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Dynamic Discounting: Reaping the Benefits of Early Pay

By iPayables | January 20, 2022

Digitization scaled

It’s no secret that an organization’s ability to survive and prosper often depends upon their willingness to find and utilize new revenue streams. One such innovative and often overlooked revenue stream for the accounts payable department is the dynamic (or early-pay) discounting, offered by most AP automation solution providers. Higher-level solution providers, such as iPayables, can also offer dynamic discounting.

Dynamic discounting provides ample time for a supplier to be notified that an invoice has been approved. This discount is automatically generated by the system based on terms set by the supplier and customer—leading to easier discount capture. They are also notified that the invoice can be paid early with a discount. Suppliers can either opt for said discount, or select a different date to be paid and a new discount will be calculated, if applicable. InvoiceWorks® uses advanced algorithms in real-time to determine the appropriate discount for the supplier based on the selected date.  This makes cash flow forecasting far more accurate and efficient.

Dynamic discounting is the epitome of the proverbial “win-win.” Both the customer and the supplier benefit by offering an early pay option. The customer benefits by consistently taking advantage of the additional discounts captured. The supplier gets the financial flexibility and stability of having that payment clear faster.

Since the early 2000’s, accounts payable has seen the processing of paper invoices steadily decline. More companies have automated their payables processing using an e-invoicing (AP automation) system such as InvoiceWorks®. Through this kind of automation, invoices and payments can now be viewed and approved with just a few simple clicks. This gives the AP department additional time that they would have lost if they were processing with paper.

The time savings of dynamic discounting results in improved payment flexibility. In many cases, a supplier might need a payment to process faster, and is willing to provide a discount extra for it. These kinds of discounts were previously unavailable due to the slow-moving process of paper invoicing.

Benefits of Dynamic Discounting:

  • Buyers can pay their suppliers early in exchange for a discount
  • Buyers can benefit from double-digit, risk-free returns
  • Organizations can earn more early payment discounts
  • Strengthened workflow in the AP department
  • Suppliers are provided with quick and easy access to payments
  • Buyer/supplier relationships improve

One of our clients—the world’s largest restaurant chain—picked iPayables to be their APIA (Accounts Payable Invoice Automation) provider.

This restaurant chain has effectively transformed their accounts payable department into a revenue generator. In fact, in their first year with iPayables, they generated nearly $200,000 from discounts alone. The money they generated through dynamic discounting outweighs the cost of their top-of-the line automation by iPayables. Thanks to the time-saved and financial benefits of using an electronic invoicing application like InvoiceWorks, dynamic discounting provides abundant with savings opportunities that any enterprise organization should be taking advantage of.

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