Some accounts payable automation vendors offer dynamic discounting as part of their platform suite. Dynamic discounting is a collection of methods that gives the supplier the flexibility to collect payments from buyers earlier than the due date in exchange for a discount. The discount rate is typically a sliding-scale annual percentage rate (APR), which varies based on the payment date. Otherwise, the supplier can define discount tiers based on when the buyer chooses to pay. For example, if the first tier is a term of 3% 10 Net 30, it means that if the buyer pays the invoice by day 10, they can deduct 3% from the invoice price. Similarly, if the second tier is 4% 20 Net 30, it means that if the invoice is paid by day 20, the buyer can deduct 4%, and so on.
Unlike supply chain finance (which we’ll discuss in more detail later in this article), in dynamic discounting, the buyers finance the suppliers by enabling them to receive funds early on their terms: the suppliers choose the invoices they want to accelerate and how early they wish to be paid.
Some source-to-pay vendors, such as Taulia and Basware, among others, extend their trade finance options to include third-party funding solutions, commonly referred to as supply chain finance.