How do suppliers benefit from BidPay’s approach to Active Payable Discounting?
The use of BidPay® reduces supplier dependence on outside funding sources and lenders if they can wait until their invoices are approved by their customer. BidPay® provides suppliers the ability to obtain payment on demand from their customers as soon as invoices are approved by the customer.
Some cash-constrained suppliers are unable to wait for their payments from their large corporate customers. They often borrow against or factor their accounts receivable to obtain cash immediately upon invoicing. Those that can wait until their customer approves their invoices (often a week to one month after invoicing) may obtain immediate payment directly from their customer by offering a small discount on BidPay®’s user-friendly online portal.
What is active payable discounting?
Active Payable Discounting is a business process through which Your largest corporate customers may actively and dynamically pay Your invoices ahead of schedule at a discount. Buyers benefit by earning a return on funds that otherwise earn little or no interest while your company waits weeks or month for payment. Suppliers benefit by having a reliable option that turins their approved invoices into immediate cash, reducing dependence on receivable financing.
Receivable financing provided by lenders requires suppliers like you to complete an application and wait for approval. This process may take days, weeks, or months, depending on the lender. If your customer offers BidPay®, you don’t have to apply or qualify. You are notified by e-mail when your invoices are eligible to be paid ahead of schedule, and you submit a discount bid if you need payment right away.
Why does it cost extra to get paid more rapidly?
In large organizations like your customer’s, the process of receiving, inspecting, accepting, and paying for goods requires significant amounts of labor and expense. Expediting any of those steps for the sake of a few suppliers that require faster payment places a cost burden on your customer. BidPay® facilitates the process for your customer. Your discount bid, offered through BidPay®’s auction platform, compensates your customer for these costs.
It is customary and has been the norm for well over 200 years, for large companies to expect their suppliers to wait 30, 60, 90, or even 120 days to receive payment after goods are delivered. The concept of “prompt-payment discounting” provides a means for your customer to recoup its costs involved with paying you more quickly—if that is even a possibility. Your customer understands that its best capitalized suppliers will simply borrow from a bank under their revolving bank lines of credit to finance the wait period.
In recent years, you may have even experienced an increasing trend in the length of time your customers wait before they pay you. Your extension of trade credit allows your customer time for receipting and paying for goods and services. It also provides a primary source of funding for your customer. In fact, when considered in the aggregate, supplier trade credit is likely the single largest source of funding for your customer. Your large customer simply will not use its own liquidity to enhance yours without demanding something in return—typically, a small discount.
Naturally, if large customers disrupt their normal business process to pay some suppliers more quickly than others, and had to replace trade credit with borrowed funds, the expense would be enormous. Your customer’s response would be to demand price cuts across the board from all suppliers to cover the expense relating to only a few. No supplier wants that to happen. It is unreasonable, therefore, for suppliers to expect their customers to absorb the cost of prompt-payments and the accompanying consumption of their liquid resources, without reimbursement.
As a result, BidPay® technology was invented by supply chain finance experts who understand that sometimes, demands placed by buyers on their suppliers can be overwhelming. BidPay® was designed specifically to reduce supply chain stress by providing suppliers with an “invoice payment-on-demand” instant liquidity solution. Your customer understand that its suppliers occasionally experience borrowing constraints imposed by their lenders and unplanned cash needs that exceed the supply of immediately available credit. Your customer also understands the importance of the strength of their supply chain—which depends on suppliers having access to the “spot liquidity” when the need arises. BidPay® fills this need like no other source of short-term business credit can. If your customers don’t offer BidPay® as an exclusive supplier benefit, please click here to ANONYMOUSLY join our petition drive to expand awareness of BidPay® through conventional and social media outlets.