May 18th, 2010

Dynamic Discounting

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In my very unscientific research I have come to discover that Dynamic Discounting is all the rage, but that doesn’t exactly mean people are doing it.  During the “Changing Role of AP/AR” panel discussion at last Wednesday’s Masters Session a number of the panelists and and brave souls from the audience spoke very openly about how they are not really slaying this dragon… yet. 

When one panelist asked aloud if the room was engaging successfully in the practice only about 3 hands when up all the way…  there were one or two of those “half-up-but-not-really hands.”  I will not call anyone out but among the firms successfully using dynamic discounting were two large fortune 50 stalwarts.  Even they had to admit that they targeted vendors were of a select group and that procurement was still very much debating if they should negotiate longer terms and stay away from the early pay discounts.

Just thought I would shed a little light for those in the crowd that think they missed this train.  The conclusion:  People LOVE the idea of a successful dynamic discounting program and this topic has major buzz, but like most things… not many people can really sustain the practice and it remains in “when-I-have-time-to-get-around-to-it” limbo.

Please comment if you have plans to make this practice work internally or if you have input on the topic.  Would love to get more data on this.

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One Response to “Dynamic Discounting”

  1. Markus Ament says:

    I admit I am not exactly unbiased when it comes to Dynamic Discounting, but I try to be neutral.
    I agree that there is way more buzz and hype than there is current usage of Dynamic Discounting, but this is going to change.
    In my opinion, one of the reasons that Dynamic Discounting was not as successful in the last couple of years (and why it will be in the next 6 to 12 months) is technology. I think it was simply not possible for buyers (large or small) to offer Early Payments in an easy way. Vendor Portals are still not as widely used as they could be, and supplier networks just started to really take off in the last 2 years. But these 2 technologies are the actual foundation of Dynamic Discounting, and the places where a supplier opt for Early Payments.
    With the impressive growth of portals and networks, it will be possible for buyers to actually reach their suppliers without any additional boarding effort.
    In addition, I really think that networks and portals charging suppliers to access them (for supplier self services or invoice submit) did not really help promoting the Dynamic Discounting case.

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