What overall benefits does SAP Ariba Discount Management provide?
The solution offers a wide range of benefits to you and your suppliers, including the following:
- Strengthen your financial supply chain: Mitigate risk and support business continuity in your supply chain by strengthening suppliers’ ability to manage liquidity needs.
- Enhance your cash flow and working capital position: You can expect approximately $40 million of increased free cash flow for every $1 billion of spend extended 15 days.
- Capture early payment discounts at any point to invoice maturity date: Automate the early payment terms process to reduce missed discounts and capture additional savings from supplier discounts on all spend per supplier or an invoice-by-invoice basis.
- Increase cash returns: SAP Ariba-led early payment programs enjoy, on average, APRs between 24% and 36%, significantly outperforming most internal investment hurdle rates or returns on short-term cash.
- Give suppliers greater transparency and access to capital: Through Ariba Network, suppliers gain full visibility into when they’ll get paid, reducing the volume of inquiries to your accounts payable department.
- Fund business objectives through early payment program: Cash flow and/or income generated can be put to work to build new plants or stores, increase R&D spending, enter new markets, conduct mergers and acquisitions, pay down debt, or issue dividends.
- Accelerate cash flow: Suppliers can accelerate payments with buyers on Ariba Network based upon their cash flow needs.
- Reduce days sales outstanding (DSO): By expediting conversion of receivables to cash, suppliers can reduce DSO and free up working capital for other needs.
- Control payment timing: Suppliers can request automatic early payment on all invoices upon full approval to pay, or on an individual invoice- by-invoice basis as cash flow needs dictate.
- Gain payment visibility: Suppliers can use Ariba Network to see the details of their scheduled payments along with line-item rich remittance information, closing the loop between invoice and payment.
Does a supplier need to accept an early payment on all invoices?
No, suppliers can accept early payment on an invoice-by-invoice basis. This option is called the buyer-initiated early-payment option since you, the buyer, are offering a certain rate at which the invoice discount is calculated.