In Part 2 of the Making Sense of Dynamic Discounting series Maex Ament, Chief Product Officer and co-founder of Taulia, joins Susie West, CEO of sharedserviceslink, to discuss the missing piece in purchase to pay: the ability to finance suppliers and benefit from it.
eInvoicing and ePayments have been around for years but lately, supplier finance has been getting a more prominent role in these projects. Dynamic Discounting and Supply Chain Finance have been growing traction because corporates are able to save millions through early payment discounts with minimal changes to their P2P landscape, all while strengthening supplier relationships.
In terms of adoption in the market, the concept has been around for 10 years, but there’s still a lot of education to be done. Everyone knows what eInvoicing is, but Dynamic Discounting is still a new concept to many. Many companies are still in the mindset of holding onto their cash to collect interest but this approach no longer pays off. This is a common misconception in the corporate treasury and finance world, especially since APR rates are so much lower than they were 20 years ago.
In organizations, the main owners of Dynamic Discounting are Finance and Accounts Payables departments. However, Treasury, Shared Services and IT all have important roles in decision-making for implementing a complete Procure-to-Pay solution.
Dynamic Discounting solution providers mainly focus on Global 5000 companies as there is a large cost to installation and implementation. However, smaller organizations--those who process 10,000 invoices or less each year--are switching to cloud-based ERP solutions, which removes the barriers of implementing a solution like Taulia and connecting to our network. Therefore, there is little to no implementation cost.
In the next two years, Ament predicts the imbalance of supplier financing rates today (e.g., factoring) and corporate return rates will equalize and will be more fair to both parties. Factoring will be cheaper and supported by technology.
Listen to the full interview here: