitioning,
  • the iPhone app,
  • iRequest,
  • opt-in community benchmarking, and
  • supplier ratings.

Considering that:

  • they’ve had APIs since day one, Boomi handles most of the integration, and ERP integration is always just a matter of time and resources,
  • it’s about data capture (not slick UIs),
  • they’ve had the ability to capture this data since day one,
  • dashboards are dangerous and dysfunctional,
  • they’ve always had alerts and the usefulness of this should have been obvious years ago,
  • if you have an iPhone, you have e-mail, and that’s good enough for approvals,
  • the goal is not to buy outside the system,
  • benchmarks are pointless unless you’re benchmarking against peer data, and
  • optional surveys are about as useful as snowshoes in summer

while it is still forward progress (which is more than a few of their peers can claim these days), it really isn’t much considering their historical rate of innovation. (Of course, that’s when Davie ran The Coupa Factory.) While their new strategy may have enabled their rate of growth to skyrocket, going from a few dozen customers to over one hundred and fifty in under two years, it appears to have put a crimp in their rate of innovation — especially considering the unprecedented power Coupa could have brought to their platform if they had taken the last two features to the next level.

To be continued.

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A Hitchhiker’s Guide to e-Procurement: Tax Reclamation, Part I

Mostly Harmless, Part XV

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Tax reclamation is the process of applying for and securing tax refunds and rebates due to the organization. In many circumstances, a buying organization may be eligible to reclaim some or all of the taxes that it pays to a supplier. For example, in the US a buying organization can often reclaim out-of-state sales taxes (if the organization has no presence in that state), in Canada an organization can reclaim GST (Goods and Services Tax) paid, and in the UK, sometimes an organization can reclaim VAT (Value-Added Tax). In addition, a company can almost always reclaim tax overpayments if a filing is made in a timely manner, especially if the organization has an APA (Advance Pricing Agreement) in place.

Taxation is a tricky subject in just about any country. For example, in the US, while intangible assets are not subject to property taxes in most states, they are in some. The same holds true of electronic downloads (software, books, etc.). There’s the LKE, which allows capital gains tax to be deferred when the sale of an asset is being used to generate cash to buy new, or similar, assets to replace the asset which is being deprecated. Then there’s the tangled web called the Harmonized Tariff Scheduled (HTS) which determines import taxes, where classification mistakes are easily made and where a simple misclassification (ladies sleepwear vs. ladies lingerie) can result in a large difference in assessed taxes. (My favorite is imported printers. Leave the cartridge out, the tax rate can be 0. Put the cartridge in, that’s a “value” tax of about 5.5%.) And of course, there’s the issue of foreign taxes, which the organization can get credit for, and in essence reclaim, if properly recorded and reported.

Canada has similar complexity. Out-of-province purchases may not be subject to a provincial sales tax if the company does no business in that province. There’s the GST (Goods and Services Tax) which must be charged by the seller on all non-exempt purchases, but which a buying organization is able to reclaim in full on an annual, or quarterly basis (as the tax is designed so that the ultimate bearer of the tax is to be an individual). And then there are special tax credits, such as the SRED (Scientific Research & Experimental Development) tax credit that can be accrued on up to 75% of all eligible R&D expenses and used to offset (federal) taxes owed by the corporation.

And then there’s the EU, where every country, despite a common currency, still has it’s own complicated tax structure. There’s so much to keep track of that a number of businesses are built around the provision of taxation databases and regular updates to their customers, as some of these businesses are able to charge thousands a year just for database access. The EC (European Commission) Taxation and Customs Union site alone has 14 different databases indexed (and these are just the EU tax systems), including:

  • AEOAuthorized Economic Operators
  • EBTIBinding Tariff Information
  • QUOTATariff quotas and ceilings.
  • SEEDSystem for the Exchange of Excise Data
  • SUSPENSIONSAutonomous Tariff Suspensions
  • TARICIntegrated Community Tariff
  • Taxes in EuropeThe EC’s on-line information tool covering the main taxes in force in the EU member states.
  • VIESVAT Information Exchange System

As a result, tax reclamation is an involved and difficult process that requires really good e-Procurement support to get right. However, considering that it can save a large organization millions of dollars a year (or more), it’s worth it.

Next Post: Tax Reclamation, Part II

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A Hitchhiker’s Guide to e-Procurement: Payments

Mostly Harmless, Part XIV

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Reconciliation challenges and best practices.

A payment is the transfer of wealth from one party to another. The payment is usually cash or cash equivalent, such as cheque, money order, or electronic funds transfer. The payment must be recorded, tracked, reported and assigned to an invoice. Despite all of the focus on e-Payment (P2P, EIPP, etc.), it’s actually the simplest part of the e-Procurement process. The AP clerk simply sends a cheque or instructs a payment to be made, and then records the debit. All of the complexity comes before (which should now be apparent after reading this far in this series) and after (which will become clear). Nevertheless, there are still some challenges to be addressed, some best practices to streamline processes, and some benefits to getting it right.

Common Challenges

  • Paying on Time

    For even a moderately sized company with hundreds of payments to process every week, it can be hard to keep track of which payments are due and which payments are approved. While the organization might choose to make some payments late, others may need to be made on time to avoid penalties.

  • Automating Payments

    If a contract specifies a regular, recurring payment, if a payment can be automatically approved, or if the organization has chosen to pay off a debt in an instalment plan, the payments should be automated.

Best Practices

  • Rules-Based Automation

    The system should allow one time, limited-time recurring, and regular (repeating) payments to be automatically queued according to whatever rules the organization has in place.

  • e-Payment / Accounting System Integration

    e-Payments generally need to be made through bank systems, or through accounting systems that are integrated with, and authorized to use, bank systems. As a result, the system should be capable of being integrated with these systems. This integration can be as easy as exporting a (differential/update) XML file at an hourly interval (with information to be propagated to the accounting system) and importing a (differential/update) XML file at an hourly interval (with information to be propagated [back] to the e-Procurement system).

Potential Benefits

  • Cost Reduction

    Without good system support, payment processing is a very time consuming, and somewhat error prone, task. A good system that automates payment processing saves time (and processing costs), prevents late payments (that generate penalties), and reduces the chance of human error (that can lead to more penalties or costly recovery initiatives).

  • Increased Savings

    Automating payments not only reduces costs, which contributes to savings, but allows payments to be scheduled in a manner that allows for early payment discounts, which increases the savings available to the organization.

Once the payments are made, it is time to try and recover the tax payments that can be refunded to the organization, which is the subject of the next post.

Next Post: Tax Reclamation, Part I

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A Hitchhiker’s Guide to e-Procurement: Reconciliation, Part II

Mostly Harmless, Part XIII

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In the last post, reconciliation was defined as the process of comparing and matching figures from the accounting records of one system with the accounting records of another system. This meant that records in the system not only needed to match up, but match any associated records in the inventory system, the human resources system (if temp labor was procured), and the records in the supplier systems. This often requires a number of challenges to be overcome. This post will address some of the challenges of reconciliation, some associated best practices, and a few of the benefits that could be expected from an appropriate e-Procurement solution.

Common Challenges

  • Manual SKU Assignment

    If a line item can not be automatically matched with a purchase order line item and a corresponding price, then it can be difficult to match an item with the proper item in the buyer’s system.

  • Overpayment Identification

    As explained in the previous post, sometimes overpayments will slip through the most controlled system, especially if it’s difficult to match a conditional discount against a line item or if a contract is late being entered into the system.

  • Tax Verification

    Is the tax rate correct? Are the items being taxed subject to taxation? Is the organization exempt? Is the organization eligible to recover (part of the) tax payment? These can all be difficult questions to answer.

Best Practices

  • Flagging of Manual Assignments

    The system should automatically flag any manual assignment, and queue any manual assignments above a certain value for supervisory review.

  • Automatic Identification of Potential Overpayments

    The system should automatically identify any off-contract payments for goods and services that relate to existing contracts with suppliers in case the goods or services were covered by general discount clauses or in case the opportunity arises to negotiate them into a (future) contract revision.

  • Automatic Tax Rate Verification

    The system should automatically verify that the tax rates used are correct, that each tax the organization knows it has to pay is included, and that any taxes it gets to reclaim are appropriately flagged.

Potential Benefits

  • Overpayment Detection and Recovery

    Good reconciliation support will increases the number of overpayments that are detected and increase the chance of full and timely recovery.

  • Tax Recovery

    Good reconciliation support will increase the chances that recoverable tax payments are identified.

Once the reconciliation phase is complete, it is time to reclaim any tax payments to which the organization is due, which is the subject of a future post.

Next Post: Payments

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A Hitchhiker’s Guide to e-Procurement: Reconciliation, Part I

Mostly Harmless, Part XII

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Reconciliation is the process of comparing and matching figures from the accounting records of one system with the accounting records of another system. In e-Procurement, it generally refers to the reconciliation of the invoice and associated payments against goods receipts, purchase orders, contracts, and / or tax records.

While reconciliation should be done at each step of the process — as the purchase order should be matched against the approval and a contract, the goods receipt against the purchase order(s), and the invoice against the goods receipt(s) and the purchase order(s), there should be a separate, (semi-)manual reconciliation phase as not everything can be reconciled automatically and there will always be new situations and exceptions not accounted for in the automatic rules.

If there is an error in a SKU or other identifying attribute, it may not be possible to automatically match one or more invoice line items against the purchase order(s) they correspond to. In this situation, the e-Procurement system would flag the invoice for manual review, at which point the individual who (first) processed the invoice would do a manual match. If the amount is significant, this match should be rechecked at a later time, because if there were two similar items in the procurement system (catalogs) and the match was made to the wrong, off-contract item, the organization might end up paying a higher price.

A review should also be made of all purchases against a supplier’s account for which there are no contract prices if there are contracts in place with the supplier. For example, a contract with an electronics vendor might be such that the organization gets 10% off of list price for all items for which a contract price is not specified or that the organization gets 15% off of all purchases once it has purchased One Million Dollars worth of goods and services. These situations may not be caught by the system automatically as it might not be easy to encode which goods or services are covered, especially if items are being ordered / purchased not yet in the system.

In addition, a review should be made of all tax payments. Is the tax rate correct? Are the items being taxed subject to taxation? Is the organization exempt? Is the organization eligible to recover some of the payments (such as GST in Canada)? This is a difficult subject and a manual review will be required to ensure that the right taxes are being made at the right amount and that the organization is capturing the right information that will be required for tax reclamation, which is the subject of an upcoming post.

Next Post: Reconciliation, Part I

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