Benefits
Dynamic discounting offers suppliers the flexibility of discounting some or all of their receivables, eliminating the need to use high-cost financing options like factoring or asset-based lending to obtain cash liquidity and stronger balance sheet positions. It also mitigates the uncertainty surrounding the timing and amount of payments, allowing for superior cash flow forecasting capabilities. On the other hand, supplier financing can enable buyers to extend their payment terms with the injection of third party capital. These benefits accrue without adversely affecting trading partner relations. And interestingly, dynamic discounting is based on a buyer’s credit rating instead of being pegged to the supplier’s risk, further strengthening buyer-supplier relationships.
- Allows buyers to pay their suppliers early in exchange for a discount
- Allows buyers to benefit from double-digit, risk-free returns
- Reduces large organizations annual spend by earning significantly more early payment discounts through additional discounts on non-discount invoices and maximum capture of traditional discounts
- Strengthens the financial supply chain and supplier relationships by providing suppliers with quick, easy access to cash
Read more about this topic: Dynamic Discounting
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