How To Get Paid Faster From Home Depot

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(This post originally appeared on Forbes)

Home Depot is a great company – but let’s face it, they do what a lot of big businesses do: They pay kind of slow. I know this because I have clients who do business with them. Typical terms are around 60 days. These terms are not uncommon when dealing with larger companies. And yet, it’s a huge issue for smaller companies.

That’s because smaller companies need cash. By the time one of my clients sells product to Home Depot or a larger company all of their money has been spent on buying the raw materials, producing the product, paying people, maintaining overhead and shipping the items…and then it’s another 60 days until the cash comes in. Big businesses have greater cash reserves and large credit facilities made available by banks who are more than happy to lend them money. Small companies don’t have these resources at their disposal. They just wait.

Until now. There is an enormous change happening in payments processing, a change that will impact any small business doing business with larger companies. Technology is driving this change and a company named Taulia is right in the middle of it. Taulia, founded by former entrepreneurs who wrote payment processing software for SAP, raised about $15 million in additional financing last January and is now valued at close to $1 billion – and there are rumors that they’re considering a public offering in 2016.

“This company makes a lot of sense,” says Josh Hannah of Matrix Partners, one of Taulia’s earliest investors and a board member. “I love companies that find legacy-related inefficiencies that have persisted for years then make them efficient.”

How is Taulia solving these problems? Take Home Depot (or John Deere, EBay,Grainger, Salesforce, PayPal, Coca-Cola Bottling Consolidated, Hallmark Cards,Johnson Controls, Graphic Packaging, Pacific Gas & Electric – all customers, according to the company). You’re a small company selling product or providing services to one of these giants. You ship your product/do your service, send your invoice…and wait to get paid. Meanwhile, other bills need to be paid. Your bank is offering you less credit (if any credit at all). Factoring and micro-finance options are expensive. You’re trying to grow but you’re restricted. You need the cash now.

But what if Home Depot comes back to you and says “Look little guy – we value you and we’re happy to pay you earlier. Just find your invoice in our online portal and click the button that says ‘pay earlier.’ It’s as simple as that.” And it really is that simple. Taulia’s software is written to integrate with their customers’ back end systems. A portal is provided to the small business suppliers, either by Taulia or from the large company. If a small supplier chooses to be paid earlier the payment will be made, net of a discount. The discount is ultimately split between the big company and Taulia. I’m simplifying a few things here, but you get the point.

For the small business, the benefits are summed up in two words: working capital. Forfeiting a small percentage of what’s due in return for having the cash in hand means that that cash can be re-invested in more products, more people and more equipment which will result in a much greater return than the cash original given up. Home Depot, for example, has a more productive and happier supply chain – both big and small suppliers alike. A finance program is offered by Taulia for those big customers that want to just outsource the whole process to them too. And of course, the big company is saving cash and turning their payables over quicker and more efficiently. Taulia’s system provides this capability seamlessly.

Is this a new concept? Not really. Banks such as Citibank and Bank of America have had supply chain financing in place for large transactions and competitors like Ariba offer payment processing for larger companies using software that has to be purchased from Ariba by all parties involved.  But it’s the small company that has always been ignored because the cost and complexity of managing this process always exceeded the benefit derived by the company. Small companies often don’t want to go to the effort to set up more software in their business in order to get paid quicker and large companies don’t want the complexity of supporting systems at thousands of little suppliers. Again, technology has solved this problem.

“Giving SMB suppliers the opportunity to pay bills early with no additional investment on their end has always been a challenge for large companies,” says Hannah. “But these inefficiencies are quickly going away. And now smaller companies can get the working capital they need. And large companies that care about the health of their supply chain are signing on.”

Are you selling to a larger company? Struggling with working capital while you’re waiting on payment? This is a problem that is quickly going away. Ask your big customer and find out if they’re yet offering options for you to get paid quicker. You may be pleasantly surprised by the answer.

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