Will The Plethora of Early Pay Techniques Give Suppliers a Nightmare?

Step back from the current craze around all the new financial technology solutions for companies to access cash, from e-procurement and e-invoicing solutions to marketplace lending and supply chain finance, and try and think about this from a logical basis – from the perspective of the supplier.

Most of the purchase-to-pay (P2P) solutions in the market today start with what might be described  as an anchor buyer and typically an approved invoice. The near-term creditworthiness of the buyer – the chance the transaction may go insolvent in the time between invoice approval and invoice payment – is what forms the basis of this foundation.

But now the real fun – or headaches – begin for the supplier.

Say you have 100 customers and 5 of them are offering you fixed supply chain finance solutions. For the sake of argument, assume 4 are bank programs with different platforms and 1 is with a technology vendor.

Beyond this, a number of customers are encouraging you to move onto a virtual card so they can move you off ACH, tie the card into their PO and invoice process and make significant rebate income. (Unfortunately this is at your expense.) And yet a few more buyers are offering you, from time-to-time, discounting from a number of technology vendors that sell into this functionality, including SAP’s Ariba, Tungsten and Taulia. And one of your buyers is using C2FO.

Do you see where I am heading?

You want to pay early. Cash is virtue, as Lord Byron once said. But by the time you figure out how to get it from all these solutions, you’ve logged into half a dozen or more solutions every day that are not directly integrated into your systems. You may even have to hire a few staff. In addition, you no longer have your receivables to dangle in front of bankers and other lenders flush with cash.

And you never know how long some of these solutions will be offering you cash, as programs can shut, companies can decide to stop self funding dynamic discounting and more.

All in all, this is an area that deserves more attention, which suggests it might move to embracing a supplier-led ecosystem as well.

Consider, for example, how Kyriba, PrimeRevenue, Basware and many others are going after this market with receivable financing solutions. They have different models and it is very important to understand the nuances.

As they say, details matter. There are others that can play an interesting role – BillTrust comes to mind – and, of course, never discount the banks. They have been easy to kick to the curb over these last few years as they try to move away from legacy batch programs to a real-time world, with an overlay of moving regulation and increasing compliance costs.

If you’re a buyer, supplier or investor interested in this market and you’re interested in cutting through the noise, feel free to reach out. Trading thoughts is always welcome.

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