In these precarious and uncertain times, companies have cash flow top of mind and are looking for innovative ways to save money.
In fact, 75% of companies said their top concern due to the coronavirus is the financial impact, per a recent PwC survey. Flexibility has become more important than ever, especially in your payment strategy. You may not want to pay vendors quite as early as usual but still save a little money via discounts.
That makes now a prime time to look to or increase your usage of dynamic discounting. Since dynamic discounting works on a sliding scale, you have that needed flexibility. The earlier A/P pays, the bigger the savings. But even if you pay closer to the due date, you can still capture a smaller discount.
Here are some essential steps from Direct Commerce to maintain a solid dynamic discounting program:
1. Negotiate with vendors
First, if certain vendors are already used to setting traditional discount terms with Purchasing and A/P, remind your staffers to actively encourage them to consider dynamic discounting.
Tip: Some dynamic discounting solutions providers will help your company with outreach efforts, like making calls and urging vendors to enhance their default terms. This is something CFOs may want to check up on or consider with future providers.
2. Provide a user-friendly experience
You know the easier something is to do, the higher others’ participation will be. Make sure your staff communicates to vendors just how simple your program can be (e.g., how they can modify terms based on when they want payment, the discount size they’re willing to give, which invoices they want to discount).
Your finance staff could go a step further by providing vendors with a short instructional video, a FAQ page or a dedicated point-of-contact staffer for all questions and concerns related to dynamic discounting.
3. Integrate it in your corporate culture
Of course, vendors aren’t the only ones you have to get on board. Employees approving invoices and submitting supporting documentation also must understand how it works. That way, they get items back to A/P at the optimal time.
While many people are still working remotely, your finance staff may want to shoot out a quick memo reminding these employees how crucial their role is, especially now. Virtual program training or short information sessions could help, too. (And those meetings can be held in person once employees are back in the office.)
4. Monitor your program’s success
What isn’t tracked can’t be improved. So, you’ll want to make sure A/P runs regular reports to track and analyze your dynamic discount capture. Then your company will be able to make smarter decisions and plans to maximize savings in the future.
5. Approach it in A/R, too
As mentioned, flexibility is key right now. Companies have to adapt and show their trading partners that they’re willing to adjust and accommodate.
So, dynamic discounting may be a topic you want to discuss with your own customers on the A/R side, as a way to incentivize them to keep paying your company. Along with ensuring you get paid on time, reaching out will show customers that your company values the relationship, which could increase their long-term loyalty.