Introducing BidPay®, the transformational investment tool for corporate CFOs and Controllers. BidPay® revolutionizes early-payment discount programs by providing high-yielding, risk-free cash returns for buyers while creating a payment-on-demand online auction environment for credit-constrained suppliers.
The High Cost of Missed Opportunity
BidPay® is the only technology that improves upon all currently existing methods and e-commerce early-payment systems. BidPay® requires no investment in hardware or software, no complicated integration process for buyer or supplier, no ongoing support or transactional costs, and most importantly, no significant change in the business processes for buyer or supplier. In fact, BidPay® is the only payment-on-demand product designed for the singular purpose of maximizing supplier discounts realized by buyers in an online auction environment.
BidPay® technology packs a powerful proprietary punch—a patent-pending algorithm that exploits the inherent weaknesses found in all other “early-payment-for-discount” models. By using active payable discounting technology, BidPay® transforms the old, static payable discounting model into a dynamic, payment-on-demand system that seizes on discount opportunities otherwise overlooked or ignored completely. BidPay® expands opportunities for buyers throughout the discount opportunity window*, and maximizes suppliers’ discount offers through the bid process. As a result, large buyers may capture millions of dollars annually of new-found revenues while incurring no incremental cost.
A recent poll conducted by a leading Business Service Network that has processed over $170 billion of payments to 40,000 suppliers, reveals 85% of suppliers state a willingness to occasionally or always accept discounts for faster payment.1 Using results cited in the same survey, BidPay® projects that 30% to 40% of the payable dollars it auctions through BidPay® will be successfully discounted at rates meeting or exceeding buyer’s investment objectives. Through weekly BidPay® auctions, credit-constrained suppliers that have a “spot” need for cash at any time throughout the discount opportunity window, may submit discount bids on their invoices appearing on the auction site. Suppliers submitting successful bids receive immediate payment from the buyer at the close of auction.
Simplicity Without Sacrifice
For their payables to appear on the auction site, buyers simply export a file of eligible** payables from their existing ERP (payables system). BidPay® sends auction notices to the respective suppliers once per week; collects discount bids from suppliers; and returns a modified file to the buyer containing a list of payments on which qualified discount offers were submitted and accepted. BidPay®’s fee is contingent on auction success. If an auction ever fails to deliver results that meet the buyer’s financial objectives, BidPay® earns no fee for that auction.
Liquidity-Neutral Payment Discounting
BidPay® provides opportunities for buyers to adopt highly profitable, liquidity-neutral payment strategies without adversely impacting credit-constrained suppliers. One such strategy involves stretching payment terms to all suppliers. By increasing their Days Payable Outstanding to fund the early payment of certain invoices, better-capitalized suppliers effectively fund the early payment of credit-constrained suppliers. Such strategies can dramatically increase supplier participation in a payment-on-demand environment. Buyers employing similar strategies generate millions of dollars per year in newly found revenue, without adversely impacting relationships with credit-constrained or strategic, well-capitalized suppliers.2
About The Company
BidPay® CEO, and inventor of the BidPay® technology, Tony Furman, has over 30 years of experience in banking and supply chain finance. Furman is co-founder and President of the Interstate Capital Group of Companies, one of North America’s leading supply chain finance firms, responsible for discounting over $4 billion of receivables for thousands of suppliers throughout North America. BidPay® is a subsidiary of Interstate Capital. BidPay® plans to market to companies with annual sales between $3 billion USD and $10 billion USD. BidPay®’s Active Payable Discounting technology is patent-pending, and the company is expected to release Version 1.0 for beta testing partners late in 2013. BidPay management expects to launch publicly in 2014. Furman forecasts BidPay® will put out to bid over $1 billion of payments in its first full year of operation and will account for over 50% of the Interstate Capital group of companies’ annual revenues within five years of launch.
The Supplier’s Best Alternative To Traditional Supply Chain Financing
For suppliers, BidPay® is an alternative to the traditional supply-chain financing model where buyers lean heavily on suppliers’ willingness and ability to provide trade credit. In the presently existing model, suppliers must tie up valuable working capital or borrow from external funding sources to finance receivables arising from their extension of trade credit to buyers. For all of the suppliers of buyers that implement BidPay® technology, the traditional receivable financing model is reversed.
By contrast, for suppliers of buyers that offer the BidPay® solution, lenders are removed from the equation—and buyers capture a high, risk-free yield on funds employed.
Limitations and restrictions imposed by suppliers’ lenders can disrupt the supply chain and adversely affect suppliers and buyers alike. Every supplier, irrespective of their size, industry segment, or financial condition, may obtain early payment on their invoices from any participating BidPay® buyer.
Restrictive Lending Policies Disrupt Your Supply Chain
Utilizing their 20+ years of supply chain finance experience, BidPay® management sought to design a system that:
– reduces suppliers’ dependence on external funding sources;
– provides credit-constrained suppliers ability to obtain payment-on-demand
– places buyers in better control of their supply chain;
– delivers a significant source of ongoing revenue for buyers; and
– produces above-market risk free returns on investment
By providing buyers with the first-ever payment-on-demand solution, BidPay® delivers income opportunity for buyers that was previously reserved exclusively for banks and non-bank lenders that extend credit to suppliers.
Furman explains, “When credit-constrained suppliers are preoccupied with managing their limited financial resources, invariably they are distracted from tasks like quality control and on-time delivery. We sought to devise a product that reduces suppliers’ dependence on lenders to finance their working capital needs.”
BidPay®’s most valuable feature is its patent-pending algorithm that drives the discount acceptance/rejection process. By instantly analyzing millions of combinations of variables, BidPay® technology prevents suppliers from predicting outcomes and discourages the submission of bids that fail to meet buyers’ investment and income objectives.
*Discount Opportunity Window is defined as the time period between the date of invoice approval and the invoice due date.
**Eligible Payables are supplier invoices which have been approved for payment by the Buyer, but are not yet due. Sometimes, these payables are referred to as “vouchered”, meaning they have gone through the Buyer’s approval process and in the payment queue awaiting release.
***Payment On Demand refers to supplier’s ability to obtain payment at any time during the Discount Opportunity Window—that is, any time between the date an invoice is approved for payment and the date it is scheduled for payment.
1Thomas Glassanos, “Early Payment Discounts”, December 29, 2006
2 Justin Murfin, Yale University, Ken Njoroge, University of Oregon, “The Implicit Costs of Trade Credit Borrowing by Large Firms”, February 2, 2013. [Note] “Consistent with access to capital being an important driver of the documented effect, we find that the sensitivity to buyer payment speed on investment is eliminated for rated firms. A closer look at financing patterns reveals that rated suppliers compensate for delayed payment by important buyers through new debt issuance.”
3 Serena Ng, “P & G, Big Companies Pinch Suppliers on Payments, Wall Street Journal, April 16, 2013