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What is Dynamic Discounting
Dec 13, 2021
BSOS Blog
Supply Chain Finance

What is Dynamic Discounting?

Dynamic discounting is a solution that enables sellers to provide a discount on the invoice for buyers to get paid earlier, which means sellers have the option to request their buyer for a discount early payment. Simply speaking, the earlier the invoice is paid, the greater the discount the buyer receives. For example, if you have a 30-day net payment term, the seller can request a 5% discount if the buyer pays on Day - otherwise, the buyer can pay in full at 30 days

How does dynamic discounting work?

There are already several dynamic discounting solutions in the market, but the model should always include these steps.

  • Seller and buyer make the deal - buyer purchase goods or service from seller.
  • Seller supplied and received an account receivable.
  • Seller request for discount early payment to buyer
  • Buyer can accept or decline the request.

Benefits of dynamic discounting

Benefits for suppliers

  • Get paid at the right time: With dynamic discounting, you can easily leverage early payment for your seasonal cash need or any liquidity needs.
  • Improve cash forecasting: Suppliers can decide when to get paid, making it easier to forecast future cash flows and plan ahead.

Benefits for buyers

  • Pay early, pay less: Utilize excess cash to achieve accounting benefits for your company. With dynamic discounting, you can increase gross margin and reduce the cost of goods sold, then improve your P&L.
  • Build a resilient supply chain: Control your working capital easily to conquer black swan events through dynamic discounting solutions. Strengthen you and your suppliers' financial health.
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