Dynamic discounting gives your company cash flow at a lower cost than alternatives like bank loans or venture capital. Mediafly, an Inc 5000 company that creates unique mobile selling experiences for B2B firms, used this technique to generate cash when they needed it most.
Based in Chicago, Mediafly is a customer interaction platform that allows SMBs to use cloud ERP to create sales and marketing experiences on mobile devices to help sell more products and services. They used SAP Ariba's Discount Professional and Invoice Management products to get access to cash by encouraging early customers to pay faster.
Bank Debt or Equity Capital
At a recent SAP SapphireNow + ASUG Annual Conference presentation, John Evarts, COO/CFO of Mediafly, explained the challenges they faced. Mediafly had a long sales cycle. They had a lack of clarity about the timing of payments -- would clients pay Net 30, Net 60 or Net 90? Or as Evarts says, "Net Never." And then what about extended contract terms?
Financing options were bank debt and equity capital. But bank debt for small businesses and midsize companies is time consuming and expensive, and venture capital dilutes ownership and has unfavorable terms.
The Power of Dynamic Discounting
In contrast, dynamic discounting allowed MediaFly to get early payments from clients in return for accelerated discounts. For example, if Mediafly works out a 2 percent discount for paying a month early, over the course of a year it adds up to a return of 24 percent. "What types of projects are paying off at a 24 percent rate on payments that you are already making one month from now?" Evarts said.
Since using Ariba, Mediafly has experienced tremendous growth. Their client list has expanded from three customers in 2011-2012 to a robust roster of top companies such as S. C. Johnson & Son, NBC Universal, General Mills, PepsiCo, MillerCoors and Charles Schwab.
SAP Ariba Business Network
Growing a business in the digital economy isn’t easy. But more than 250,000 small and mid-size companies like yours are making it easier by running SAP. Using SAP Ariba’s business network will provide you with the convenience and agility of cloud-based technologies, while letting you more effectively manage the entire payment cycle. Ariba’s Invoice Management and Discount Professional software helps fully automate the process of offering, negotiating and agreeing on early payment terms. You can run simple, managing your business with a partner you’ll never outgrow, no matter where your business takes you.
Watch the Mediafly dynamic discounting video presentation by John Evarts to get the whole story on how SAP Ariba business management software can help improve cash flow for your growing business.
