© 2012 Financial Operations Networks LLC

Improving Workflow, Streamlining Approvals and P2P Initiatives at the

PNC Financial Services Group

About Your Presenter

Dennis R. Cooper, MBAVice President, Operations Director, Accounts PayableThe PNC Financial Service Group

Dennis is responsible for providing management, leadership, strategic direction and tactical oversight for PNC’s Accounts Payable function, reporting to the Supply Chain Management Executive. Additionally, he is tasked with developing and executing best-in-class Procure-to-Pay and Expense Management strategies for the enterprise in partnership with PNC Finance and PNC Supply Chain Management. Dennis’s 25 years’ experience includes positions with Ringling Bros. & Barnum and Bailey Circus as the Director of Financial Shared Services and the CFO for the Magic Johnson Foundation, Inc. He also represented Accounts Payable with implementation of various software systems. (J.D. Edwards, Lawson, Concur T&E, Gauss Imaging/Workflow) He holds a BS in Financial Management from Husson University and an Executive MBA from the University of Hartford.

Case Study

BackgroundPNC is one of the 5 largest banks in America, where the staff of 50 inthe Accounts Payable department handles a monthly volume of more than 60,000 invoices, and 7,500 expense reports at an estimated $3-$6 billion in annual spend.

PNC recently purchased National City Bank, so PNC had two businesses using two different workflow environments in PeopleSoft and Ariba. The companies were similar in size, and our processing demands had increased as a result of the acquisition.

The Challenge Accounts Payable was tasked with developing a Centralized Invoice Receipt Strategy with the goal to transition PNC from a decentralized to centralized processing model.

Accounts Payable had the opportunity to also evaluate our current organizational structure in preparation to successfully support the addition of the new business entity while becoming efficient within our workflow process and streamlining invoice approvals.

Integration Milestones

• Cross trained National City’s Accounts Payable staff on PNC’s new terminology and policies and procedures

• Trained all National City employees on PeopleSoft’s ERP (Enterprise Resource Planning) and Human Resources systems in addition to Ariba Travel & Expense and Invoice Approval workflow

• Developed new Accounts Payable organizational structure & defined new leadership roles & responsibilities

• Defined interim invoice payment processing approach for the Pittsburgh and Cleveland Accounts Payable sites

Organizational StructureModel

AP Organizational Model

Re-designed Structure Milestones• Transition from a dual site management structure to a functional entity

structure

• Establish a leadership structure that serves as the direct point of contact for each function

• Each functional leader will be responsible for managing and directing staff resources at both sites (Cleveland, Pittsburgh)

Benefits• Positioned Accounts Payable Leadership Team to effectively manage

our resources along with implementing Industry Best Practices

• Better aligned to implement change management and improve overall communication with staff

Leadership Structure

Dennis CooperVice President, Operations

Director

TBDVice President, Operations

Senior Manager

TBDVice President, Operations

Senior Manager

TBDVice President, Operations

Manager II

-Invoice Processing(PeopleSoft, Ariba)-Expense Reports-PNC T & E-Credit Card Program-SLA Compliance-Expense Policy Compliance-P-Card & Affiliate Card Programs-Invoice Centralized Receipt-Customer Support - Processing Review-Wire Transfer-Special Project Assignments-Site Management

-Compliance-Sox Controls-HR Relations-Budgeting-Performance MeasurementReporting/Statistics-AP Communications-End User Training-New Employee AP Orientation-AP Policies & Procedures-Internet Information-Updates-Audit Recovery-Work with Audit & Quality Services-Site Management

- ERP System Testing-PeopleSoft/Ariba-System Enhancements-Review of System Audit Controls-E-Invoicing-Validate AP Functionality Prior to being live in Production -System Project Team Participate-Handle System/Screen Modification Request -Serve as an AP System Subject Matter Expert-Special Project Assignments

All Payment DisbursementProcessing Compliance, Reporting &

Sox Controls

Technology & System Enhancements

AP Centralized Receipt Strategy

Build Consensus

Finance, Accounts Payable, and Supply Chain Management developed an overall strategy that served as the framework to define our respective requirements in support of Accounts Payable Centralized Receipt initiative.

Joining efforts with the three groups positioned Accounts Payable to better set the expectations along with the overall benefits.

Overall Strategy

Strategy

Paper invoices are received centrally/e-Invoicing Preferred

Invoices are received and are converted to P.O.(2-Way & 3-Way Match)or Non-P.O.Invoices are routed using the normal or the exception workflow process

Measures are pursued for the optimal balance of service, control and efficiency

Leverage existing operational investments and proven industry providers for success.

Benefit

Improves visibility to invoice processing

Sets up improved efficiency and controls

Unified user experience for approvals

Improved compliance capability

Responsive and adaptable to needs of PNC

Rapid adoption and on-going cost efficiency

Multi Currency

Consolidated comprehensive payment solution

Fully Integrated Solution

AP Centralized Receipt Strategy P2P

`

e-mail and fax

eInvoice or ePO “flip”

mail

Invoice ConversionScan using OCR, converted to

electronic format, and electronically archived for

research and audits

Workflow EngineElectronic Approval

Invoices are routed for approval electronically based on a

defined rule set

PaymentA payment file is sent for P-

Card, Credit Card , ACH, wire transfer or check

disbursement and GL is updated

Supplier Employee Accounts Payable Fully Electronic Invoices

Legend

Exceptions Only

Invoice ReceiptInvoices are sent to a

centralized location for prepping and sorting

Purchase OrderP.O. Requisitions are submitted by business group for approval to create a purchase order .

Vendor generate invoice andMail or eInvoice

mail

`

-2-Way Match-3-Way Match

Paper Invoices

Workflow Decision

Current Workflow Engines

PNC currently leverages the PeopleSoft and Ariba workflow environments to electronically route and approve vouchers for payment

PeopleSoft ERP (Enterprise Resource Planning) Module is not a fully integrated system. Based on this we leveraged Ariba Buys to process P.O. requisitions and capture approved purchase orders.

In our current decentralized invoice receipt environment, PNC business groups enter purchase order invoices into Ariba and Non-P.O. invoice transactions are entered into PeopleSoft.

The “hybrid” NCC processing model would require the business group to provide the accounting code and the AP staff would enter the invoice into PeopleSoft.

Recommended Workflow Approach

• Process P.O. (Purchase Order) and Non-PO invoice transactions in one workflow environment.

• Continue to leverage PeopleSoft AP as the standard, centralized Accounts Payable system.

Workflow Timeline

RFP to PeopleSoft and Ariba

Clarify requirements

and expectations

Conduct Ariba and PeopleSoft

on-site demonstrations

Workflow Decision

1/20/2011 4/10/2011 5/05/2011 9/08/2011

Solution Offered

Ariba Oracle

Pros •Already have all modules•No software investment required•Same system is used today for requisitions and expense reports (user acceptance)•Huge supplier network – e-invoicing•Highly customizable solution

•Same “brand” as PNC’s Human Resources, General Ledger, and Accounts Payable’s systems

Cons •Development would be needed for control groups

•Solution being offered is not what PNC has installed in PeopleSoft AP and would be considered an add on

•No supplier network – any e-invoicing would have to be done on an individual set-up basis

Solution Evaluation

System Recommendation • The recommendation was to utilize Ariba as the workflow solution for

electronically routing PO and Non-PO invoice transactions.

• This workflow decision will serve to support our Accounts Payable Processing Strategy for centralized invoice receipt recommendation.

Determining Factors

• The determining factors in the decision were predicated on the following:

– Lower investment cost– Faster value achievement– Close alignment with AP Centralization Strategy

PeopleSoft – System Evaluation

Evaluate System Controls

• Accounts Payable contracted the services of Drivestream with the purpose of performing a system evaluation and assessment of the PeopleSoft AP Module.

• The results of the evaluation revealed the following:System– Low Module Utilization – Key control modules were not activated– No systematic control fee validation to AP Module– Delivered reports not activated– Payment Terms not activated

Process– No password controls built around Spreadsheet Upload– E-mail vendor remittance notification not activated– AP reviews and approve all invoice transactions

PeopleSoft Re-Engineering

• The Accounts Payable Department developed and implemented a total of 7 Process Improvement projects.

• Four (4) projects resulted in a staff reductions of 0.5 FTEs.

• Three (3) projects resulted in a 15% improvement of process controls.

PeopleSoft – Future Enhancements

• Systematic control fee interface reconciliation• Electronic e-mail vendor notification• Check printing at dual sites• Implement payment terms• Establish invoice approval threshold ($1 - $500 – No AP approval

required) – Recently approved for implementation• Develop reporting benchmarks – Measure performance vs.

Industry Standards• Multi Currency• Ariba – Establish as a Sox Controlled application

Future Vision

Accounts Payable will be recognized as the premier payment disbursement and audit control entity by ensuring that PNC’s financial obligations are fulfilled to our vendors and BEST-IN-CLASS system technology is provided to support our business partners while keeping pace with our ever-changing processing and regulatory demands.

3rd Party Vendor Selection(Invoice Depository & Front End Imaging Solution)

Centralized Receipt – Objectives

• Move to a scalable centralized Accounts Payable Model

• Outsource receipt, scanning, and OCR capture (back-office operations) of paper invoices

• Interface with existing AP approval workflow engine

• Transition from paper to electronic invoicing

• Establish key business indicator to measure process/cycle time versus industry standard

Centralized Receipt Model(Recommended)

Sabrix

PeopleSoftAP

Module

System TaxCalculations

Centralized Invoice Receipt Model

(Operating Model Change)

PittsburghLockbox

-Receive vendorinvoices(open, prep &image capture)-Electronic routeimages to 3rd partyvendor

Invoice Conversion

- Post indexing review-Capture vendor info-Populate invoice fields-Transmit electronicinvoice file to Airba -Compliance reporting

3rd PartyVendor

(Post IndexInvoices)

Ariba Workflow(PO/Non PO

invoices)

AP Exception Work Queue

Workflow EngineElectronic Approval

Payment Create payment

file

General ledger(posting)

3rd Party Vendor Selection – Determining Factors

The Determining Factors in the vendor section process were as follows:

• Experience – Proven experience within AP industry with organizations of similar size to PNC preferably in the Financial Service Industry

• Infrastructure – Proposed service is “in production” with other organizations of similar size (i.e. equipment, resources, staff, etc.)

• Technology – Propose solution use OCE Technology or applicable Image Capture / Scanning Equipment

• Service – Can support turnaround time specified in the requirements of RFP estimated transaction volume (24 -72 hours)

• Risk – Business resiliency, disaster recovery, financial solvency, etc.

• Cost – Proposed estimated pricing does not exceed current in-house cost for back-office operation

Expected Benefits

Improved risk mitigation for disbursements by providing better quality controls and visibility into accruals and liabilities

Better management of our cash flow and overall payment disbursement process

Position PNC to take full advantage of vendor payment terms to enhance Treasury Management’s investment opportunities

Indirect saving would result from the elimination of the business user’s time currently devoted to receive/prep invoices

Best-In-Class Model

Define a best-in-class model. • Successful invoice and payment management models have

employed the following approach to streamline their processes:

Centralization of the receipt of invoice process ensures that the AP Department has instant visibility into the company’s outstanding liability

Front-end imaging – ensures that invoices entered into the system are processed faster and improve faster research and retrieval

Implementing OCR and intelligent document recognition with imaging to reduce the amount of data entry required to extract info

Electronic invoicing solution quickly expedites the submission of invoices, reduces cost per transaction and restricts only clean invoices to be entered into AP processing queues

Leveraging an automated workflow solution ensures that invoices enter the solution will be routed to the required approver systemically, based on pre-defined business rules

Automated Workflow Benefits

Benefits of Automated Workflow

PayStream Advisors, Inc. Survey

Benefits of Electronic Invoicing

Benefits of Electronic Invoicing

PayStream Advisors, Inc. Survey

Fewer Supplier Inquiries

Improve Vendor Satisfaction

Fewer Duplicate Invoices

Increased Ability to Capture Discounts

Increased On-Time Payments

Reduction in FTE & Processing Cost

Quicker Approval Cycles

Reduction in Exceptions & Discrepancies

Better Visibility Across the Transaction Lifecycle

Fewer Lost or Missing Invoices

20%

27%

31%

37%

39%

46%

46%

47%

47%

63%

Transaction Cost & Cycle Time

2011

Cost Cycle Time

Best In Class $2.05 4

Median $5.41 10

Laggards $10.26 25

PNC Results $4.30 15

Barriers to E-Invoicing Adoption

Barriers To E-Invoicing Adoption

PayStream Advisors, Inc. Survey

Questions

?

© 2012 Financial Operations Networks LLC

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