The Procurement Glossary » Dynamic Discounting

Dynamic Discounting

Finance & Payments

Definition

A flexible early-payment scheme where the discount varies with how early the buyer pays, agreed on a sliding scale.

Explanation

Unlike a fixed 2/10 term, dynamic discounting offers a discount that shrinks each day toward the due date, letting buyers deploy surplus cash for guaranteed returns and suppliers get paid faster on demand. It is usually run on a platform.

Example

The buyer pays a supplier 18 days early and earns a pro-rated 1.2% discount via the dynamic-discounting portal.

Related terms

• Early Payment Discount — A discount a supplier offers for paying an invoice ahead of its due date, such as '2/10 net 30'.
• Supply Chain Finance (SCF) — Financing arrangements, often bank-backed, that let suppliers get paid early while the buyer pays on normal terms.
• Working Capital — The money tied up in day-to-day operations — broadly current assets (inventory, receivables) minus current liabilities (payables).
• Cash Flow — The movement of money into and out of a business over time.

Frequently Asked Questions

What is Dynamic Discounting?

A flexible early-payment scheme where the discount varies with how early the buyer pays, agreed on a sliding scale. Unlike a fixed 2/10 term, dynamic discounting offers a discount that shrinks each day toward the due date, letting buyers deploy surplus cash for guaranteed returns and suppliers get paid faster on demand. It is usually run on a platform.

Can you give an example of Dynamic Discounting?

The buyer pays a supplier 18 days early and earns a pro-rated 1.2% discount via the dynamic-discounting portal.

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