Thursday, December 09, 2010

SaaS P2P Provider Making News

Taulia, which offers a hosted purchase-to-pay solutions, has been making the news in the last couple weeks. At end of last month, it annouced a partnership with invoice capture specialist Brainware. It followed up this week by announcing a $3.2 million round of Series A financing.

Taulia is especially interesting to us because its management team features three ex-ReadSoft employees, all of whom were with Ebydos. Ebydos, of course, developed the SAP workflow integration technology, which ReadSoft leveraged to really break into the invoice processing market in a big way. From the way I understand it, Taulia basically enables users to take full advantage of their capture applications.

They do this be enabling a process called dynamic discounting. Here's an excerpt from an article that ran earlier this year in our premium edition that explains dynamic discounting and Taulia's buisness plan:

"Dynamic discounting is designed to eliminate a disconnect between suppliers and buyers. 'Dynamic discounting takes banks out of the purchasing equation,' explained Markus Ament, CFO and VP, products and solutions for Taulia. 'It basically enables suppliers and buyers to finance transactions themselves.'


"According to Ament, the most common arrangement today is that suppliers offer a 2% discount if buyers pay within 10 days of an invoice date. 'If the invoice is paid on the 11th day, the buyer receives no discount,' he said. 'So, if a buyer knows it is not going to get a discount, it will often hold its payment until the 30th day to maximize the interest it is receiving from its bank.

"'The problem is that this often requires the supplier to finance its business in other ways while awaiting payment. Based on today’s interest rates, the buyer might be earning 1% on its cash, while the supplier is financing its business at a much higher rate. Really, the only ones profiting from this arrangement are the banks.'

"Dynamic discounting involves creating a sliding discount scale, depending on when an invoice is paid. For example, for days 11-15, a supplier could offer a 1.75% discount, for days 15-20, 1.5%, and so on. This enables the buyer to earn more than the 1% interest rate it gets from the bank, and enables the supplier to finance its business at a lower rate.

"'Before invoice automation utilizing technologies like OCR, almost no invoices were paid within the first 10 days,' said Ament. 'Even with automation, the majority are still not paid in that time period— but many are processed well before 30 days. So, unless buyers can take advantage of a process like dynamic discounting, they’re not really getting the full ROI from their A/P automation implementation.

"Ament’s company is called Taulia, and its service is licensed by buyers and integrated with their ERP systems. 'The buyer basically sets the discount rates,' said Ament. 'The supplier selects a payment date and accepts the discount associated with that date—assuming the invoice is processed on time.'"

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