TECHNOLOGY
INSIGHT
SERIES
DDM
Dynamic Discount Management
Finding the “Treasure” in Treasury
Featuring Insights on...
Interest in Discount Capture
and the Ability to Make it Happen
Capture of Early Payment Discounts
Dynamic Discount Management
Solutions
Working Capital and Payables
Strategies for Dynamic Discount
Management
Underwritten in part by:
www.paystreamadvisors.com
Q1
2012
Dynamic
Discount
Management
Executive Summary ............................................................................1
Opportunities in Payables...................................................................2
What is Dynamic Discounting?...........................................................3
Working Capital & Payables................................................................7
Which Tool is Best For You?...............................................................8
What Should I Do Next?......................................................................9
Reporting & Analysis..........................................................................10
Implementing Dynamic Discount Management...............................11
Taulia Case Study ..........................................................................17
Conclusion ........................................................................................19
About PayStream Advisors, Inc ......................................................19
SolutionSource .................................................................................20
i
Dynamic
Discount
Management
Executive Summary
Recent innovations in trade payables and payments have created a
Executive Summary
LEARN MORE
Listen as
PayStream’s lead
analyst discusses
Dynamic Discounting
in this online tutorial:
http://www.
paystreamadvisors.
com/store/details.
cfm?id=338
PayStream Advisors has developed this Technology Insight Series
report titled Dynamic Discount Management: Finding the “Treasure” in
Treasury,
discounting solutions. To compliment this report, PayStream also
published the Dynamic Discount Management Implementation Guide.
Both the report and the guide are among many resources available in
our research library at www.paystreamadvisors.com
1
Dynamic
Discount
Management
Opportunities in Payables
Many payables departments with paper invoices or decentralized
Opportunities in
Payables
Figure 1
INTEREST IN
DISCOUNT
CAPTURE AND
THE ABILITY
TO MAKE THIS
HAPPEN
companies are
unable to capture
suppliers.
invoices contain discount terms. The reason: Many suppliers grouse
2
Dynamic
Discount
Management
discounts was important to them, but only 27 percent did so
Discount
decentralized invoice receipt – were the primary internal stumbling
Figure 2
MISSING EARLY
PAYMENT
DISCOUNTS
More companies
are capturing all
available discounts,
but the remainder
are missing more
.
both buyers and sellers to propose terms, setting those terms in
motion by putting them on a sliding scale, opening them up to
Dynamic Discount Management.
Figure 3
REASONS FOR
LATE PAYMENTS
AND MISSED
DISCOUNTS
5, where 5 is the
highest.
Dynamic
Discount
Management
Discount
Sliding Scale Discounts
Dynamic Discounting provides the technological and business
opportunities in trade payables on a much larger scale than
previously.
longer than 10 days.
Second, and more important, dynamic discounting can address the
all approved invoices awaiting payment. Early payment opportunities
Chase’s Order to Pay, Direct Insite, Taulia or OB10.
large buying organization, as typical interest rates underlying such
maintain a neutral cash and payable position on their balance sheet.
Dynamic
Discount
Management
Third Party Financing
Emerging solutions that enable trading partners – buyers, suppliers and
Discount
time, collaboration between buyers, suppliers and capital sources.
Third Party Finance solutions come in two types:
lenders allows payers to use other capital sources in order to
and private lenders.
Supply Chain Finance
At the same time, SCF enables suppliers to reduce their Days Sales
Dynamic Discounting.
Receivables Trading
5
Dynamic
Discount
Management
The exchange houses all the transaction history and buyer/supplier
Discount
organization approving the invoice and trade payable to be traded.
lender.
The arbitrage opportunity between large buying organizations and
emerging solution that enables buyers and suppliers to rapidly create
Discovery allows buyers to award early payment to suppliers that bid
various, discount rates being established online.
higher returns than what they currently earn in other investment
vehicles.
Management solutions aim to improve the buyer’s bottom line, while
Dynamic
Discount
Management
Payables
securing early payment, enhanced visibility into invoice status via
enabling buyer organizations to proactively propose early settlement
discounts to suppliers.
balance sheet positions.
Invoice Approval Cycle Times
.
7
Dynamic
Discount
Management
Electronic Processes Drive Supplier Interest
solutions can dramatically increase collaboration between buyers
improves the visibility and control they have over AR processes.
buyer’s payables approval process, allowing them to monitor and
assess receivables in real time. For the buyer, this translates into a
and receivables.
to any alternative investment. From an accounting perspective, a
spend discounted.
8
Dynamic
Discount
Management
approached at an enterprise level. DDM initiatives need a strong
to help enterprises implement “integrated” DDM and maximize its
valuable to consider, including:
Dynamic Discounting Management Tools
level.
can be discounted.
view invoices that can be discounted and evaluate the
and accounting systems.
receivables systems.
9
Dynamic
Discount
Management
Analysis
bundled with discounting solutions. Authorized users
generate reports that provide visibility across transactions to
buyers and suppliers.
Electronic Settlement
Enhances prompt payment
discount capture and reduces the
Table 1
BENEFITS
OF INVOICE
AUTOMATION
AND
DISCOUNT
MANAGEMENT
Lowers processing costs by removing the
77
Online search and retrieval tools aid in
dispute resolution.
Payables Discounting
suppliers and an additional income stream
to buyers.
Enhanced visibility into the timing and
alternatives.
suppliers can accelerate their cash
conversion cycles.
7
10
Dynamic
Discount
Management
Eight Building
Implementing Dynamic Discount Managment
PayStream Advisors has created the Discount Management
Implementation Guide called “The Eight Building Blocks of Invoice
Automation and Discount Management” to help enterprises see the big
Figure 4
EIGHT BUILDING
BLOCKS
OF INVOICE
AUTOMATION
AND DISCOUNT
MANAGEMENT
A strategic
bridge supply
chain, accounts
1. Purchase-to-Pay Vision
2. Purchase-to-Pay Strategy
a. Clear and concise discount management strategy
c. Documented metrics to measure progress
11
Dynamic
Discount
Management
Eight Building
3. Supplier Interaction
b. Vendor segmentation and adoption planning
c. Supplier communication and recruitment strategy
e. Incentives/penalties to drive supplier behavior
4. Culture and Change Management
b. IT resource allocation and training
c. Incentive compensation based on goals achieved
5. Process Management
a. Enhanced invoice visibility and accurate accruals
b. Cash conversion cycle and DPO goals
cycles
6. Purchase-to-Pay Information
c. Visibility across transactions and access to data dashboards
7. Automation Technology
b. Electronic invoice submission and receipt applications
c. Seamless integration with ERP and accounting systems
8. Value-Added Services
a. Multiple delivery models including hosted and SaaS
b. Supplier recruitment and onboarding
in developing the Discount Management vision and strategies. It
12
Dynamic
Discount
Management
Founded
2009
Headquarters
San Francisco, CA
Other Locations
Employees
Revenue (2010)
Customers
Table 2
TAULIA
SOLUTION
PROFILE
Industry Segments/
Specialties
Dynamic Discounting in 2011 in North America alone.
Technology, Retail, and Services industry
Annual Transaction
Volume
Key Accounts
Awards/
Recognitions
Partners/Resellers
OB10
Solution Overview
The Taulia Invoicement® Suite provides corporate treasury with a
digit returns on their cash more than 50 times greater than Money
enables procurement to automate and scale payment discounts to 100
Dynamic
Discount
Management
box. This duality provides rapid time to value with minimal resource
SAP system. The buyer continues to maintain control and ownership
Supplier Recruitment
tools, has made the solution very attractive to suppliers. Its strong
on purchase orders result in very strong supplier adoption rates.
The enrollment process is designed to promote the value available
access to all historic transactions and transitions suppliers to use the
Electronic Invoicing
purchase orders into invoices, EDI, or uploading invoices in various
Dynamic Discounting
The Taulia Dynamic Discount Optimizer adds dynamic discount terms
Dynamic
Discount
Management
or ASAP payment term, which happens at the contract/PO stage.
Terms can be set up and maintained directly in SAP and treated
criteria as well as advanced terms and discount rates management.
management right within SAP and provides a complete audit trail and
documentation.
Cash Management
Taulia’s solution provides cash management capabilities to both the
suppliers based on various criteria, including region, size and spend
categories. Taulia consults with buyers to help them segment current
suppliers and set rates using current and past spend, plus other
and the date on which they need the amount. The Cash Planner then
the buyer, automating this process.
Reporting and Analytics
Taulia’s solution comes with extensive reports and dashboards tailored
15
Dynamic
Discount
Management
standard SAP reporting options may be used to analyze, report and
Pricing and Implementation
Various support levels are available.
Dynamic
Discount
Management
Taulia
Case Study
Taulia Case Study
dollar savings.
wanted to extend the program’s reach to their entire supply base and
Previous Challenges:
Dynamic Discounting was limited to suppliers using the
seamlessly integrating with the company’s ERP system.
The Solution:
overcome internal silos that existed between accounts payable,
Discounting opportunity within their supply base. For this company’s
cally, and most
approved invoices through the Dynamic Discounting program,
17
Dynamic
Discount
Management
Taulia
Case Study
The Highlights:
contract signature.
18
Dynamic
Discount
Management
Conclusion
Conclusion
capital at a premium, which is why buyers, suppliers, technology
Conclusion
we provide advice on vendor selection. PayStream Advisors will
About PayStream Advisors, Inc.
improves the way companies plan, evaluate, and select emerging
technologies to achieve their business objectives. PayStream
IT applications related to business process automation with the goal
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19
Dynamic
Discount
Management
PayStream’s SolutionSource
SolutionSource
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20