When COVID fears hit back in March 2020, companies around the world scrambled for ways to preserve capital and protect their businesses. While today’s economic picture is certainly improving, the pandemic-driven need for access to cash and liquidity remains a top priority.
One of the best tools to optimize working capital management is a well-organized and strategic early payment program based on dynamic discounting technology. With the right program in place, your company can earn impressive risk-free returns and generate significant cost savings – all while supporting supply chain resiliency.
Dynamic discounting provides suppliers an alternative source of funds that does not add debt to their balance sheet. And the SAP® Ariba® Discount Management solution makes it simple by integrating dynamic discounting directly into the existing procure-to-pay process. Once an invoice is approved and scheduled to pay, a supplier can choose whether to get paid early in exchange for a cash discount, enabling real-time cash flow management. This offers major benefits for both you as a buyer and your suppliers:
Benefits for you
- Increase cost savings: Typical well-adopted early payment programs can generate US$1 million to $3 million in annual savings.
- Put your cash to work: By using your cash to support early payments to suppliers, you can realize returns (averaging 24% over SAP Business Network) greater than what could be found in investments with similar risk profiles.
- Support the resiliency of your supply chain: According to a recent survey from SAP, approximately 50% of SAP Business Network suppliers are looking for affordable, non-debt sources of working capital to fund business operations. Providing a helping hand during difficult times can boost your brand value to suppliers, customers, and the broader community.
- Fund core business objectives: Use savings or free cash flow generated through the program to reinvest in a business, increase research and development, explore merger and acquisition options, enter new markets, or pay down debt.
Benefits for your suppliers
- Manage working capital in real time: Suppliers can accept early payment easily and efficiently over SAP Business Network to help reduce their days sales outstanding and improve their working capital positions.
- Access a non-debt source of liquidity: The solution can help suppliers avoid the debt and administrative burden they might incur through government or other short-term sources of financing.
- Gain greater transparency and efficiency: Suppliers have full visibility into when they will be paid, which helps them forecast and plan.
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