For decades, managing cash has been the responsibility of the Treasury department of most large companies. Today, while that is generally still the case, more business functions and employees are making a positive impact in this regard. This is particularly true of Chief Procurement Officers and their departments and for Controllers and others who often oversee accounts payable.
Not only are more business functions getting involved, but in the present business environment, an increasing number of enterprises are looking to implement working capital optimization strategies in order to improve balance sheets as well as fund investments and fuel growth. Accounts payable (“AP”) represents one of the main opportunities to optimize working capital. One area of focus is in managing vendor or supplier payments and the use of dynamic discounting.
Today, we continue our series that looks at new solution providers that have entered the space with technology that is designed to optimize working capital and improve cash flow management between trading partners (Part I of this series which looked at Tradeshift is here).
C2FO
C2FO, formerly known as Pollenware, takes a unique and innovative approach to optimizing working capital for both buyers and their suppliers. C2FO is an online market that allows enterprises to optimize their working capital in a live bid/ask environment. This market attempts to provide an efficient solution for suppliers to improve cash flow by accelerating payment of their invoices while giving buyers the ability to reduce their cost of goods via early payment discounts.
The challenge that enterprises typically face with early payment discounting is that when a buyer has cash reserves and wants to pay an invoice early, a supplier may not be willing to take a 2% discount because they don’t have a need for cash and vice versa.
C2FO solves this by enabling a buying organization and its suppliers to gather online for a live ‘cash flow optimization’ event. During this event the buying organization looks to get a certain return on excess cash. Prior to the event, the buying organization identifies and invites suppliers to the event; those that register see their outstanding approved invoices with that buyer. With this information and using the different tools available, the supplier can place early payment offers on invoices of their choice before the market closes (this is a pre-set date determined by the buyer).
Early payment discount offers should ideally be placed before the market closes (i.e., event ends). Because the buyer only has a certain amount of cash available to pay early they will choose the best discount offers from their suppliers. So, in order to improve chances of being awarded early payment, suppliers are able to see the status of their offers and make real-time adjustments during the closing phase of the event. C2FO helps by providing additional information, for example, automatically calculating the annual percentage rate for the suppliers discount offer.
Meanwhile the buyer has already configured their C2FO market approval ranges and thresholds for what offers they can accept in order to get the desired APR. After all offers have been submitted and C2FO has helped to optimize them, an award file is sent to the buyer and supplier that reflects the new payment dates.
C2FO has a promising future. To date, the company has enabled more than $5 billion in early cash flow payments and, by its calculation, created more than $300 million in market capitalization growth for its clients. Recent funding should provide C2FO with the opportunity to build out its solutions and marketplace, something that I will be tracking on Payables Place.
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