Why AP Management For SMBs Is More Than Making A Payment

Middle market companies need help navigating the complexities of accounts payable management, especially when it comes to cross-border, cross-currency payments.

Tipalti CEO Chen Amit told Karen Webster a holistic approach has helped his firm grow bookings by triple-digit percentages.

In business, process is as important as payments.

That’s especially important as businesses gain scale, as they expand reach into new geographic areas — and as they grapple with AP operations.

In an interview with Webster, Amit weighed in on the tailwinds that have helped the FinTech surpass $8 billion in annual transactions across its global payables platform, which, among other features, helps firms manage payments across units located in other countries.

In a release, Tipalti said earlier this month that it saw an increase of 250 percent in customer bookings in the first half of 2019 compared to the first half of 2018. During that timeframe, Tipalti’s FX services revenue increased 103 percent, driven in part by the company’s Multi-FX product launch. That solution, the company has said, helps firms save money on currency conversion for subsidiary-focused payouts across more than 30 different currencies.

The company’s revenue model, Amit told Webster, is tied to a fee structure that extends across several types of fees, from flat fees for platform access, software related fees, and transaction fees where Tipalti processes the flow of funds. Currency-focused services exist as an optionality play, he said, in which client firms sometimes need Tipalti’s offerings to send money across entities across multiple jurisdictions in local currencies, and sometimes they don’t.

The triple-digit percentage growth comes, said Amit, as the AP solutions market is fragmented, and peers offer tech-driven software solutions that attack separate and disparate functions of the payables process.

One solution may address tax issues, another currencies, and so on — and that approach, he said, works well for larger firms, but decidedly less well for everyone else.

An integrated, holistic offering involves technological “heavy lifting” that lies beyond the scope of Tipalti’s peers, Amit said.

The company has also focused its efforts on the middle market swath of firms. Those firms have not had the time, money or resources to fully attend to the complexities of managing AP on a global scale, which presents a challenge.

“If you are not delivering an integrated solution to the mid-market, they will not be able to integrate the solution itself from different pieces of software,” he said. “The global part of it comes into play with supplier management, tax management and compliance management.”

The mid-market is so underserved, he said, and the challenges of a holistic tech approach so onerous, that two-thirds of the deals Tipalti wins are uncontested. That represents a greenfield opportunity for the firm, and has been a tailwind for growth that should continue.

“The complexity [of managing those payments] increases if you have multiple entities,” he said, adding that “the complexity increases if you mix 1099s with W2s,” which, in turn, affects compliance and tax issues. And, he noted, the regulators are not making it any easier for firms to manage cross-border business flows.

“We’re just in the early stages of creating the category” of automated AP management for B2B, he said.

Asked by Webster where Tipalti is seeing demand currently, Amit said that beyond digital companies (defined as dot-coms) and online marketplaces, more than half of business now comes from “traditional” firms in verticals like manufacturing and insurance.

As these companies tend to use software offerings like NetSuite and Quickbooks — with which Tipalti also integrates — he said that conversions to Tipalti’s AP offerings have been significant.

“They just don’t have anything in place” when it comes to AP management, said Amit of those traditional companies. For the dot-coms, he said, those firms typically outgrow the solutions they’d had in place and need more complex and agile technology and support across cross-border activities.

“It seems to me that the market is hungry for a solution,” he told Webster.