In the final part of Making Sense of Dynamic Discounting, Taulia’s Chief Product Officer and co-founder Maex Ament joins Susie West, CEO of sharedserviceslink in a talk about dynamic discounting and eInvoicing and their role in the corporate world.
Gaining traction among corporates was the concept of dynamic discounting and investing in the supply chain by paying suppliers early in exchange for a discount, and the credit crisis of 2008 emphasized the need for alternative investment options. Interest rates were at an all-time low and suppliers had little or no access cash. Thus, dynamic discounting was the perfect solution for both suppliers and buyers: suppliers had access to cash, and buyers were able to set early payment discount rates higher than the interest they would earn on their idle cash.
But what if interest rates go up again?
If interest rates go up, Maex Ament explains that offering early payments to suppliers is still attractive for both suppliers and buyers. Even in an extreme situation where the interest rate on a savings account rises from 1% to 5%, taking advantage of a 12% or higher APR for early payment discounts is still a more viable option for buyers.
In addition to adding millions to the bottom line, dynamic discounting is a mean to keep many large corporations’ suppliers in business. Before having early payment options, suppliers either had to 1) wait weeks for payment and have limited access to cash, or 2) resort to expensive short-term loans or factoring.
Listen to the full interview here:
Making Sense of Dynamic Discounting Series:Part 3