Brent Kinman, Vice President of Network Payables at SAP Ariba, talked about the profound benefits of B2B networks for the CFO.
At the outset of his thought leadership presentation at the 2016 Chief Financial Officer Forum held on April 21 in Atlanta, Kinman announced that he was going to talk about networks in two ways—what they do to business processes and their role from a B2B commerce perspective, which means bringing a network-centric approach to collaborations between a company and its supply base.
Kinman began with a little history about networks. Railroads were a 19th century form of networks. In the mid-1800s, 80% of all U.S. farmland was less than five miles from the railroad network. Then came telecommunications, which made it possible for people in different geographic areas to communicate. Now there’s the Internet. “Not only did the Internet blast open the lines of communication between people and companies globally, it also provided a platform for an entirely new way of accessing technology that revolutionized the business environment.” Amazon provides a common platform for thousands of brands, so we no longer have to go to the manufacturers’ web sites to order products. Plus Amazon has product ratings and reviews—another form of network communication. “Uber is an example of using network intelligence in a novel way to disrupt yet another industry,” he said. “Basically, networks—Google, YouTube, Twitter, Facebook, Amazon, service providers—are a massive disruptive force in almost every part of our lives.
“If networks are so powerful,” Kinman asked, “why is the way we conduct most B2B commerce—between suppliers and buyers—fundamentally flawed?” For example, we have to find out from each supplier how it wants to receive purchase orders, and the suppliers have to find out from each buyer how it wants to be invoiced. There are all these questions—where do contracts sit, how are bids tendered, how are payments made, etc. “There are a lot of inefficiencies in B2B transactions. This area is ripe for a network disruption,” he emphasized.
“If networks are so powerful, why is the way we conduct most B2B commerce—between suppliers and buyers—fundamentally flawed?”
To solve these issues, businesses need to look for three principles before joining a network:
- The network needs to be open. Participants make networks powerful, so the network can’t be difficult to join.
- The network has to be comprehensive across hundreds of business processes.
- The network has to provide intelligence, which means it’s automated, contextual, operates in real time, and is big-data driven. This is where the true B2B value is.
“But aren’t B2B networks about improving supply chains?” asked Kinman. “You may be asking yourself what’s in it for you, as a CFO.” There are profound benefits to the supply chain that result from collaborating with suppliers in this way, he pointed out, but even greater benefits—to your financial supply chain—are generated from just participating in one of these networks.
“Networks have been a huge game changer for B2B payments,” said Kinman. B2B networks in the payment realm are able to provide an 80-character transmission of information about the payment with the payment itself. “Many suppliers care as much about the information that comes with the payment as they do about the payment. B2B networks are able to facilitate financial settlement along with transparency and security in ways that don’t exist using ACH.” In addition, B2B networks allow buyers to extend payment terms (free cash flow), earn early-pay discounts (net income), and provide scalable and secure electronic payment. For suppliers, B2B networks offer the advantages of low-cost, on-demand financing (reducing costs, eliminating debt), and faster collections (reducing DSO) as well as create payment visibility and remittance. “And that,” concluded Kinman, “is how networks help the CFO.”
“Networks have been a huge game changer for B2B payments. Many suppliers care as much about the information that comes with the payment as they do about the payment.”
ABOUT BRENT KINMAN:
[no bio on event schedule site]