Black Box "Financial Supply Chain "

Which software solutions optimise in companies’ CFO departments now and in the future – an international market appraisal

September 2013 2_Black Box "Financial " Black Box "Financial Supply Chain Management"_3

Executive Summary

In all key functional areas of financial supply chain management self-developed solutions dominate the solution landscape – except for automatic cash allocation management Management Summary

• The key functional areas of software solutions in companies’ CFO departments1 are automatic cash Present solution allocation management, cash & liquidity management, treasury management, invoice management landscape as well as payment management

• Standard ERP software solutions are dominant only for automatic cash allocation management, while in all other areas mainly self-developed and rarely customised solutions are commonly used

• Users of SAP systems work notably more frequently with standard software then non-SAP users (e.g. Oracle, Microsoft)

• Across all functional areas, there is only partial satisfaction with how the present solution landscapes conform with business requirements – an assessment of the ability to consolidate decision-relevant information in the management information system (MIS) also revealed room for improvement

• The observed functional deficits lead companies to make plans for the use of external solutions Future solution as well as complete outsourcing in upcoming years – especially in the areas of automatic cash landscape allocation management, treasury management and payment management

• Interviewed companies rated holistic single-source solution suites as advantageous – the main reasons for this are the reduction of interfaces and the resulting cost savings

• Among those extensive, holistic solution suites, release-secure solutions which are ready to be integrated in the respective ERP systems generate a higher willingness to pay with one in every two companies

1 Area of responsibility of the Chief Financial Officer/finance director/ manager Source: goetzpartners 4_Black Box "Financial Supply Chain Management"

Survey – Objectives and Approach

Across various countries and industries, goetzpartners interviewed 300 users of software solutions in all areas of financial supply chain management Objectives & approach Distribution of participants

• Objectives:  Evaluation of financial supply chain manage- ment software solutions  Identification of key trends and market dynamics • Sample:  Interviews with 300 users (company experts who deal with software solutions for financial Interviewed countries management) from Infor middle management Govern- Other Insurance >€ 2,000 mn <€ 80 mn Other and above ment Sage 1% 1% 5%  Balanced spread of 14% 11% Energy interviewees across 25% 22% SAP 8% 29% Telecom. countries, industries 12% and company sizes 9% & media Revenue ERP Industries classes systems • Survey method: 10% 13% 26% Micro- 47%  Online questionnaire Retail 17% 27% soft • Survey period: 23% Chemicals, Oracle € 400-  March-April 2013 pharma & Manufacturing & healthcare construction 2,000 mn € 80-400 mn

Source: goetzpartners Black Box "Financial Supply Chain Management"_5

Key Functional Areas of Financial Supply Chain Management

The survey examines the five key functional areas of software solutions that help to optimise the financial supply chains of companies

• Optimisation of accounting processes concerning • Daily overview of company-wide cash incoming payments positions • Securing of automatic processing, allocation and • Planning/simulation of middle and long booking of incoming payments based on the term liquidity trends electronic account statement • Receipt and disposal of cash flows 1 2 • Analysis and research functions to settle • Corporation-wide closing of receivables cases for clarification and liabilities (netting out) • Implementation of in-house banking

• Support and automation of • Central mapping, assessment and corporation-wide payment processes booking of all financial transactions • Implementation of centrally (interest, currencies, raw materials etc.) controlled payment factories to 5 3 • Connection to external trading systems bundle payments and save • Support of hedge accounting transaction costs • Analysis and reporting • Electronic authentication of payments (e.g. value-at-risk) • Centralised communication with banks as well as integrated bank • Optical recording/recognition of 4 account management and signing incoming non-electronic invoices authority • Automation of invoice verification as • Integration of electronic banking well as workflow support in the components approval process • Automatic initial account assignment, booking and filing

Source: goetzpartners 6_Black Box "Financial Supply Chain Management"

1 Automatic Cash Allocation Management

To process automatic cash allocation management, companies particularly use the standard software of their ERP systems – non-SAP users tend to additionally use complementary solutions Leading software solutions1 Leading software solutions by ERP system1,2

Total SAP Oracle Microsoft Others

ERP standard 32% 53% 30% 26% 25%

Self-developed 26% 20% 30% 28% 25% solution

External solution 12% 7% 23% 11% 17%

Outsourcing 9% 10% 10% 10% 8%

Not relevant 20% 10% 8% 26% 25%

Key findings • Comparing all interviewed companies, the ERP standard software most commonly dominates the processing of automatic cash allocation management – a differentiation between the ERP systems in place, however, shows that SAP users are much more likely to work without further complementary solutions to their SAP standard • With their current solutions for automatic cash allocation management, only 13% of the companies reach an automatic reconciliation rate of incoming payments that is >95%, one in every two companies even fails to get above reconciliation rates of <85%

1 Rounding differences possible; 2 Interpretation: 53% of SAP users stay with their SAP standard, 20% use in-house developments etc. Source: goetzpartners Black Box "Financial Supply Chain Management"_7

2 Cash & Liquidity Management

Irrespective of company size, specialised software solutions for cash & liquidity management are rarely used – in-house developments based on Microsoft Excel dominate this functional area Leading software solutions1 Leading software solutions by revenue class1

€ 400- Total < € 80 mn € 80-400 mn 2,000 mn >€ 2,000 mn

ERP standard 23% 9% 26% 29% 23%

Self-developed 31% 29% 31% 32% 31% solution

External solution 17% 8% 19% 24% 13%

Outsourcing 5% 3% 4% 4% 8%

Not relevant 25% 52% 19% 11% 25%

Key findings • In the functional area of cash & liquidity management, the company software is most often supplemented by self-developed solutions for financial planning: while the raw data comes from the ERP system, the data aggregation, , simulation etc. are mostly carried out using Microsoft Excel – irrespective of the size of the company • Actually, one in every two companies with revenues of < € 80 mn attributes no separate relevance to this area – therefore they are not paying any attention to specialised cash & liquidity planning software solutions either

1 Rounding differences possible Source: goetzpartners 8_Black Box "Financial Supply Chain Management"

3 Treasury Management

In spite of the existing, highly efficient SAP offering, SAP users mainly work with self-developed solutions in the area of treasury management – even fewer non-SAP users rely on the ERP standard Leading software solutions Leading software solutions by ERP system1

Total SAP Oracle Microsoft Others

ERP standard 22% 31% 19% 20% 17%

Self-developed 29% 32% 35% 25% 25% solution

External solution 11% 10% 16% 15% 8%

Outsourcing 5% 3% 12% 7% 0%

Not relevant 33% 24% 19% 33% 50%

Key findings • Functional requirements in the area of treasury management are in most cases met by the interviewed companies’ self- developed solutions – despite the highly efficient SAP offering, this holds true for SAP users and, to an even larger extent, non-SAP users • Due to the fact that their financial transactions are often relatively easily manageable in terms of scope, small companies do not see an essential need for specialised treasury management software solutions

1 Rounding differences possible Source: goetzpartners Black Box "Financial Supply Chain Management"_9

4 Invoice Management

The dominance of self-developed solutions is extended to the functional area of invoice management – the ERP standard is only used frequently in industries with high invoice volumes Leading software solutions1 Leading software solutions in selected industries

Telecom. & Manufact. & Total media Retail Insurance construct. Others

ERP standard 28% 20% 13% 37% 37% 27%

Self-developed 33% 36% 44% 37% 28% 32% solution

External solution 14% 8% 13% 13% 19% 13%

Outsourcing 5% 8% 5% 10% 4% 5%

Not relevant 19% 28% 26% 3% 12% 24%

Key findings • For invoice management, self-developed solutions are more important than for any other functional area of financial supply chain management – from the optical recording/recognition of incoming, non-electronic invoices to workflow-supported invoice processing • Again, SAP users work considerably more often with their standard software than users of other ERP systems – especially in industries with high invoice volumes • E-invoicing is not yet used by almost half of the interviewed companies

1 Rounding differences possible Source: goetzpartners 10_Black Box "Financial Supply Chain Management"

5 Payment Management

The functional area of payment management clearly differentiates between the installed ERP systems: SAP users work considerably closer to their standard software than users of other ERP systems Leading software solutions Leading software solutions by ERP system1

Total SAP Oracle Microsoft Others

ERP standard 24% 35% 16% 22% 25%

Self-developed 31% 27% 42% 30% 33% solution

External solution 15% 14% 14% 18% 8%

Outsourcing 6% 3% 12% 5% 8%

Not relevant 24% 21% 16% 25% 25%

Key findings • Almost half of the companies that use SAP work with their standard software • However, cross-nationally self-developed solutions are used to a large extent for payment management – particularly companies in the energy, telecommunications & media as well as retail segments rely on such solutions to an above-average extent

1 Rounding differences possible Source: goetzpartners Black Box "Financial Supply Chain Management"_11

Management Information System (MIS)

The consolidation of all company-relevant key financials in management cockpits is mainly relevant for medium to large corporations, yet reveals room for improvement Evaluation of installed Evaluation of installed MIS solutions by revenue class1 MIS solutions € 400- Total < € 80 mn € 80-400 mn 2,000 mn >€ 2,000 mn

Very good 20% 22% 17% 17% 23%

Good 43% 26% 49% 52% 43%

Adequate 21% 22% 19% 23% 19%

Bad 3% 2% 4% 2% 4%

Very bad 0% 0% 0% 0% 1%

No MIS in use 13% 29% 12% 5% 9%

Key findings • Management information systems are often part of highly efficient business intelligence solutions and therefore only interesting for companies with turnover of >€ 80 mn • The implemented solutions basically comply with the business requirements, yet room for improvement was revealed at four out of five companies • There is unanimous agreement when it comes to the acceptance of increasing information provision on mobile devices

1 Rounding differences possible Source: goetzpartners 12_Black Box "Financial Supply Chain Management"

Implemented Solutions' Compliance with Business Requirements

The partial satisfaction across all functions concerning compliance with business requirements leads to cross-industry willingness to invest in external solutions Compliance with business requirements in the functional areas1 Automatic cash Cash & liquidity Treasury Invoice Payment allocation management management management management management

Strongly agree 43% 40% 41% 43% 43%

Agree 52% 53% 51% 51% 48%

Disagree 3% 6% 6% 5% 7%

Strongly disagree 2% 1% 1% 1% 1%

Key findings • Regardless of the functional area within financial supply chain management, there is only partial satisfaction concerning the solutions’ compliance with business requirements • Comparing the different countries involved in the survey, it becomes clear that companies from the DACH region2 are more likely to be fully satisfied than companies from other EU countries and the US

1 Rounding differences possible Source: goetzpartners Black Box "Financial Supply Chain Management"_13

Planned Changes in the Solution Landscape in the Upcoming 3 Years

Due to performance gaps, the interviewed companies plan the implementation of external software solutions or outsourcing in the areas of automatic cash allocation, treasury and payment management Planned implementation of external software solutions1 Planned outsourcing of functional areas1

Automatic Automatic Presently cash allo- Cash & cash allo- Cash & leading cation liquidity Treasury Invoice Payment cation liquidity Treasury Invoice Payment solution mgmt. mgmt. mgmt. mgmt. mgmt. mgmt. mgmt. mgmt. mgmt. mgmt.

ERP standard 41% 31% 43% 23% 36% 33% 28% 38% 27% 34%

Self- developed 27% 29% 23% 23% 14% 25% 28% 27% 16% 13% solution

Key findings • Especially in the areas of automatic cash allocation management, treasury management and payment management, present users of the ERP standard perceive functional deficits and are considering the implementation of external software solutions or even the outsourcing of the respective functional areas • In the US, nearly half of companies are considering implementing an additional/alternative external solution for automatic cash allocation management in the upcoming years and one in three is thinking about it for cash & liquidity management • In the DACH region, one in three companies is currently planning to implement a treasury management solution

1 Interpretation: 41% of the companies currently using the ERP standard for automatic cash allocation management plan to implement an external software solution in the future Source: goetzpartners 14_Black Box "Financial Supply Chain Management"

Value-Adds of Single-Source Solution Suites

A majority of the interviewed companies from medium to high revenue categories sees a considerable value-add in single-source solution suites for their company Value-adds of single-source solutions in detail Key findings

• A majority of the interviewed companies sees advantages in single- Essential value-adds1 source solutions for financial supply chain management – for SAP Reduction of 58% interfaces users the percentage was as high as nearly 70% Cost advantages 53% • Small companies with revenues of <€ 80 mn, on Reduction of 50% the other hand, see isolated applications neither a general benefit Single contact nor the depicted value- 45% 43% 57% person adds for themselves Consistent • The main additional 36% look and feel benefits are seen in the No double reduction of interfaces, 35% administration cost advantages and the reduction of isolated Scalability 26% applications – a single point of contact is also relevant for the majority of companies

No Yes

1 Multiple answers possible Source: goetzpartners Black Box "Financial Supply Chain Management"_15

Willingness to Pay for Single-Source Solution Suites

At more than 50% of the interviewed companies, a general willingness to pay for a holistic solution suite as well as release-secure integration in their own systems has been identified Willingness to pay for holistic solution suites1 Willingness to pay for release-secure systems integration1,2

Insurance Energy Others Insurance Energy Others

Yes, max. Yes, max. 40% 26% 29% 40% 26% 33% 10% more 10% more

Yes, Yes, 10% to 33% 61% 23% 10% to 23% 52% 22% 30% more 30% more

Yes, Yes, more than 7% 0% 3% more than 17% 4% 4% 30% more 30% more

No 20% 13% 45% No 20% 17% 42%

Key findings • More than half of the interviewed companies expressed a willingness to pay for a holistic cross-functional solution suite for their entire financial supply chain management as well as release-secure integration in the existing ERP systems – there is an especially high willingness to pay in the insurance and energy industries • Particularly users of SAP systems are willing to pay for a solution to be release-secure integrated into their ERP system; however, small companies with revenues of <€ 80 mn do not consider this a priority

1 As a price premium compared to current licensing and service charges; 2 Rounding differences possible Source: goetzpartners 16_Black Box "Financial Supply Chain Management"

Selection Criteria for Financial Supply Chain Management Solutions

In financial supply chain management, reliability and quality of support are crucial selection criteria – differences become especially clear at industry level Top 10 selection criteria1 Top 3 by selected industries1 Key findings

Total Energy • The key selection criteria for financial management Financial stability 48% software are reliability as Reliability 45% well as the quality of the Quality of 39% customer support customer support Quality of 41% customer support Personal contact 26% • Differences become visible after differentiation by Personal contact 35% branch of industry: While there is high price sensi- tivity in the retail business, Financial stability 34% Retail companies with a manu- Availability/ Loweste price 46% facturing or construction 32% flexibility background rate the relia- Availability/flexibility 38% bility of the systems higher Lowest price 30% Integration competence 36% • Comparing the countries, in the US, alongside relia- Reference/image 27% bility one in every two companies cites the impor- Innovative Manufacturing & tance of the solution’s 27% product construction availability/flexibility

Integration Reliability 59% • For small companies with 26% competence Availability/flexibility 50% revenues of < € 80 mn, personal contact is of Integrated product 23% Financial stability 41% portfolio importance as well as a convenient price

1 Multiple answers possible Source: goetzpartners 17_Business Transformation Black Box "Financial Supply Chain Management"_17

More Studies by goetzpartners

In 2013, goetzpartners is publishing a new study called “Finance organisation 2.0 – Contribution to a company’s success” concerning the changing role of the financial organisation within a company Finance organisation 2.0

The growing complexity of companies also 1 • Establish a comprehensive delivery model with clear accountability and respect places the financial organisation before for Focus on to business units and geographical setup core tasks • Provide decision support for (top) management new challenges. • Set focus for corporate functions Advancing internationalisation, increasing complexity in the chain of production and the 2 Standardise • Identify value creating core processes that can be standardized ad hoc supply of decision papers for top processes • Use (offshore) shared service centres management are just some of the challenges and tasks • Align IT infrastructure to automate standardized core processes effectively 3 a CFO has to face. • Right-size organizational layers and regional/geographical setup Reduce complexity • Eliminate processes with little or no value In this study, goetzpartners will show the • Enforce rigorous internal controls to reflect risks and impact of potential errors requirements for today’s financial 4 • Establish central process governance Strong governance organisation and what position it should take • Use consistent data from defined sources throughout the company on data and • Agree on data and information assets with business partners that these are in within the firm. With the help of five processes line with corporate strategy optimisation levers, goetzpartners 5 demonstrates how the financial • Define key KPIs which support the corporate strategy • Use business metrics as track of execution for finance organization and Performance organisation’s contribution to the company’s business partners metrics/KPIs overall success can be increased: • Introduce individual scorecard and drill down functions for top and middle management 1. Focus on core tasks “To make strategic decisions, it is essential to know what effect they will 2. Standardise processes and tasks have on the financials of the company. This is the only way to lead a 3. Reduce complexity company successfully.” 4. Strong governance on data and processes The study will be published in the autumn of 2013 and contain a series 5. Performance metrics/KPIs of interviews with CFOs and other experts about the positioning of financial organisations within the company and their contribution to driving corporate success

Source: goetzpartners 18_Business_Black Box Transformation "Financial Supply Chain Management"

About goetzpartners

goetzpartners is a leading independent European consulting company that combines M&A (mergers & acquisitions) advisory and under one roof. With this unique service offering goetzpartners advises companies along their whole value chain, thus creating sustainable value for them. The Group is represented with offices in Munich, Düsseldorf, Frankfurt, London, Madrid, Moscow, Paris, Prague, Shanghai and Zurich, and maintains international cooperation ventures. goetzpartners Management Consultants concentrates mainly on the fields of strategy, operational excellence, and business transformation. goetzpartners Corporate Finance focuses on M&A advisory services. goetzpartners is ''hidden champion'' in the consulting discipline corporate finance and management consulting (result of the ''Hidden Champions-Study'' conducted by Prof. Fink in cooperation with the business magazine ''Capital'').

Industry Line Financial Institutions In the area of Financial Institutions, goetzpartners provides comprehensive first-class support in consulting mandates, M&A transactions and assistance to financial investors. With our integrated approach we support our clients in adapting to the challenging market environment, reassessing and, where necessary, redefining their business model.

Industry Line TIME In the TIME sector (telecommunications, IT, media and e-business), goetzpartners supports numerous clients with their alignment and transformation according to the new market environment within the converging world of media. Through our innovative, strategic approach coupled with our strong implementation and value orientation, we work with our clients to improve their competitiveness and ensure sustainable success.

Service Line Business Information Strategy To ensure sustainable success, companies are increasingly dependent on the effective and efficient use of information and technology. In close cooperation with the client, goetzpartners addresses the various issues in the field of business information strategy. Among other things, this includes the development and optimisation of IT strategy and governance, the optimisation of product and service portfolios, structures and processes of IT organisations and service providers, as well as the planning of high- technology usage for products or services. Black Box "Financial Supply Chain Management"_19

Disclaimer This publication is protected by copyright. The duplication as well as any other form of distribution or publication, also of extracts, requires the approval of goetzpartners. Our own analyses and assumptions for this brochure have been prepared to the best of our knowledge and belief. goetzpartners does not assume any liability for the correctness and completeness of the analyses and assumptions. Naturally this brochure does not consider the circumstances of any individual cases. Therefore it can neither substitute for specialised consulting nor replace extensive research by a third party. Contacts

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