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early payment discounts

Taking Advantage of Early Payment Discounts

Many wholesale distributors are leaving money on the table by not taking advantage of early payment discounts. Despite being concerned about their bottom-line, processing invoices is extremely time-consuming and error prone. 

As a result, accounts payable departments struggle to receive those discounts. On average, it takes up to two minutes to manually process an invoice, creating a painful strain on AP specialists and vendor relationships. 

The good news is that through today’s modern automation technology, accounts payable departments can take advantage of these discounts, improving their bottom line.

An early payment discount is a favorable credit term offered to companies in exchange for expedient payment. For example, many suppliers will offer a 1-2% discount per month when payment is made within 10 days of receipt. 

Over the course of a year, the cost-savings can mean thousands of dollars in savings. How do distributors take advantage of early payment discounts? Through automated invoice processing.

Automating your invoice processing can have tremendous advantages in terms of efficient resource allocation. An automation system can reduce processing time by as much as 80 percent with significantly better accuracy than a human.

This reduction in time dramatically reduces the stress placed on accounts payable departments and makes it easier to take advantage of early payment discounts. In addition, it presents the opportunity for AP firms to negotiate more favorable terms with vendors, even if the relationship has been strained in the past. 

Prior to the advent of artificial intelligence and machine learning, many accounts payable departments relied on EDI software in hopes of receiving these discounts. Yet despite EDI’s popularity in accounting departments, many suppliers don’t have EDI implemented, and have no plans to do so due to the costs and training involved.   

As a result, AP departments are faced with a variety of both paper- and EDI-based formats, which create additional bottlenecks and more work.

Even if every vendor sends invoices via EDI, their accounts payable department will need to review and process invoices manually. An automated solution allows companies to bridge the gap between invoices received via EDI and non-EDI methods.

Case Study

A mid-sized distribution company struggled to optimize their invoice processing by converting vendors to EDI transmission. However, this proved largely ineffective due to implementation and cost issues. 

Through our Trapeze for Invoice Processing solution, the company increased the volume of invoices processed from 300 per day with three employees to 500 with one. Through automation, the company reduced its accounts payable costs and took advantage of early payment discounts from a variety of vendors. 

As industrial suppliers deal with greater financial strain due to rampant late invoice payments, distributors can utilize automation to stand out from the pack. Through automation, distributors can make 2019 the year of early payment discounts and better improve relationships with suppliers.

You can read more about how we helped this company automate their invoice processing by reading the case study here.

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