Dynamic Discounting Content

Regardless, one of the chief problems that cash-rich Treasurers are having is determining how to increase returns GIVEN current policy restrictions for the types of investments that can be made. What if you invest the cash into higher yielding assets? There are a lot of things you can do. What risk are you willing to take on? Do you want BB- bonds for higher yield? What are your restrictions for the types of investments that can be made? What type of illiquidity can you live with?

One option is to broaden self-funding to all your suppliers with an early pay program.

There is no argument that the demand for early payment on invoices is as strong as ever — that is to say, if you have invoices to generate. In the coronavirus era, many businesses have lost significant revenue. For example, businesses serving the U.S. hotel & food-services industry have shed 40% of jobs from January to May, and received only 8% of the government’s small business loans.

Many see early pay via dynamic discounting as a win-win — help suppliers get cash, and buyers manage cash at much better yields than alternatives.

For suppliers, it’s easy to present the advantages to make a yes/no decision — get paid early with a known discount, predictable cash flow and don’t worry about onboarding hurdles that most supply chain finance programs are burdened with.

But let’s explore the supply-side for a second. There are a number of factors at play in a COVID-19 world, some favorable and some not-so-favorable, that make one pause for consideration.

As a stand-alone capability, dynamic discounting often plays second fiddle to eProcurement and invoice automation/e-invoicing investments. Yet the dynamic discounting tools sector has been around […]