It’s not always financially smart to jump on every discount offered by suppliers, but does your finance staff understand that?
Companies usually embrace one of two schools of thought on prompt-pay discounts:
- Ignore them. They pay on their schedule, regardless of the incentives their suppliers offer.
- Take them. If there’s a discount at stake, they’ll make it theirs, even if they get in just at the deadline … or maybe even a day or two after it.
Perhaps a more moderate view would be best.
Approaching discounts on a vendor-by-vendor basis and even an invoice-by-invoice basis can help Accounts Payable staffers be confident it’s economically wise for your company to take the break.
The factors they should be considering:
- the discount rate offered by the vendor
- the total number of days in the payment period, and
- the number of days left to accept a discount from the vendor.
(Of course, the current interest rate should be taken into account, too.)
A tool to ease the process
Of course, they’re numbers people, so your Finance staffers should be able to do this pretty readily. But the easier your company makes it for them, the more likely they’ll be to think strategically when it comes to your company’s payments.
The Financial Management Service Department of the Treasury has come up with an online tool to help its employees do this. If your company is serious about maximizing supplier discounts, it may be worth adapting for your own organization. You can check it out at: http://www.fms.treas.gov/prompt/discount.html.