Forget about scrimping. How about first claiming every dollar that’s rightfully yours?
Many organizations let hundreds and even thousands of dollars slip away each month. The culprit: missed prompt-pay discounts. If your cash flow allows you to take advantage, you’ll certainly want to.
Here’s an escalation strategy to ensure you grab what’s yours for the taking.
1. Start subtle
Often the reason discounts get missed is a simple one: Nobody realized there was money at stake! Some invoices sit on approvers’ desks, they get pushed to the bottom of A/P’s to-key pile, and by the time they’re ready — poof! — the discount window has closed.
But there are two subtle ways you can make sure certain invoices are higher priority. And both start in A/P.
First, have Accounts Payable note in their master vendor file invoices or vendors with a potential prompt-pay incentive.
But more important is the next step: Make sure other people in the company know time is of the essence.
Find a way to make discount invoices stand out.
Some companies stamp “discountable” invoices with either a priority stamp or one that says “Discount at Stake,” so approvers know to turn those around ASAP.
Others have A/P walk those VIP bills over to approvers personally — so they can wait while they’re approved for payment. This probably isn’t an option if you have a large number of possible discounts on the line.
It’s not a full-scale blitz. But with a small amount of effort you may be able to see some serious savings.
2. Ramp it up
Of course, you might need to light a bit more of a fire under other departments who drag their feet turning around invoices.
Chances are they don’t understand how much money is really slipping through the cracks. A 2% discount may not seem like much, especially to a non-financial person.
That’s why Finance may want to spell it out for people. Try pulling one check run’s worth of invoices and calculating the amount of discounts lost, in dollars and cents.
Putting that under people’s noses should open quite a few eyes.
Another option? Think about calculating the discount of specific invoices and highlight that when A/P sends the bills out for approval.
It should be tougher for people to ignore an invoice when the exact amount they stand to save your company is staring them in the face.
3. Hit ’em where it hurts
And if savings are still slipping through, you could take that a step further.
It’s not going to be popular, but if your organization is serious about discounts, you could charge departments back for those discount amounts.
At a time when people are already feeling their budgets squeezed, no one wants to lose even a single dollar. So you can bet that being charged back for a missed discount even once will ensure that group doesn’t miss another deadline again.
And once word spreads that you are willing to enforce such a get-tough policy, everyone’s diligence is bound to go up.