Supply Chain Finance and Dynamic Discounting

1. Supply Chain Finance & Dynamic Discounting Worried from economical conditions & lacks of cash flow in the market?

2. CASH • Almost every business in this world thinking of a long run wants to keep its suppliers happy. They very well realize the importance of contented vendors for the smooth running of a business. • Cash is the most important aspect of a business. • But unfortunately, due to dull economic conditions and lack of cash in the market, businesses are unable to cater to the payment needs of the vendors.

3. SUPPLY CHAIN FINANCE • Supply Chain Finance- It is a method of Vendor Finance in which the buyer pays the supplier through a third party. • The third party or the financer pays to the supplier on buyer's behalf. The amount which is paid to the supplier is less than the actual amount mentioned on the invoice. • The financer then takes the full amount from the buyer as per the agreed terms and the difference between the amount on the invoice and the actual amount paid to supplier serves as a profit for the financer. This method is also known as  Supplier Finance. • The buyer gets away with the burden of timely payments without affecting the smooth flow of business, on the other hand, the supplier has access to quick cash and gives them the   Working Capital required for running the business 

4. DYNAMIC DISCOUNTING • Dynamic Discounting - It is a more flexible way of early payment in which the buyer pays the supplier using their cash. • Under this method, the supplier accepts the payment from the buyer at a discounted rate. • It is called dynamic because the rate of discount keeps on changing depending upon how early the buyer makes the payment. • The earlier the payment is the higher is the discount rate. • It is a kind of  Cash Discountwhich the supplier gives in return for the early payment. • This method is beneficial for both the parties as it helps the buyer in purchasing at a lower rate and as per the supplier's point of view it helps in smooth flow of business due to instant availability of cash.    

5. MAIN PURPOSE • The purpose of both Dynamic Discounting and Supply Chain Finance are almost the same but the only difference is that the discount offered in dynamic discounting is never fixed whereas the discount in Supply Chain Financing is almost fixed. • Priority Vendoris one of the most trusted names in India providing Vendor Finance services to its clients. • Looking at today economical conditions and lacks of cash flow in the market it is recommended for businesses to opt for Supplier Finance in order to lower their burden of timely payments.