Better Financial Control with Dynamic Discounting
It’s fairly easy to see why so many organizations still view AP Automation as just a source of handling supplier payments. But in the reality, it can have a major impact on the working capital of the company, like better financial control. As such, Electronic Invoicing in conjunction with Dynamic Discounting is fully deserving of an investment for most enterprises.
Not Just Back-Office Duties
Historically, the majority of people have thought of AP Automation as embodying just back-office duties like vendor payment scheduling and supplier invoice approval. This may have been true a few years ago, however a variety of organizations are now realizing how much value EIPP and Dynamic Discounting can bring to their company.
Better Control Means Improved Cash Flow
Managing invoice payments and approving invoices from suppliers is just a small part of the Accounts Payable process. As a major cash flow source, AP Automation savings can play a major part in the company’s overall financial health. Any AP savings or captured discounts on supplier payments can create extra capital for leveraging in other areas of the business. Then AP Automation and Dynamic Discounting become not only cash distribution functions, but also indicators for guaranteeing more effective cash flow.
Impact on Working Capital
AP Automation with Dynamic Discounting has the capability of having a direct impact on working capital that can often be immediate as well. It does this via management of the Day’s Payables Outstanding. DPO is a leading financial health measuring factor that is a daily indication of an organization’s financial health. A high DPO indicates the company’s ability to apply additional cash toward operational needs.
A Workable Strategy
The management of the working capital of an organization, while also managing its DPO, can have a powerful impact on its overall financial health. This Illustrates just how well AP Automation and capital management are functioning within the company. As such, the creation and application of a workable strategy regarding supplier payments that includes specific financial tools can be crucial. These important tools should include Dynamic Discounting and Supply Chain Finance.
Dynamic Discounting allows companies that have slower processes of invoice approval and payments to take advantage of discounts for early payment by opening up the full payment period to possible discounts. Those discounts are controlled by the customer allowing for even better rates than a factoring agency, making cash flow forecasting more accurate and precise. Thus, including E-invoicing and dynamic discounting can consistently improve an organizations cash flow.