Does Procurement pay for Dynamic Discounting and Pcard programs?

Do you see suppliers fighting back by raising prices when buyers use dynamic discounting or p-cards to settle more traditional supply chain spend?  I hear that comment from Procurement officers sometimes, but there really is no data anywhere that I can find.  Both Dynamic discounting and p-card programs charge high annualized percentage rates.  In the case of p-cards, the business model of interchange must support both the merchant and issuing card member bank.  In dynamic discounting, its a risk free return for treasury.  These high rates beg the question regarding when suppliers will just swallow the interchange in order to keep the customer and when they will push back (including refusing to accept a p-card in the first place).

I suspect that there is not as much pushback onto Procurement, and here is why:

  1. First, we are dealing with small, service based suppliers that typically have little leverage with large buyers.  Large buyers ultimately make the rules.
  2. Second, while the APR rates may be high (18 to 36 percent is common on invoice discounts of 1 to 2 percent), small vendors like their cash, and taking a discount of $2 off of a $100 invoice is offset by getting $98 now.
  3. Third, this is typically an option for suppliers, not a requirement.  So it is a binary decision to take the money or not.  Large corporations continue to provide a menu of options for suppliers to get early payment on their invoices.


Where it will get interesting is when corporations that have implemented programs try and move more suppliers with bigger volume and spend types onto these programs, perhaps luring them with better financing rates.   We've done a number of posts on Crossflow and how they provide reasonable financing rates today (see related posts below).

Then it will become interesting.  From a p-card or e-invoicing vendor's perspective, this is of strategic importance as it ultimately affects the ceiling of these programs - or how high you can go.

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  1. Amandeep Bhati:


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