Case study: Automated payments and dynamic discounting fuel growth at Mediafly

US technology company Mediafly, which celebrates its 10th anniversary in 2016, describes itself as “the Customer Interaction Platform” and its role as helping companies with large field sales operations deliver “the perfect in-person selling experience” in the form of encrypted mobile applications.

Based in Chicago, Mediafly’s list of customers includes names such as Athena Health, Pepsico, brewing giant MillerCoors and SAP. John Evarts, its chief financial officer (CFO) and chief operating officer (COO) joined the company six years ago and says that one of his main roles is providing its key stakeholders with guidance and expertise in strategy, operations, administration and financial management. He also served for three years as president of the CFO Roundtable of Chicago, which brings together financial professionals from prominent organisations.

Evarts is a firm believer in the benefits of dynamic discounting and has described in the business magazine Forbes how it has helped the company’s strong growth by enabling it to expand its tech team. He describes the background to Mediafly’s impressive growth performance below:

What supplier financing challenges did Mediafly face?

We work with Fortune-ranked companies, enabling sales transformation by modernising marketers and empowering sales teams to deliver the perfect selling experience. Being a smaller company, many of the Fortune 500 clients we work with often don’t share our sense of urgency in the supplier financing process.

Mediafly had a system set up where our customers were typically paying yearly subscriptions, which meant each invoice was a substantive amount of money. In addition, the majority of our payments were taking place using paper cheques. Both of these factors were creating significant financial challenges and preventing us from growing as a company.

What’s more, handling payments manually, and offline, poses problems for small businesses and start-ups. Payments are often delayed and the lack of visibility into scheduled payments makes it difficult to forecast cash flow. Even when payments are received promptly, they can’t easily be reconciled because the payment file may come with incomplete remittance detail, or may not contain any remittance information at all. With most of our clients relying on manual payment infrastructure, it was a black box as to when we were going to see payments and what we were actually paid for.

As a small company, timely access to our earned capital is crucial to supporting operations and driving growth. The cost of capital today is high for start-ups. Even with strong revenue growth, in those early years a balance sheet or profit and loss (P&L) can’t be levered to get competitive rates from traditional financing sources. Late payments could end up costing small businesses and start-ups huge amounts- even their entire company.

Combined, both of these factors meant we had little insight or control over our cash flow resulting in significant reduction in pace of hiring and, therefore, the pace of innovation we were able to deliver.

What solution did you use to face these challenges?

A client requested that transactions be done on the Ariba Network – on the basis that it’s the largest, most global business network with over two million companies in 190 countries – and we began sending all of our invoices electronically. This changed everything.

Leveraging the connectivity and insights of SAP Ariba’s business network provided us with the convenience and agility of cloud-based technologies, while enabling us to more effectively manage the entire payment cycle. The network acted as a fast and secure electronic environment in which we could exchange purchase orders and invoices, and deliver rich remittance data along with payments that showed what they represented at the invoice and line-item level.

Was dynamic discounting part of this solution?

Absolutely – we used Ariba’s Invoice Management and Discount Professional software, which helped us fully automate the process of offering, negotiating, and agreeing on early payment terms. Discount Professional enabled us to decrease the time it takes to go from quote to settlement down to 14 days, as opposed to a typical 30- to 90-day span. Cutting this this turnaround time by over 50% gives us access to the capital we need to fund Mediafly’s growth faster than would have been possible or even imaginable with traditional financing sources.

What other benefits have come from leveraging dynamic discounting over the network?

The biggest benefit has been our buyer’s ability to pay invoices to us ahead of time through dynamic discounting. We use the resulting capital to speed our hiring process of engineers, which resulted in explosive business growth. This early capital also enabled us to release a product ahead of schedule, which proved a huge success.

The business milestones achieved and company growth experienced is directly correlated to automating our payment processes and offering discounts for early payment. The value of getting that cash early has far outweighed the cost of giving the discount.

In addition, as our business grew with increased revenue and employees, the network was a great resource we could tap into for new business – exposing us to many potential customers.

Could other businesses benefit from payment automation and dynamic discounting processes?

Getting buyers to agree to pay early and sellers to offer a discount might seem like an impossible task. But business networks and the technologies underlying them actually make it quite simple. Delivered in the cloud, the solutions provide buyers and sellers with all of the tools necessary to fully automate the process of offering, negotiating, and agreeing on early payment terms.

Buyers can capture discounts at any point between invoice approval and the net due date and automatically present offers to lock them in. Suppliers can automatically accept offers or control the acceleration of payment on an ad-hoc basis according to their needs.

Through this entire process, we’ve learned that collaboration is key to navigating through supplier financing – and business networks make it easier than ever to do. Buyers and suppliers who tap into them and leverage tools like dynamic discounting to work more closely together and ensure their mutual health end up sparking business growth and overall bottom line during the process.

To put it simply, success and competitive advantage are natural results for businesses that move away from antiquated, offline payment methods. At Mediafly, we’ve never looked back!

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