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    What is Dynamic Discounting?

    Dynamic Discounting is a program setup by a company that establishes a process by which buyers and sellers can "dynamically" alter the standard terms of payment.  The basic component of a dynamic discounting program, or Accelerated Payment as some companies call it, is the ability for the buying organization to offer early payment for a stated discount to its suppliers.  The discount offered can be changed as the cash flow position of the buyer changes and the percentage of the discount will go down the closer to the normal payment date that transaction becomes.  These programs are a win-win for the buyer and suppliers: the suppliers can choose to have all, or select invoices paid early to augment their cash position.  Buyers can generate substantial savings through aggresive discounting of payment obligation.

    What are the Benefits of Dynamic Discounting?

    Taking a closer look at the benefits of dynamic discounting can help us understand why implementing a dynamic discounting program can generate sizable economic advantages for the buying company and reduce DSO and increased cash flow for the vendor/supplier:

    Advantages to Buyer

    • Offer early payment for goods and services in exchange for substantial discounts
    • Achieve savings of 1/10th of 1% of annual spend, or $1 million for every $1 billion in spend
    • System designed to allow you to control:
      • Percentage of discount
      • Amount of cash dedicated to program on a daily, weekly or monthly basis
      • Which suppliers, invoices, product or service categories are eligible to participate
    • Ability to negotiate better contracts with vendors and suppliers

    Advantages to Supplier

    • Flexibility of discounting some or all receivables
    • Eliminates need for high-cost financing options
    • Better cash flow forecasting capability
    • Reduces the ambiguity of the timing and amount of payments

    Who Should Implement a Dynamic Discounting Program?

    There are a few things to consider when deciding if implementing a dynamic discounting program  is right for you. The cost saving benefits of doing so are evident by the benefits listed above and according to PayStream Advisors, “buyers who report achieving these discounts tend to pay their suppliers about 10 to 15 days before the invoice is due.”

    On of the most important factors to evaluate in considering whether to implement a Dynamic Discounting program at your company is the current state of your Account Payable and invoice payment systems. The key to taking advantage of this dynamic and lucrative program is having streamlined and automated payment processes.  ICG Consulting can help your organization assess its current processing environment and help you decide whether a dynamic discounting program is right for your company.

    Find Out if Dynamic Discounting is Right for Your Business

    ICG Consulting offers expertise on dynamic discounting and can discuss with you how dynamic discounting can be implemented within an ICG supplier portal. Contact us today and we can start to discuss your company’s needs and determine if dynamic discounting is right for you.