How to Choose a Dynamic Discounting Solution

Wednesday, March 19, 2014

A dynamic discounting solution gives sellers the ability to encourage early invoice payments from buyers based on a sliding discount scale, depending on how early the buyer pays the invoice. Typically, sellers offer buyers discounts for paying invoices within a 10-day window. With dynamic discounting, sellers can extend the discount period beyond the traditional 10-day timeframe. Sellers can discount their approved receivables at any time leading up to the invoice due date.

Advantages of Using a Dynamic Discounting Solution

Dynamic discounting benefits both sellers and buyers of commercial goods. Although the vast majority of AP professionals view discount capture as an important priority, only one-fourth of companies can capture discounts effectively, according to a recent study by Direct Insite and PayStream Advisors. This translates into lost profits because companies are paying more to vendors than they would if they paid within the discount timeframe.

This problem stems from bulky manual invoicing processes that slow down invoice approval and payments cycles in AP departments. Dynamic discounting benefits buyers by improving working capital requirements and automating invoicing processes to ensure organizations are taking advantage of available discounts. On the supplier side, dynamic discounting improves control over cash flow and provides access to capital at more competitive rates.

What to Look for in a Dynamic Discounting Solution

Selecting a dynamic discounting solution is an important decision for AP professionals and businesses. While you should carefully assess the various solutions based on your unique business requirements, there are several key indicators of a strong solution provider:

  • Compliance and Security: Payment security and compliance are an essential component to an effective dynamic discount product. Be sure to enlist a solution that is Payment Card Industry (PCI) compliant to protect cardholder data and prevent payment fraud.
  • Comprehensive Feature Set: A strong solution will come equipped with an array of useful features and functionality to streamline the invoicing discount process for both suppliers and buyers. This includes: discount configuration, which gives companies flexibility to change discount schemes based on a variety of scenarios, whether it’s offering discounts to an individual supplier or a group of suppliers based on region; discount control enables buyers to choose which invoices are available for discounting depending on working capital needs and timeframe; and discount capture where suppliers can review and approve applicable invoice discounts and associated fees.
  • Easy-to-Use Technology: Companies that leverage dynamic discounting capabilities should pick a solution with a simple user interface. The solution should provide visibility into discount terms and rates for every participating party, including the ability to alter rates and terms at any time leading up to the invoice due date.
  • Analytics and Reporting Tools: Increased visibility into financial history and trends is an advantage of using an ePayments and invoicing solution for dynamic discounting. It’s important to find a solution that offers easy-to-use reporting tools that are updated in real-time. This will help you make more sound business decisions grounded in hard data and improve your organization’s overall financial health.

Direct Insite’s PAYBOX® platform is a comprehensive dynamic discounting solution that supports both buyers and sellers. With comprehensive reporting tools, a user-friendly interface and robust features, Direct Insite’s PAYBOX® streamlines dynamic discounting processes and automates AP and AR processes. For more information or to set up a private consultation, give us a call at (631) 873-2909.