No CFO wants to pay more than they have to – but turns out, the vast majority are doing just that.
More than a third (35%) of your peers said they capture less than 20% of discounts offered. And more than 10% aren’t capturing any discounts, says research from the Institute of Finance and Management.
That’s a whole lot of cost savings opportunity left on the table.
Extra steps for extra green
Luckily, some of your finance peers have found various ways to maximize their discount capture.
Here are some top strategies you and your finance team can use to start saving more today:
1. Communicate your payment strategy. You and Treasury set a unified cash management strategy for the whole company. And you’ll want to make sure that A/P knows and understands that strategy at any given time (and especially as it changes over time) so it’s reflected in their approach to taking discounts.
If your payment strategy is clearly communicated, A/P will know when to take advantage of discounts, when to hold onto cash longer, etc.
2. Check bank services. You’ll want to make sure to stay up on all the different services your bank offers. With today’s technology, some banks can even pay invoices with the discount terms on A/P’s behalf, mentioned one expert at a recent A/P P2P conference.
It could be beneficial to assign a top staffer to organize regular communication with your bank and keep you abreast of new developments.
3. Link up with Purchasing. A great discount program requires great teamwork. Consider sitting down with your Chief Procurement Officer to see if Purchasing can:
- Address discounts during each vendor’s onboarding. Putting a discount plan in place right away means your company can start saving money immediately. Plus, it saves Purchasing and A/P from having to backtrack later to figure out if a deal can be struck.
- Meet regularly. Your company’s vendors will likely call Purchasing, not A/P, to discuss changes to the way they’re doing business that would warrant revisiting your discount plan (e.g., increasing volume). That’s why it’s crucial your team can get regular updates from Purchasing.
- Raise the bar. When it’s time to renew vendor contracts, ask Purchasing to consider “Can we negotiate different or better terms?” And let them know your team’s happy to be a part of that conversation.
4. Leave no room for uncertainty. Remind your staff: It’s crucial to clarify the details of each vendor’s discount terms and policies. To be sure you’re capturing every extra dollar you can, have them:
- Define when the clock starts. Are you going off the invoice date, when it’s received, etc.?
- Remember the “grace period.” If your A/P team just barely misses a discount deadline, they may want to try to put it through anyway. Two in three vendors will allow five to seven days past the set discount terms, experts say.
- Reach out. Call vendors if there’s no discount listed in the terms or on their invoices. You may be surprised how many are still open to the idea.