What is dynamic discounting?

Dynamic discounting is a form of early payment discount, offering great benefits to buyer and seller alike. Continue reading to learn more!

Sabrina Maly avatar
Written by Sabrina Maly
Updated over a week ago

Dynamic discount is a form of early payment discount that suppliers can grant their buyers. It allows your customers to settle the invoice any time between invoice approval and maturity date. The earlier the payment, the greater the discount.

Static vs. dynamic discounts

Static discount

When offering a static discount, there is only one discount level. It does not take into account on which day within the payment period a customer settles the invoice.

For example, the identical discount percentage is given on day 1 and day 9, provided the payment is made within the given payment period (e.g. 2% discount for payment within 10 days).

Hence, there is only little flexibility, as such discounts are usually specified in the terms of delivery, which are not adjusted on a regular basis.

Dynamic discounting

The dynamic discount is offered on an invoice basis and the amount can be defined as desired and is calculated to the day, i.e. dynamically.

For example, a discount of 2% for a payment period of 31 days is calculated as follows:
- Payment day 1: 2% discount
- Payment day 16: 1% discount
- Payment day 28: 0.2% discount

Therefore, dynamic discounting is very flexible, as different discount levels and different payment terms can be offered on an invoice basis, or a discount can be waived altogether - you have the full flexibility, depending on your liquidity needs.

Who benefits from dynamic discounting?

While buyers can maximize their savings from early payment discounts, also the company offering the discount benefits from advantages:

  • Increase in liquidity, as early payment is rewarded (and you get paid faster)

  • Improvement of the customers’ payment morale

  • Higher customer loyalty

Would you like to offer dynamic discounting to your customers? Learn how to offer dynamic discounts with amnis!

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