# Dynamic Discounting and the New Cash Management Imperative Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2018-01-05 Category: FINANCE Category URL: https://financedigest.com/category/finance Meta Title: Unlocking Hidden Value: Transforming AP Functions with Meta Description: Discover how dynamic discounting can transform Accounts Payable processes, generating significant revenue streams and turning finance departments into profit URL: https://financedigest.com/dynamic-discounting-and-the-new-cash-management-imperativehtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/fd050118-7-1-1736843103801-compressed.jpg) By **Nilay Banker,** founder and CEO **,** [**Inspyrus**](http://www.inspyrus.com) Current low interest rates are forcing CFOs and enterprise finance departments to work harder and seek more innovative ways to drive greater returns to satisfy working capital needs. This new cash management imperative is ushering in new disruptive approaches to transform Accounts Payable (AP) functions from cost centers to profit centers by unlocking hidden value, unleashing new and significant revenue streams. Today, technology is revolutionizing the procure-to-pay process, providing the requisite velocity and transparency to support [dynamic discounting](http://www.taulia.com/products/dynamic-discounting) – where suppliers proactively offer early payment discounts on approved invoices awaiting payment. While dynamic discounting has been in existence for several years, today it’s fast becoming one of the key tools of today’s new breed of innovative CFOs who are discarding the traditional practice of holding onto cash and delaying payments, which has proven to deliver inadequate returns in today’s fast-moving and demanding economy. Leading organizations are leveraging dynamic discounting to forge ahead with disruptive approaches that make early-pay discounts a real source of cash — capturing up to 2% of corporate spend directly back the bottom line and optimizing cash management in real-time. While dynamic discounting can provide significant [competitive advantage](https://www.financedigest.com/how-automation-gives-fs-leaders-a-competitive-advantage.html "How automation gives FS leaders a competitive advantage"), unfortunately it remains out of reach for too many organizations today. Only 17% of the nearly 200 AP and finance executives, leaders, and professionals surveyed by Ardent Partners for its The State of ePayables 2017: The Convergence of Cash, Suppliers, and Intelligence report currently utilize dynamic discounting as an ePayables solution. Despite enormous opportunities for savings, there are many reasons why dynamic discounting remains elusive to many organizations. Unfortunately, for companies with manual AP processes, long invoice cycle times and frequent [late](https://www.financedigest.com/how-big-is-the-late-payments-crisis-and-who-will-break-the-deadlock.html "How big is the late payments crisis and who will break the deadlock?") payments make the prospect of capturing early payment discounts a “moon shot.” [Innovative organizations](https://www.financedigest.com/the-artificial-organs-market-to-show-an-inclination-towards-digitized-innovation.html "The Artificial Organs Market to show an inclination towards digitized innovation") are recognizing the need to streamline procure-to-pay processes so they can seize these opportunities, and leapfrog Laggards to land in the Leaders category. Arming the enterprise with the ability for suppliers to dynamically request early-pay discounts fundamentally changes the game, providing a win-win for both sides of the Procure-to-Pay [value chain](https://www.financedigest.com/gonorrhea-therapeutics-market-value-share-supply-demand-share-and-value-chain-2021-2031.html "Gonorrhea Therapeutics Market Value Share, Supply Demand, share and Value Chain 2021-2031") (fostering business enhancing relationships). It [delivers the fastest payments](https://www.financedigest.com/will-central-bank-digital-currencies-deliver-a-more-democratic-payment-industry.html "Will Central Bank Digital Currencies deliver a more democratic payment industry?") to suppliers, while maximizing discount returns for vendors — easily exceeding traditional (slow time-to-value) investment alternatives. Of course to maximize the potential of this paradigm shift, dynamic discounting [needs to be coupled with next-gen invoice automation to ensure companies](https://www.financedigest.com/why-companies-need-to-rethink-retirement-tips-for-ensuring-a-happy-life-in-later-years.html "Why companies need to rethink retirement – Tips for ensuring a happy life in later years") capture every possible discount available. It’s this powerful combination that delivers the force multiplier necessary to [turn Finance departments into profit](https://www.financedigest.com/uber-rival-bolt-seeks-to-turn-profitable-next-year-ipo-in-2025.html "Uber rival Bolt seeks to turn profitable next year, IPO in 2025") centers. Once the issue invoice automation is addressed, the other significant roadblock to fully capturing available discounts is supplier participation. To maximize your discount capture, supplier adoption is key. However, oftentimes organizations take all-or-nothing approach when likely a better option is a phased approach to onboarding suppliers. To this end, it’s beneficial to profile suppliers to determine their readiness and capabilities to engage in dynamic discounting programs. You’ll also want to consider the strength and significance of your supplier relationships, looking at [factors such as transaction volume and spending and cash-flow challenges](https://www.financedigest.com/extracorporeal-co2-removal-market-in-depth-analysis-by-trends-opportunities-drivers-challenges-and-growth-factors-by-2026.html "Extracorporeal CO2 Removal Market: In-Depth Analysis by Trends, Opportunities, Drivers, Challenges and Growth Factors by 2026"). From there you’ll have a solid basis to prioritize suppliers so you can select the [top 10 to 15 percent of suppliers where a dynamic](https://www.financedigest.com/mycology-immunoassays-testing-market-growth-share-industry-dynamics-top-trends-and-regional-analysis-forecast-to-2027.html "Mycology Immunoassays Testing Market Growth Share, Industry Dynamics, Top Trends and Regional Analysis Forecast to 2027") discounting will drive solid returns. Once this initial effort is completed and initial wins are demonstrated, the organization can then look to expand the program to encompass a broader group of suppliers. As we look to the foreseeable future, all signs indicate [finance leaders will continue to need to look harder for returns and think more strategically about cash management](https://www.financedigest.com/how-application-management-can-help-tackle-the-finance-industrys-carbon-emissions.html "How application management can help tackle the finance industry’s carbon emissions"). However, they need not look far – the secret is in [unlocking the value](https://www.financedigest.com/how-innovations-in-edge-computing-can-unlock-value-for-global-organisations.html "How innovations in edge computing can unlock value for global organisations") of their payables through dynamic discounting. _Nilay Banker is founder and CEO of_ [_Inspyrus,_](http://www.inspyrus.com) _a Fintech Software-as-a-Service (SaaS) company that specializes in transforming Accounts Payable (AP) and finance operations into profit centers. He is a Stanford Computer Scientist with over 23 years of experience with cutting-edge technologies and successfully delivering [business software](https://www.financedigest.com/how-to-choose-the-right-software-architecture-for-your-business.html "How to choose the right software architecture for your business") products for Fortune 500 companies. Previously, as director of product development—Oracle Fusion Middleware and WebCenter, Banker was instrumental in [developing strategies](https://www.financedigest.com/closing-the-door-before-the-horse-bolts-developing-a-proactive-network-detection-and-response-ndr-strategy.html "Closing the door before the horse bolts: Developing a proactive network detection and response (NDR) strategy ") and roadmaps for several products in addition to taking these products to market._ --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---