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AP Levels Up with Dynamic Discounting

February 07, 2019

According to a recent study from Levvel Research, finance executives at companies that have embraced AP automation are optimizing working capital by increasingly taking advantage of dynamic discounting. As a result, they are able to manage cash flow while taking advantage of supplier early payment discounts in a way that balances cash and cost savings. According to the study, these companies typically recoup 2% of their total annual spend.

Traditionally, dynamic discounting was a strategy reserved for large, best-in-class finance organizations. Today, however, the wide availability of solutions to automate the handling of vendor invoices, extraction of transaction data, coding/approval routing and ERP transaction entry has allowed firms of all sizes to achieve the same level of process control. With shorter internal payment processing cycle times and less time/effort spent by AP team members on administrative tasks, they have been able to focus instead on optimizing financial performance.

“The result we’re seeing is that AP team members are able to step up their game and apply their diligence and attention to detail to the financial health of the organization,” said Jeff Moore, CSO/Partner at Artsyl Technologies.

“It’s just one part of the evolution that our customers go through as they look at AP as a strategic ally, rather than a cost center,” Moore added.

Dynamic discounting is an approach that allows companies to actively monitor and manage cash flow, requesting early-pay discounts and expediting discounted invoices only when they have achieved target KPIs around working capital. Historically, companies relying in manual AP processes struggled with internal cycle times around invoice processing to consistently take advantage of early pay discounts, much less achieve visibility to timely data to balance discounts against cash flow.

For companies that have chosen to automate accounts payable by intelligently routing inbound invoices and extracting data automatically, the biggest benefit in terms of process control and cash flow is timely access to G/L accruals. With better visibility comes a greater ability to make decisions to optimize working capital and be smart and selective about capturing discounts.

From a broader perspective, companies that take advantage of early pay discounts in general remains in the minority, with only 19% of companies indicating that they employ a strategy to do so. This is a direct reflection of an inability to do so because of manual process inefficiencies. The net result for companies continuing to accept the status quo is a widening gap between the “haves” and “Have nots” when it comes to process automation and competitive advantage.

To learn more about how your company can lower costs, boost productivity and achieve greater process control, contact your Artsy account executive at sales@artsyltech.com.

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