Early Payments 2/10 Net 30

from Fantasy to Business Necessity

Early payments are a win-win between the supplier and the buyer.

  • Suppliers receive faster and more affordable working capital via fully secure payments.
  • Buyers secure a reduction in spend and a more solvent supply chain all while eliminating payment risk.

Yet the effort has remained more theory than reality.

  • Disconnected Technologies
  • Questionable Data Hygiene
  • Financing Complexities
  • Slow Invoice Processing
  • Understaffed AP Departments
  • Negotiation Ping-Pong
  • Complicated Reconciliation

Dealing with a handful of suppliers is easy, but the complexity escalates for companies with thousands of suppliers spread globally.

But there’s hope. What started less than a decade ago as fantasy has matured into a critical tool for the modern CFO. For the first time ever, a single corporation can connect digitally with thousands of suppliers — and in mere clicks — actualize the promise of early payments.

Why does it matter?

Soon, there will be two types of finance departments...


At the core of what will separate the two? Accounts payable automation and early payments.

What Are the Different Types of EP Programs?

“Early payments" is the catch-all phrase reflecting all scenarios whereby a supplier is offered the opportunity to be paid in advance of an invoice due date in exchange for a discount.

There are two predominant forms of EPs – dynamic discounting (DD) and supply chain finance (SCF). Both rely on a dual arbitrage:

  • A gap between net payment terms and invoice approval date
  • A gap between the cost of capital between the payer and the payee (buyer/supplier and payer/payee used synonymously)

Manual approaches to either are problematic.

Dynamic Discounting for Early Payments

Dynamic Discounting works with a buying organization paying a supplier early by leveraging their own balance sheet cash. The benefit of DD is that surplus cash can generate double digit returns while strengthening supplier solvency. But that also means the buyer has to have a large reserve.

Dynamic Discounting Steps

The supplier sends an invoice to the buying organization (a.k.a. the payer) for goods or services received.

An internal workflow determines that the invoice is correct and approved.

The buyer determines the EP discount rate based primarily upon the size and cost of capital of the supplier.

The buyer offers an EP to the supplier, typically via a supplier portal. The absolute size of the discount is directly influenced by how quickly the supplier wishes to be paid (a.k.a. how many days the invoice is accelerated versus the net terms).

The supplier elects to take the early payment, and the buyer executes the payment, adjusts the invoice to reflect the discount and transmits the money (while performing all of the required checks related to tax, OFAC, KYC, etc.).

Supply Chain Finance for Early Payments

Supply Chain Finance is considerably different, though ultimately the goal is similar. SCF occurs when a buying organization pays a supplier early using someone else’s cash, such as a bank, a financial institution, or other investment arm. SCF provides flexibility to a CFO’s discounting program enabling EPs even when balance sheet cash is unavailable.

Supply Chain Finance Steps

The supplier sends an invoice to the buying organization (a.k.a. the payer) for goods or services received.

An internal workflow determines that the invoice correct and approved.

The payer and the payee negotiate terms to discount the invoice amount. Often 2% if paid within the first 10 days.

Once agreed to, a third-party financial institution takes on the risk and immediately provides the supplier the discounted payment.

Upon the invoice reaching maturity (e.g. Net 30), the buyer pays the full invoice value to the third-party financial institution. They would then be returned a portion based on the discounted amount.

Why Haven’t More Companies Implemented EP Programs?

Successful EP programs require a confluence of strategy, patience, and technology. Only well-run companies comfortable with leveraging technology to augment legacy practices have the fortitude and aptitude to execute EP.



AP comes before EP. AP Free is the utopian vision shifting financial ops from tactical to strategic through the augmentation of previously manual processes. A roadmap of automated invoice approval, supplier portals, and automated payment operations all must be carefully plotted before an EP program is viable.



EP success results from increased adoption. The path ahead requires commitment and time to encourage the supply chain. While the implementation of AP automation technology is straightforward, you need to shift your organization’s mindset in nearly every step of the supplier payment process.



Most business payments are still paid by physical check. Most AP teams still rely on the phone and email back-and-forth to communicate with suppliers. For companies still relying on on-premise ERPs or with OCR document management, there exists a substantial gap to close before an effective EP program can be installed.

Technology's Role in Early Payments

Moving money from company A to company B is easy.

Moving that money accurately anywhere in the world while flawlessly adhering to both regulatory compliance and tax law with zero human touch?

That is hard.

But that is precisely what today’s CFO should strive to implement.

With the right technology in place:

  • invoices can be instantly approved
  • discount percentages applied
  • compliance checks executed
  • taxes calculated
  • reconciliations completed
  • and payments made.

Inaccurate and missed payments, regulatory fines, and tax penalties: these are the deficiencies that can de-rail early payment programs.

With automation, EP programs shift from one-offs with suppliers to being wide-scale and programmatic. The difference can be dramatic. Consider what it means to not only take out the cost of manual AP operations, but to reduce a percentage of your payable spend via a successful discounting program.

Analyze the costs

Early Payment Program Cost/Benefit Modeler

Use the modeler to better understand the costs and benefits related to early payments:

  1. Advance the sliders to set the number of transactions, average payment amounts, and EP admin salary.
  2. Experiment with the manual and automated adoption numbers, discount rates, and hourly effort.
  3. See the results and where you need to achieve a break-even point (ROI).
How Do We Get Started?

Early Payments – 2/10 Net 30 – From Fantasy to Reality

A successful early payments program cannot exist without a streamlined accounts payable supplier payments operation.

#1. Recognize the Marketing Challenge

A target customer (the supplier) has a specific pain (cash shortfall) for which you have an innovative solution (EP). And your target may already address their pain with alternatives (factoring, credit cards, loans) and are unfamiliar with your solution. Sounds like a marketing problem.

Like all good marketing solutions, the goal is the streamline messaging and adoption. Your EP program should include outbound campaigns to educate the supply chain. Since EP is a demonstrably cheaper and more predictable, it’s all a matter of getting the word out of its benefits.

#2. Get the Discounting Right

Seasonality, invoice amount, acceleration window, supplier cost of capital, buyer hurdle rate, discounting liquidity constraints, availability of SCF, and many other variables must be considered to determine a discount rate that maximizes the supplier’s likelihood of acceptance while ensuring an attractive margin to the buyer.

This is not the job for a clerk with a 10-key. Sophisticated technology coupled with real data science is needed. And timing discounts based on the original net terms is not something you can sit and watch. It must be an automated process.

#3. Obsess over Supplier Adoption

As the calculator above demonstrates, adoption is everything. The more suppliers engage digitally with a buyer, the more invoices will be electronically processed, and the more payments will be executed smoothly.

If you can reduce adoption to be part of an integrated, automated accounts payable flow, while executing EP agreements in a matter of clicks, you’ve essentially solved the puzzle.

The business must be able to reconcile AP and EP payments in real time.

Early Payments Is the Outcome, Not the Start

The modern CFO knows that what once was manual can and must be automated. Perhaps more importantly, the modern CFO knows that the finance department (including AP) can generate a profit. All that’s required is a look beyond the upcoming quarter.

CFO's Gut Check (Are We Ready?)

  • We have automated invoice approval systems in place.
  • We have access to surplus balance sheet cash or third-party capital to fund a discount program.
  • Our suppliers already use a supplier portal to engage our AP team.
  • We reconcile EPs within our ERP system to ensure accurate accounting.
  • Someone within the finance organization owns this transformation effort.
  • We know how to drive adoption from suppliers.
  • We know how to determine discount rates to encourage supplier adoption.

Tipalti’s early payment automation eliminates the complexities of supply chain finance at scale:

  • Generate Revenue for Your Business
  • Fully Automated Negotiation and Offer
  • No Payer Interaction Required
  • Payers Still Pay on Standard Terms
  • Rapid Time to Value (weeks vs. months)
  • No Impact to Existing Capital Agreements
Early Payments - 2/10 Net 30 - From Fantasy to Reality 2

Tipalti Early Payments is the perfect competitive differentiator. We can pay our partners faster, their onboarding and management is frictionless, and it directly generates revenue to reinvest back into our business.

Chris Brownridge, Co-Founder and CEO, GawkBox

Early Payments - 2/10 Net 30 - From Fantasy to Reality 3

With early payments built right into Tipalti’s accounts payable process, the effort to set up supply-chain finance is eliminated. In a matter of clicks, suppliers can elect to receive funds quicker for a small discount. Finance teams receive a referral fee for every dollar paid early, transforming AP from a cost center to “AP free” or even a profit center. Contact us today to learn more.


Contact us today to schedule a demo to see if Tipalti can help automate your accounts payable processes