The Ultimate Cash Devise for E-invoicing

Dynamic Discounting or Early Payment can be the ultimate cash management device when using E-invoicing. As described in Wikipedia, cash discount reduction is “a price given by the creditor to the debitor is known as cash discount. This discount is intended to speed payment and thereby provide liquidity to the firm. They are sometimes used as a promotional device.”

An example of a discount is as follows 2/10 net 30 – this means the buyer must pay within 30 days of the invoice date, but will receive a 2% discount if they pay within 10 days of the invoice date.
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6 Compelling Reasons for Easy Pay

1. Better Discounts – appropriate costs are determined for early payment which coordinates with supplier’s requirements. Supplier agrees to the discount and can look forward to a payment that meets their schedule.

2. Guesswork is Eliminated - a scheduled payment is submitted in a timely manner. The date the payment will be made is selected and carried out.

3. Stronger business relationships Established - buyer and supplier are able to work together while improving capacity for future affiliations.

4. Improves Equity - in the above example return on capital is 36%.

5. Reduces the cost of Doing Business – for suppliers credit is either difficult to secure or expensive. By leveraging the power and flexibility of discounting, they can create an option that reduces prices, reduces the cost of borrowing and ultimately reduces the cost of doing business.

6. Cuts out the Middleman Costs – by dealing directly with suppliers allows a discount with no middleman involved.

Recently one of the World’s Largest Restaurants was asked to give their feedback on how well they were able to incorporate Early Pay into there Electronic Invoicing system. Included are some of the questions and answers.

Dynamic discounting: How has it helped your company to increase their equity?

“Dynamic discounting has allowed us to capture early payment opportunities for which we were unable to realize previously. Our goal is to take advantage of every opportunity possible. Yet there are times when we simply can’t obtain approval in time. The ability to capture a sloped portion of the discount has helped us to realize those extra opportunities and maximize the discounts earned revenue.”

How has dynamic discounting helped your company to better manage cash expectations?

“Because of the nature of our business (cash/credit card), available cash to take advantage of discount opportunities hasn’t really been an issue for us. So I can’t say there was a huge win in managing cash expectations. Where we’ve seen the win is the hundreds of thousands of dollars we recognize annually on the discount program we have implemented.”