Cash is king. However, the chances are good that your business is passing up easy money, potentially millions of dollars, by not capturing as many early-payment discounts as it should.
Eighty-percent of the businesses surveyed by IOFM in 2016 receive invoices that offer early-payment discounts. In fact, 5 percent of those surveyed said that more than 25 percent of the invoices their business receives offer discounts for early-payment, while 3 percent of businesses say between 16 percent and 25 percent of the invoices they receive offer early-payment discounts.
Businesses that take advantage of just a discount term of 1/10 net 30 earn an annualized 18 percent return – a lot more than they can earn from a typical interest-bearing bank account.
Yet the majority of all businesses capture less than 21 percent of all early-payment discount offers, and 12 percent of businesses are unable to capture any early-payment discounts, IOFM’s 2016 AP Key Performance Indicators Study found. These results are more sobering when you consider that 79 percent of businesses say their suppliers offer payment terms of 30 days or more. Only 27 percent of businesses surveyed by IOFM capture more than 80 percent of early-payment discount offers.
When asked to list the reasons for late payments and lost discounts, 68 percent of businesses surveyed by PayStream Advisors cited “manual routing of invoices,” and 58 percent cited “lengthy approval cycles.” Incredibly, many businesses simply can’t see all of their available discounts.
Automated solutions such as NexusPayables address all of these issues:
- Faster invoice approval cycles open the door to more early-payment discount opportunities.
- Dashboards provide senior finance executives with visibility into outstanding invoices, potential discounts, and other transactional information required to effectively manage working capital.
- A portal facilitates easier collaboration between buyers and suppliers on discount offers.
With revenue growth hard to come by, your business cannot afford to keep passing up easy money in the form of early-payment discount offers. Contact Nexus to learn more.