What is Dynamic Discounting and Why is it a Big Deal?
Trading early payment for a discount isn’t a new idea. AP departments have been using the 2/10 net 30 method for a very long time. When implemented properly, the combination of discounts for early payment is a great outcome for both buyer and supplier.
Buyers get a guaranteed return on investment, and often one that is better than they could achieve by investing that same money elsewhere–especially considering the short investment timeline. On the other side of the transaction, suppliers also generate value by driving down DSO and getting faster access to capital.
So if discounting for early payments is such a tried and true method, what makes dynamic discounting a big deal?
Because dynamic discounting gives you dynamic tools that make the discounting process even more efficient and effective.
For the first time, Paystand is offering accounts receivables teams the opportunity to take control of the discounting process–rather than waiting for payers to take initiative. Rather than offering a static discount for the first ten days, AP teams will be able to implement a progressive discounting system, secured and verified via blockchain smart contracts. With dynamic discounting, you can control exactly how much of a discount you offer to each payer and have that discount automatically reduce by your chosen increments. Set your discounts to reduce at a steady rate, quickly after day five, or whatever other sequence helps optimize the financial situation of your company.
Why should you care?
In today’s economic environment, access to capital is even more important than ever. As the Fed continues to raise interest rates at a historic clip, access to money is only going to get more expensive for the foreseeable future–at least the kind that comes from a bank. Fortunately, there are other ways to keep the flow of cheap money flowing for your business. That includes using every tool at your disposal to make sure that your buyers are prioritizing your business’ invoices, and paying them in full and in a timely manner.
Dynamic discounting gives you a new, highly customizable, highly automated tool that helps gain an edge when you need it. Read our latest press release on Paystand’s launch of the world’s first AR-centric Dynamic Discounting solution, powered by Blockchain Smart Contracts.