What is dynamic discounting in supply chain finance?

Dynamic discounting is a solution that enhances a buyer’s profitability by reducing its Cost of Goods Sold (COGS). Dynamic discounting gives the buyer’s vendors the flexibility to choose when they would like to get paid in exchange for a reduced price on the goods and/or services purchased.

Does dynamic discounting improve the margin?

By taking advantage of a dynamic discounting program, buyers can reduce costs by generating a bigger discount, ultimately helping grow profit and EBITDA margins.

What is dynamic discounting in Ariba?

In simple terms, the Ariba Invoice and Dynamic Discounting solution relies on suppliers using the Ariba Network to submit invoices via the Web, gain visibility on the customer’s payment status, and then apply discounts for early payment.

How does PrimeRevenue work?

PrimeRevenue provides a cloud-enabled platform that creates a digital ecosystem between buyers, suppliers and funders, enabling both the exchange of information about receivables and the funds flow to pay invoices. Suppliers also have the option to trade all, some or none of their approved invoices at any given time.

How does reverse factoring work?

How Does Reverse Factoring Work? The supplier sends invoices to the buyer. The buyer approves the invoices and an ERP integration uploads the data (this includes payables and applicable payment offsets) to SCiSupplier. The supplier accesses SCiSupplier online anytime to see all approved invoices.

How does supply chain finance work?

Supply chain finance is a set of tech-based business and financing processes that lower costs and improve efficiency for the parties involved in a transaction. Supply chain finance works best when the buyer has a better credit rating than the seller and can thus access capital at a lower cost.

What are the benefits of dynamic discounting solutions for a buyer?

Benefits for buyers By offering dynamic discounting, buyers are effectively investing their own cash in order to capture discounts – and these translate into risk-free returns which are often greater than the returns offered by traditional investment. Achieve cost savings.

What is a discount management?

We refer to this as ‘counter discount management’, i.e. having salespeople clearly reporting why they give discounts, and then have managers oversee and approve discounts that deviate from what is considered normal.

Who initiates reverse factoring?

buyer
One questions to ask is: Why would a supplier agree to financing? It’s the buyer who initiated reverse factoring after all. The supplier doesn’t need financing. But if the supplier doesn’t agree, then the buyer is out of luck for the most part.

Who pays fee in reverse factoring?

supplier
The fee is paid by the supplier. The result is that the supplier can get paid faster and the ordering party has more time to pay the invoices. The ordering party then pays the invoices to the bank at a later date. There are benefits to all three parties involved in the agreement.

What is the dynamic component of discounting?

The “dynamic” component refers to the option to provide discounts based on the dates of payment to suppliers. In most cases, the earlier the payment is made, the greater the discount. Dynamic discounting enables buying organizations and their suppliers to initiate early-pay discounts on an invoice-by-invoice basis.

What is the difference between traditional and dynamic discounts?

It is different from traditional discounts – Dynamic discounts are calculated as a function of the time of payment. This eliminates the issues of static terms, such as 2\%, 15, Net 30, where the buyer is no longer entitled to a discount if the invoice approval takes more than 15 days.

How do I set discounting parameters?

With one option, you set your preferred discounting parameters once. Upon invoice approval, automation takes over to capture pre-determined discounts. Set always-on prorated discount terms that capture discounts on a sliding scale. Or use dynamic discounting, and capture discounts based on ad-hoc supplier cash flow needs.

How do you manage supplier discounting effectively?

Or use dynamic discounting, and capture discounts based on ad-hoc supplier cash flow needs. Eliminate slow and costly processes and accelerate the cash conversion cycle. Minimize supplier inquiry calls with automated notifications of discount offers and approvals.