Christian Lanng was 21 years old when he became the youngest division head in the Danish government. And with a role that is anything but easy: he must trace the 25,000 suppliers who send over 15 million invoices to the government each year. The majority of these are obviously in paper format, an aspect that makes the operation particularly complex to manage. And, exactly this need for increased efficiency pushed Lanng to build an electronic platform capable of cataloging invoices in order to keep track of them. It is a software that also allows suppliers to send invoices and verify their payment states. In less than 10 months, 95% of Danish companies began using the system.
Given its success, Lanng decided to go out on his own and launch a startup based on the same idea of managing invoices in order to monitor and speed up payment. He called it Tradeshift. The program allows companies to send their payment requests by simply filling out a standard form online. The requests are ordered and cataloged and those who inserted them can also track them. Thus, the cash flow cycles become much faster.
This is not a detail to be ignored if one takes into consideration that companies who work for public administrations have payment cycles of 30, 60, or 90 days. The fact that payments are not immediately made often causes problems, above all for small and medium sized businesses (and just think how many of these there are in Italy!). It has been calculated that in the U.S. about 2 trillion dollars are “blocked” due to late payments and the long processes of payment procedures.
Some analysts have declared that these delays are “a fact of business life”, an intrinsic factor in normal business operations, therefore they cannot be eliminated. To the contrary, Lanng and the Danish government are determined to show how these convictions are a vestige of an antiquated culture that can be surpassed with efficiency thanks to services that incentivize administrations and companies (when there are acquisitions between one company and another) to pay suppliers more rapidly.
Lanng’s startup Tradeshift offers a 2.93% discount for payments made immediately. To the contrary, those who wait 45 days pay the full price. The logic behind this is called Dynamic Discounting: the faster you pay the less it costs. It is an opportunity that is advantageous for both sides because suppliers, paradoxically, earn more by being paid immediately though a bit less than waiting for payments for so long that, at times, results in requests for loans due to lack of liquidity. It is estimated that businesses could save up to 30 million dollars just by receiving payments on time rather than with long delays (Source: Business Insider). As well as Tradeshift, other companies are now offering similar services, like Ariba (which was bought by SAP for 4.3 billion dollars) Taulia, and Basware.
Tradeshift is also available on smartphones and is free for companies that want to join the platform. As well, it is open-source, thus offering the possibility of personalizing it for specific needs. Today, three years from its commercial launch, Tradeshift has over 500,000 clients from around the world, including giants like DHL, Dell, and the British national health system. Over the past 18 months it has grown by 300%, processing a value equal to 300 million dollars. This is a successful startup that was created by a young man who knew how to take risks and, when he was asked whether he intended to sell it to SAP, responded: “To tell the truth I want to by SAP”.