Dynamic discounting is a workable solution that gives buyers more flexibility to choose how and when to pay their suppliers in exchange for the best possible discount for the goods and services purchased.
What Is Cash Discounting?
Cash Discounting is an offer presented by sellers to encourage the buyer for clearing payments within a stipulated time period. It is also known as an early payment discount.
Businesses aiming to encourage regular payments may offer a cash discount to buyers. Many businesses invest a large amount of time and resources bargaining clients and tracking down payments. Cash Discounting gives customers an incentive to pay right away, which means less time and money are spent in the collection process. Timely payments also mean faster access to valuable cash flow, which makes it easier for the business to pay its own bills. Cash discounts may mean more money for the business overall as it can improve business cash flow and reduce bad debts, but they might unnecessarily cut into the seller’s profit margin.
How Cash Discounting Works In A Treasury?
The treasury of an enterprise has various business units under it and these units in turn deal with multiple vendors. In a typical invoice discounting ecosystem, each business unit forwards the discount percentage to the treasury. The treasury then may or may not approve the discount percentage. In cases where the enterprise has a fixed rate of discount, the vendor may or may not agree to the proposition owing to various factors. Hence, it can become a prolonged process to get a discount rate approved for a single invoice affecting the cash flows for businesses.
What is KredX Early?
KredX Early is an Early Payments solution based on dynamic discounting and serves as an alternative option to corporate treasuries to deploy surplus funds for profits at zero risks. The cloud-based platform utilizes cutting-edge patent-pending technology to maximise returns for corporates while helping their vendors secure early payment.
How Dynamic Discounting Works With KredX Early?
Dynamic discounting is a flexible solution that gives buyers the option to choose how and when to pay their suppliers in exchange for a lower price or discount for the goods and services purchased. The “dynamic” factor refers to providing discounts based on the dates of payment to suppliers.
The treasury of large enterprises has multiple business units with hundreds of vendors to deal with. Unlike sending a single invoice at a time for approval, the business uploads the invoices of all the vendors on the KredX Early dashboard. Therefore the treasury is able to view all the invoices on the dashboard eliminating business units in the process. The treasury then provides the vendor with a payment date against each invoice based on which, the vendor bids a discount rate against the invoice value.
Enabling the control to the treasury of enterprises to manage the vendor discounts increases the transparency in corporate governance and helps to address the liquidity to vendors.
With KredX Early Payment Technology, instead of getting the discount rate approved for every invoice, the treasury is now able to view all the invoices along with the discount rate against each invoice on the KredX Early dashboard.
How Does KredX Early Work?
Treasury uploads the invoice on the KredX Early dashboard and creates a bidding session against every invoice. The bidding session allows the vendor to submit a bid to the treasury. Once the treasury approves the bid against the uploaded invoices the funds are disbursed to the vendors
Benefits Of Bidding Process With KredX Early
- Enterprise gets the opportunity of price discovery per vendor
- Enterprise can vary the discount percentage depending on various factors
- Since the discount percentage may vary, the enterprise has the capacity to discount more invoices
- Bidding allows price discovery to the enterprise creating a healthy competition among vendors
The potentiality of our product lies in establishing the visibility for large corporates on their vendors and facilitating early payments to meet the high seasonal demand for vendors. For any further information, please reach out to us at info@kredxearly.com.
Also read: Dynamic Discounting: Bridging Profitability and Vendor Relationships
