Case Study: American Electric Power achieves substantial early-payment discount savings and extended DPO with SAP Ariba

American Electric Power Early Payment Discount Savings Fund Procure-to-Pay Program

American Electric Power (AEP), a major U.S. utility serving more than 5.3 million customers and operating a 40,000-mile transmission network, sought to optimize its procure-to-pay operations and improve working capital. The company’s objectives included standardizing payment terms, extending Days Payable Outstanding (DPO), increasing cash earnings through early payment discounts, and reducing borrowing costs.

Working with Ariba Working Capital Management Services (Ariba Discount Professional and the Ariba Network), AEP consolidated more than 150 payment terms down to four, extended DPO by two days, and drove supplier adoption with a simple interface. In the first year AEP achieved a substantial increase in discount savings (average early payment discount ~1.5%), avoided interest on AP balances, and used the savings to help fund its larger procure-to-pay automation program.

American Electric Power