The challenge

Conventionally, SABIC operates its enterprise resource planning (ERP) system for procurement activity, utilising purchase requests, purchase orders, invoices and payment by the finance function across its leading Asian operations, which spans Singapore, India, Australia, Malaysia, Taiwan, Hong Kong, Thailand and Indonesia.

Similar to other companies, high volume and low value transactions represented a substantial part of the company’s procure-to-pay (P2P) activity. In many instances, for these low value transactions, the processing cost per transaction was higher than the unit price of the item.

The solution

SABIC aligned with Citi to create a customised end-to-end P2P solution using the capabilities of virtual cards, designed to enhance SABIC’s control, compliance and engagement with suppliers.

The innovative solution focused on aspects such as purchase request and approval, which is now fully online and automated versus a previously highly manual cost-bearing approach. The virtual card programme pre-codes accounting information prior to card creation, which then enables completed transactions to be processed automatically with the least manual intervention into SABIC’s ERP system.

Conversely, the programme focused on suppliers where SABIC and the bank partnered with an acquirer to establish straight through processing (STP), which means suppliers no longer need to key in card details, as transactions will be processed and auto-credited to their accounts.

Best practice and innovation

SABIC’s unique partnership with the bank created a customised end-to-end secured payments solution through virtual cards to enhance its procurement process and engagement with suppliers and partners. Citi launched an extensive supplier onboarding campaign to increase card acceptance across Asia. The bank also partnered with Global Payments to onboard suppliers through STP. The first such implementation in Asia Pacific, it has further accelerated the progress for card acceptance going forward.

Singapore and Hong Kong markets were the initial pilot for the STP onboarding process while others remained in the pipeline. The key difference in the onboarding vendors via STP and normal virtual card accounts (VCA) is that the success rate of onboarding vendors (who traditionally don’t accept cards) is higher, for example gift suppliers, law firms and hardware stores.

In addition, SABIC’s suppliers who are onboard with the programme may now potentially enjoy a shorter payment term. Along with the invoice details generated in the system, SABIC’s general ledger (GL) code is also present in the virtual card tool at the point of card creation which enables reconciliation and payment to take place in a single platform making the process more efficient and effective.

Key benefits

By implementing this solution, SABIC has been able to improve efficiency as it is now easier and less time-consuming for employees to make low value transactions without compromising security measures and controls. In addition:

• The P2P process using virtual cards gives an average time saving of 75% as compared to the ERP process.
• SABIC has on-boarded several vendors via the STP method to date.
• Virtual cards have eliminated the occasional use of employee’s personal cards for purchases and consequent manual reimbursement process, which can be resource-laden.
• The purchases made on the virtual card improved reporting accuracy and timeliness of expense reporting.

SABIC may gain potential financial benefits with the increase in the number of virtual cards partners. The provision of enriched data from the virtual card platform has enabled a semi-automated reconciliation.