Dynamic discounting allows a buyer to pay an approved invoice early in exchange for a discount that changes with the payment date. The buyer normally uses its own cash, and the discount decreases as the invoice approaches its contractual due date.
How is Dynamic Discounting applied?
The buyer offers suppliers early payment from its own cash in exchange for a discount that changes with the payment date. An invoice paid sooner usually receives a larger discount than one paid closer to maturity. The program therefore needs an approved invoice, a clear discount formula, a supplier election and a record connecting the reduced payment to the original payable.
What the file should show
Record invoice approval, discount curve, supplier acceptance, revised payment date, paid amount and accounting treatment.
What does Dynamic Discounting not establish?
The buyer needs available cash, and suppliers need a genuinely optional choice. Aggressive discounting can weaken supplier economics.
