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eProcurement & Procure-to-Pay Resources

How to Successfully Optimize Supply Chain Finance: Part 1

Posted by Jack Mulloy on March 10, 2016 at 2:07 PM

Supply_Chain_Finance.jpgI’ve spent 20+ years in the enterprise procurement space, so I’ve encountered all types of spend management initiatives that span from spend analytics, strategic sourcing, category management, contract lifecycle management, eProcurement, accounts payable (AP) automation, and supply chain finance, among others.

Of course, a business case or ROI model surrounds nearly all spend management related initiatives and justifies the expenditure for the project. Some spend management business cases are easier to build and defend than others.

For example, I would argue building a compelling business case to launch a contract lifecycle management project is more challenging than a business case for a supply chain finance or dynamic discounting initiative.  

Why is dynamic discounting an easier ‘sell’ today than contract management?

Dynamic discounting is a relatively new tool within the arsenal of corporate treasury departments.  Recently enabled via B2B eCommerce automation, dynamic discounting allows corporate treasury departments to pay suppliers early, in exchange for a discount on the invoice.

Dynamic discounting is a ‘shiny new toy.’  It’s sexy. Dynamic discounting provides the treasury team with an alternative to the common, boring and overdone practice of further managing cash through extension of corporate payment terms. Most payment terms for most BuyerQuest clients are 60 days to 120 days, so I’m glad to see that corporate treasury departments are finding more creative ways to work with suppliers!

While dynamic discounting is sexy and fun, please note that there are numerous prerequisites that need completion prior to experiencing dynamic discounting bliss. Too often, I see companies get excited about the benefits of supply chain finance and dynamic discounting without recognizing the need to establish the building blocks of success.

What are those building blocks? In part 2 of this series, I’ll layout a few of the key ingredients to dynamic discounting success.

Stay tuned for the next post in this series and subscribe to the blog today!

 

Topics: Next Gen eProcurement

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