B2B Payments

Turning B2B Payments On Its Ear

Taulia has just raised $27 million with a simple goal—fixing the status quo in buyer-supplier payments so that it’s no longer out of date, out of touch and bad for basically everyone involved. PYMNTS.com caught up with Taulia’s CMO Joe Hyland to learn how this innovator is turning an old process into a golden advantage for both supplier and buyers.

There was a time that the 30 to 60 day lag between suppliers submitting bill and buyers paying it made perfect sense—in the paper-based world, invoices took a while to approve and clear.
The technology for invoicing has gotten exponentially better, and yet somehow the payments process hasn’t kept up. In the wake of the Great Recession, credit is harder to come by. And financing around a cash flow problem kicked off by slow invoice fulfillment is often a very expensive choice.
Slow payments aren’t just an inconvenience—they materially stop businesses from expanding and, in the worst case scenarios, actually shut them down.
The problem has become so aggravated in recent years, in fact, that both the U.S. and U.K. governments have both stepped in with well-publicized initiatives aimed at pushing out payments from buyers to suppliers at a quicker rate.
It is in this environment that Taulia—a dynamic-discounting company with a dream—closed a $27 million funding round last week (July 22) Chief Marketing Joe Hyland spoke with PYMNTS about the interesting market they play in and the surprising challenges involved in getting business of all size to adopt programs that are in everyone’s best interests.
Right now, according to Hyland, the way companies partner with their suppliers simply doesn’t make sense—for anyone involved.
(Click here)“I wont’ lie, its not easy because we’re trying to turn the status quo on it’s head. Companies for the last 30-40-50 years have been paying their suppliers essentially in the same way. You procure goods and services from your suppliers and about 30 or 60 days after you’ve received the service or the goods you pay them.”
What might have made sense when invoices took 20 days to process, makes a lot less when e-invoicing bill can clear an invoice entirely within a week. Buyers will still sit on the money for the extra 50 days, but doing so doesn’t even really help them that much, according to Hyland, because the current low interest rate environment means holding cash is likely going to yield a very low return.
(Click here“They’re earning like 1 percent annually on their cash. It’s not like the 80’s when interest rates were really high and you would get a great return on cash as it sat in a bank account. Now companies get 100 basis points annualized, so if you sit on an invoice for 2 months, you get 1/6th of 100 basis points, so you get 15 or 20 basis points—you get nothing is the point.”
Suppliers are getting worse than nothing—if they are able to get credit at all, most of Hyland’s customers are resorting to factoring, or borrowing against their receivables. That’s not a cheap choice as interest rates can get into the 30- 40 percent range. It’s also a long-term commitment, as factoring often requires a two-year commitment of all invoices.
So what is Taulia’s better option?
Essentially, it is a standard dynamic discounting model—the buyer sets the APR they want to make on their payment and offers it as a payment option on all invoices that their sellers can see. Through Taulia, buyers can customize their entire supply chain by breaking suppliers into sub-groups that each have a different financing offer in front of them. The supplier associate can then chose to accept the dynamic billing option. It can even be done with tap of a button on an iPad, as Taulia offers this as a mobile service.
There are two key factors in making this work. One is the automation element.
(Click here)“I think the way to think about this in its simplest form is you have to think about the scale. A big company like Hallmark or Halliburton can have upwards of 40K suppliers,” Hyland said. “Taulia doesn’t have that many vendors. A couple of hundred at most. If we wanted to pay our suppliers early, we could just pick up the phone and say ‘Hey, we’ve got a little extra cash right now. Would you be interested in getting paid a little bit early?’ and we could strike a discount rate we both felt happy with. That doesn’t work when you have 20K suppliers. It can’t be a negotiation just because it doesn’t work. It’s virtually impossible to have a back and forth with so many suppliers.”
The other big differentiator for Taulia is it’s focus on supplier onboarding. According to Hyland, a dynamic discounting program is only as good as its supplier enrollment and many companies just do not do a good enough job of making the proposition enticing.
“It can’t be forced on suppliers. This should be free for suppliers, (something) that encourages them to participate.“
The technology is out there, Hyland said, to make invoicing and payments easier and more efficient for everyone. But, he said, this tech isn’t new and the issue hasn’t been technological for a long time. The issue is that suppliers aren’t courted as much as they have been ordered and that makes adoption hard.
(Click here)“I think one of the reasons we haven’t seen electronic invoicing—electronic invoicing has been around for 30 or 40 years—is that three out of every four invoices are still paper. There’s no reason for suppliers, particularly small suppliers, to change their process. It’s great when one of their customers want to invoice them electronically through this new portal, but what’s in it for me? I already have an invoicing process. In our view, the holy grail of invoicing for any business is to get paid. What’s even better is to be able to elect to be paid sooner. Our customers see huge adoption rates for electronic invoicing and dynamic discounting, but I think the real driver is that it’s free for suppliers so there’s no hurdle for them to get past in terms of a fee structure.”
So Taulia offers its service to supplier for free and, as a result, they are seeing dynamic discounting take off.
What’s next?  With their $27 million dollar pick-up, Hyland says the challenge now is to get the word out there and enroll even more suppliers. The faster everyone gets on board, he says, the better supply chain payments get for everyone.



To listen to the full podcast, click here


*If you have trouble with the audio player above, click here.


Featured PYMNTS Study: 

With eyes on lowering costs to improving cash flow, 85 percent of U.S. firms plan to make real-time payments integral to their operations within three years. However, some firms still feel technical barriers stand in the way. In the January 2020 Making Real-Time Payments A Reality Study, PYMNTS surveyed more than 500 financial executives to examine what it will take to channel RTP interest into real-world adoption. Here’s what we learned.

Click to comment