SAP Dynamic Discount Manager
Obtain Greater Supplier Discounts
Optimize your working capital requirements through dynamic discounting. Discounting benefits buyers and suppliers alike and facilitates collaboration. Automation of the financial supply chain integrates interests of buyers, suppliers and financial institutions.
Source: PayStream Advisors – August 2007
The dynamic discount manager provides a buyer with a mechanism to create and manage an offer of discounted early payment to a supplier. Vendor invoices which have cleared for payment earlier than the agreed terms, can be offered for early payment to the vendor with a discount applied. The discount reduces over time, reaching zero when the due payment date approaches.
Individual discount schemes can be created for different suppliers. Your vendors can view these early payment offers online via the Vendor Portal. They can choose to accept one of the levels of early payment you are offering for each invoice by completing a check box and submitting the relevant items. The invoice records will then be collated for update in SAP.
The selected records should then be available for payment on the next payment run with the agreed discount deducted. If a vendor ignores the early payment offer, it will simply be paid at the agreed rate as per your original terms with the supplier.
Individual discount schemes can be created for different suppliers. Your vendors can view these early payment offers online via the Vendor Portal. They can choose to accept one of the levels of early payment you are offering for each invoice by completing a check box and submitting the relevant items. The invoice records will then be collated for update in SAP.
The selected records should then be available for payment on the next payment run with the agreed discount deducted. If a vendor ignores the early payment offer, it will simply be paid at the agreed rate as per your original terms with the supplier.
The benefits of leveraging dynamic discounts include:
Provides purchasing with a tool to leverage greater discounts from suppliers
Allows you to form closer relationships with suppliers
Pay suppliers ahead of time, yet gain benefits from doing it
Allow suppliers to choose what level of discount they are prepared to accept
A number of factors will affect the benefits you can acheive using dynamic discounting including: whether you having an electronic invoicing solution in place - if you lose valuable days whilst an invoice is in the mail, your ability to pay early diminishes. Additionally, if you pay your suppliers electronically they will be more inclined to accept your offer - a cheque that takes several days to arrive and then clear at the bank will not be such an atrractive proposition to them!
Read the Buyers Guide to Working Capital Solutions from PayStream Advisors.
