The timing of supply chain payments can be a point of contention between companies and suppliers. Tipalti CMO Rob Israch said both sides want to optimize cash flow, but unfortunately, that means different things depending on which side of the transaction they’re on.
Suppliers want to get paid as soon as possible, but that can be tough on the payer’s working capital, Israch said. Payment terms often stipulate that payments be made within 30 days of receiving the invoice, although more and more often, that number is getting pushed out to 45, 60 and even 90 days.
The word “tipalti” means, “We took care of it,” and that’s what the San Mateo, California, startup aims to do. The platform automates the accounts payable and payments cash flow.
Tipalti recently announced news that it rolled out early payments to help smooth that contention even more and help keep the peace between companies and their supply chain. Israch says it’s been a win for everybody: Suppliers get their payments instantly, and companies are rewarded with a discount for paying early.
In the past, early payments have been cumbersome, said Israch. Companies and their suppliers would have to sit down with the financial institution to set them up, and that process had to be repeated for every supplier in the chain that wanted early payments.
The average mid-level company that Tipalti works with has 5,000 suppliers in its chain, Israch said, so going through the rigmarole for each one simply wasn’t scalable, which was reflected in a 3 percent to 5 percent early payments adoption rate.
Once Tipalti removed the accounts payable friction and made early payments a one-click, no-negotiations process, the startup saw the adoption rate climb to 15 percent. The program’s popularity continues to rise, Israch said, as customers get their heads around it.