All 22 Vendor Management questions
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Accounts Payable & Receivable › Vendor Management

What is dynamic discounting and how does it differ from static early-payment discounts?

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Answer

Static discounts are fixed terms like 2/10 Net 30. Dynamic discounting offers a sliding discount that shrinks the closer payment is to the due date, often via a portal, letting buyers deploy surplus cash for a return and suppliers choose when to accelerate payment. It's flexible and demand-driven rather than a single fixed rate.
Dynamic: 2% if paid day 5, ~1.3% if paid day 15, 0% at day 30.
Buyer earns a return on early cash; supplier picks the trade-off.
Real-world example With idle cash, treasury funds early payments through a dynamic discounting portal, earning better returns than its bank deposits.

Common follow-ups: How is the discount rate calculated over time? | When is dynamic discounting attractive to treasury?

Payment Runs Credit Control Vendor Management
All 22 Vendor Management questions