How to Improve Discount Management

Discount management benefits both business buyers and suppliers. Buyers can capture discounts from suppliers for paying invoices in a timely manner. For example, buyers can typically receive a 2 percent discount on invoices if they pay within 10 days. This results in better rates of return for buyers and improved supplier relationships because the suppliers are paid on time and do not need to follow up with buyers to get their payments.

For suppliers, offering a discount for timely invoice receipt can increase cash flow, contribute to more predictable payments and shorter invoice cycles, and avoid profit loss from unearned discounts.

However, capturing discounts is easier said than done. In a recent study conducted by Direct Insite and PayStream Advisors, although 85 percent of accounts payable (AP) professionals cited consistent discount capture as an important organizational priority, only one-fourth of companies are able to capture discounts effectively. More than 27 percent of respondents reported missing at least 10 percent of available discounts. That equates to a significant revenue loss and hurts working capital management.

Improving Discount Management

The issue with ineffective discount management lies in traditional paper and manual invoicing processes that plague modern payables and collections departments within organizations. A reliance on paper-based invoices and manual data entry leaves room for human error, lacks oversight and slows down invoicing processing cycles—causing organizations to miss out on valuable discounts from suppliers.

To improve discount capturing and invoicing processes in organizations, companies must:

  • Embrace Automation: Invoicing automation technology reduces invoice processing time from 23 days down to five thanks to e-payment capabilities, workflow management and automatic invoice approval for invoices that meet a pre-defined criteria. It can also free up time for AP professionals and business executives to focus on core competencies and reduce instances of manual data entry errors with automated invoice scan and capture.
  • Ensure Security and Compliance: With a Payment Card Industry (PCI) compliant solution such as Direct Insite’s PAYBOX® platform, companies can ensure payment information is protected against security breaches and fraud.
  • Track Discounts and Leverage Real-Time Insights: Companies should employ the support of a solid technology platform with comprehensive reporting tools and easy-to-understand analysis on discounts, cash flow and overall financial performance.

Using Technology to Transform Discount Management

Direct Insite’s PAYBOX® solution automates invoicing processes and empowers buyers to capture more discounts from suppliers. It also helps suppliers manage discounts, invoicing and customer relationships from a single portal. PAYBOX® supports the three major forms of discounts for business buyers and suppliers, including:

  • Pre-determined Discount Rates: With PAYBOX®, suppliers can deliver e-invoices through the portal. Buyers can easily access a full list of invoices, sort by discount rates and timeframe, and complete payments via check, credit card or the Automated Clearing House.
  • Early Payment Discount Options: Suppliers and buyers can submit and approve early payment terms to streamline invoice negotiation and payment.
  • Dynamic Requests and Renegotiation: PAYBOX® fully supports dynamic discounting by providing the flexibility to update discount schemes for a variety of scenarios and customers.

To find out more about how Direct Insite’s leading ePayments and invoicing solutions can transform AP processes in your organization, give us a call at (631) 873-2909 for a personalized consultation.

Working Capital Management