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, Part II which looked at C2FO is here).
Taulia
Taulia began as a provider of dynamic discounting solutions and has since expanded its offering to include eInvoicing, a supplier portal and supply chain finance. An odd place to start you might think, but in fact, starting with dynamic discounting turned out to be a great place to start. Here was their strategy:
- Develop sophisticated dynamic discounting capabilities to work on 100% of invoices regardless of what format they are received and processed in
- Ensure seamless integration with SAP (Taulia is an SAP certified SaaS platform), and
- Deliver value for customers via early payment discounts which can help to fund other AP automation initiatives.
As I’ve talked about previously, dynamic discounting is a method of optimizing working capital. For those that are new to it, dynamic discounting is a program that allows buyers and sellers to dynamically alter the standard terms of payment. Given the ‘dynamic’ nature of the calculations, this type of program is best enabled by the use of technology. The basic component of a dynamic discounting program is the ability for the buying organization to offer early payment in exchange for a stated discount to its suppliers. The challenge in achieving this is often one of timing and need. For example, when a buyer has cash reserves and wants to pay an invoice early, a supplier may not be willing to take a 2% cut because they don’t have a need for cash and vice versa.
Effective dynamic discounting programs are typically enabled and managed using an automated solution that helps to manage discount offers and negotiation activities. In some cases, organizations will have the ability to set up rules that make/accept a standard discount offer based on certain requirements. These programs are valuable because they exploit available opportunities – throughout a year or business cycle, a supplier’s cash needs can and do change based on time of year, industry, customer, business cycle, etc. additionally, the availability of excess cash on the buyer side also fluctuates.
Where does Taulia fit in?
Taulia provides cloud-based eInvoicing, a self-service supplier portal, an invoice data capture service (i.e., OCR in the cloud), and, of course, dynamic discounting. Suppliers can submit invoices in PDF form, through Taulia’s supplier portal, by flipping PO’s into invoices, EDI, XML or upload invoices in various formats. They can also create non-PO invoices via a web-form. Invoices that are submitted as PDF files (as many are today) go through a data extraction and verification process before going into the system. Any discrepancies in the OCR capture process are verified by the supplier before being sent to the buyer. Today, Taulia is compatible with SAP systems and says that other ERP systems are also planned. Taulia’s system can make all invoices and PO’s visible to the relevant suppliers, not just those that were submitted electronically.
Typically, a client will have a certain amount of cash available to put into a dynamic discount program and will look for a certain return on it. After determining which suppliers/regions they want to target, AP/procurement teams can use Taulia’s supplier enrollment service to onboard those suppliers. The Taulia system provides suppliers with interesting functionality, for example, “Cash Planner” allows the suppliers to select the amount and date by which they would need their cash and returns a list of invoices for which early payment can be requested. Whether the buyer or the supplier requests a nearly payment, if the other party accepts, Taulia automatically changes the invoice due date in the ERP system. Pricing for Taulia is a subscription model or a revenue share model and free for suppliers.
Overall, Taulia has already made some strong strides and is well-positioned as a provider of dynamic discounting. It’s still relatively early days for its full suite, so Taulia has some work ahead of it, but it appears on the right track and has the track record and resources to do so. In August 2013, Taulia raised $18 million in Series C funding (Taulia’s total funding to date is $36 million), led by German investor Klaus Hommels and joined by previous investors Matrix Partners, Trinity Ventures, TELUS Ventures and DAG Ventures.
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