ipayables

The Bottom Line and Dynamic Discounting

By iPayables | November 26, 2020

In the modern business world where profit margins and the bottom line are often razor thin, there’s no room for waste anywhere in the company. Counting paperclips is always on someone’s mind, as it should be. But isn’t it better to trim the cost of acquiring them in the first place?

Accounts payable can help. Your AP department now has the ability to help slash expenditures, not just write the checks for them.

It all starts with dynamic discounting, the early pay incentive feature that comes with InvoiceWorks®, the accounts payable invoicing automation (APIA) platform from iPayables. iPayables may not have invented the early pay discount concept, but they perfected it. 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 the calculations are done automatically, so you don’t even have to think about it.

Your suppliers will love dynamic discounting as much as you do. On average, a supplier must wait 40 days to get paid for what its buyers have already received and benefitted from. For this reason, most suppliers will commonly charge a late fee on payments made after the due date. Yet many would rather rely on a carrot approach, offering a discount on their invoice in exchange for early payment. It’s easier and more profitable than spending time chasing after money.

The trouble is that no one wants to get locked into a long-term agreement that usually consists of a now-or-never discount target date. This is no longer a problem with dynamic discounting. With dynamic discounting, you and your supplier choose the amount of the discount according to dates you agree upon. Naturally, the largest discount is awarded early in the process, but if you miss that deadline, you can still earn a smaller discount at a later date. Everything is done on a sliding scale that is automatically adjusted.

AP automation makes these early pay discounts possible. Where under the old paper invoicing systems of yesteryear many AP departments found it difficult just to avoid late fees, they now find themselves actually making money for the company and adding to the bottom line.

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