If you get Dynamic Discounting done right, you can expect to save $5 million—and free up an additional $250 million in cash—per $1 billion of spend.
We’re all looking forward to the day when the global economy gets up and running again. In anticipation of that moment, we’re offering a series of blog posts that provides actions you can take now—while you’re working from home—to expand the working capital opportunity in your organization.This first post covers Dynamic Discounting, a program that lets you capture discounts from suppliers by agreeing to pay them earlier. If you get Dynamic Discounting done right, you can expect to save $5 million—and free up an additional $250 million in cash—per $1 billion of spend.
In addition to the tips below, we encourage you to watch a best-practices webinar on Dynamic Discounting. At the time, nearly 30% of webinar attendees said they didn’t have a supply chain financing strategy in place. We know that number has decreased a bit, but many enterprise organizations are still leaving money on the table without solutions like Dynamic Discounting.
Here are three things you can start thinking about so you’re ready to roll with Dynamic Discounting.
For effective Dynamic Discounting, organizations need input and buy-in from Accounts Payable, Procurement or Sourcing, and Treasury. Treasury will need to answer questions about having cash on hand to capture discounts. Procurement will be involved in terms standardization. And AP will take the lead on automation efforts like supplier portals and eInvoicing. It’s also critical to have a senior champion who drives the business case assessment and facilitates collaboration.
The most successful Dynamic Discounting programs are introduced alongside a standardized extension of net terms with all suppliers. Stretching your terms may be difficult, but if you do it ethically and give suppliers a way to receive payments early, you’ll get a surprisingly positive response. All your contracts should contain language about standard payment terms, electronic invoicing requirements, and early payment options.
Do your due diligence when it comes to finding a partner to implement your Dynamic Discounting program. For rapid deployment, choose a SaaS solution that easily integrates with your ERP system. Successful Dynamic Discounting programs provide suppliers with the flexibility to offer discounts at any point between the day an invoice is received until it’s paid, so make sure you have the automation solutions in place—supplier portals, eInvoicing, hosted imaging, workflow—to facilitate this.
Be sure to have your teams watch our best-practices webinar on Dynamic Discounting for more detailed information. You can also call on our experts for advice about your particular situation—we’re open for business and available to assist you from our remote locations. Simply send an email to sales@directcommerce.com, or call us at 415-288-9700, and we’ll arrange a free consultation or demo.
We hope Dynamic Discounting can save you money and free up more cash, so you’re ready to jump on opportunities when the economy opens up again.