Dynamic discounting, e-invoicing and e-procurement are often thought to be matters for just Accounts Payable (AP) and procurement. This view means that many companies are losing out on opportunities to improve their yield on excess cash, as there are a number of procurement and supplier management investment strategies that can be realized with treasury collaboration.
According to Treasury & Risks’s “Best Practices in Managing Excess Cash” that examines the recent PwC survey on treasurers and managing excess cash, most companies’ primary goals are to preserve principal and maintain liquidity, followed by maximizing returns… a-distant third. And despite being third, companies seem to be universally dissatisfied with the returns they are receiving.
Why? Simply put, they do not have the right processes and systems in place to actively manage their portfolio and while a number of companies may want new investment strategies, for many, change has been slow.
In today’s world of ePayable solutions, there is no reason why organizations should rely on antiquated systems and methods that are prone to risks and errors. Dynamic discounting through automated systems can improve overall AP efficiency.
For those treasurers who are looking for new, efficient ways to invest excess cash, user-friendly solutions and programs like dynamic discounting present a number of real cash saving opportunities that extend to both the buyer and supplier. And from the treasurer’s point of view, they can maximize returns on excess cash earned from discounts.
Forward-thinking companies can no longer ignore the financial gains that can be realized through dynamic discounting--we’re talking millions! By focusing on early payment discounts, cash-strapped suppliers can bolster their cash flow while showing an improvement in Days Sales Outstanding. Buyers, in turn, can add to their bottom line through discounts earned by paying their suppliers early. And looking toward the future, treasury, AP and procurement executives need to come together and align their goals.