In business, everyone wants their money.
Companies that are part of a supply chain are no different. Buyers want to hang on to their money and sellers want to get paid as soon as possible. Competing interests lead to conflicts that can threaten the health and resiliency of the supply chain.
But there are solutions; one being dynamic discounting.
Dynamic discounting is an early-payment solution in which the buyer pays the seller before the agreed terms in exchange for an invoice discount. Unlike supply chain finance programs, which use third-party funding sources, dynamic discounting allows buyers to draw from their own balance sheet to pay the seller. It is a good choice for buyers who have liquidity on hand and prioritize cost savings while still receiving a working capital benefit.
The discount is dynamic because it decreases as the invoice comes closer to maturity on the original terms. For example, if a seller ships goods to a buyer and the original payment terms are 30 days, an invoice paid at day 10 would have a higher discount percentage (that is, the seller would get less money) than an invoice paid at 20 days. If paid at the originally agreed-upon 30 days, the buyer would pay the full amount with no discount.
With dynamic discounting, both sides of the supply chain equation benefit:
LSQ supports dynamic discounting through its LSQ FastTrack® working capital platform, making it easy for buyers and sellers to set up and manage not only dynamic discounting, but supply chain finance and accounts receivables financing also.