Dynamic Discounting: The Best Way to Early-Pay Discounts
Suppliers often end up waiting over a month to receive payment for a product or service provided. This means the “frozen” capital is temporarily unavailable for the organization to use in other areas, which can often cause tension between the supplier and the customer. The solution? Early payment incentives for both customer and supplier. The idea of early payment incentives isn’t new – it’s a concept that’s been around for a while, but iPayables has perfected the process with our accounts payable automation dynamic discounting system.
What is Dynamic Discounting?
Customers and suppliers can establish rules and guidelines for when an invoice can qualify for early-pay discounts. If an invoice is processed and meets the agreed-upon guidelines, the customer’s accounts payable department can choose to approve the invoice for early payment. The supplier is then notified and can select if and when they would like to receive a payment early. The amount of the discount is then dynamically calculated using a rules-based software solution and the rules put in place by suppliers.
Dynamic Discounting provides ample time for the supplier to be notified that the invoice is approved and can be paid early with a discount. The Dynamic Discount is controlled directly by the customer, who can alert suppliers much more quickly than a third-party agency. Suppliers can either opt for the Dynamic Discount or select a date to be paid and the application will let them know what the exact discount will be. This makes cash flow forecasting more accurate and relieves some of the reporting burden placed on the accounting department.
Dynamic discounting uses an algorithm that gives you and your suppliers control and flexibility in deciding how much of a discount you’ll be awarded according to the date your payment is made. All calculations are done automatically, so you don’t even have to think about it.
These early payments are made possible through e-invoicing. Never again will you be charge late fees from slow paper invoicing processes – your AP department will be ahead of the curve and making your company money through the combined powers of dynamic discounting and e-invoicing.
iPayables may not have invented the early pay discount concept, but they perfected it. Contact iPayables today to get more information about our dynamic discounting system through AP automation.