Categories: Blog


Andy Cagle


In business, everyone wants their money. 

Companies that are part of a supply chain are no different. Buyers want to hang on to their money and sellers want to get paid as soon as possible. Competing interests lead to conflicts that can threaten the health and resiliency of the supply chain.

But there are solutions; one being dynamic discounting.

Dynamic discounting is an early-payment solution in which the buyer pays the seller before the agreed terms in exchange for an invoice discount. Unlike supply chain finance programs, which use third-party funding sources, dynamic discounting allows buyers to draw from their own balance sheet to pay the seller. It is a good choice for buyers who have liquidity on hand and prioritize cost savings while still receiving a working capital benefit.

LSQ Dynamic Discounting Workflow

The discount is dynamic because it decreases as the invoice comes closer to maturity on the original terms. For example, if a seller ships goods to a buyer and the original payment terms are 30 days, an invoice paid at day 10 would have a higher discount percentage (that is, the seller would get less money) than an invoice paid at 20 days. If paid at the originally agreed-upon 30 days, the buyer would pay the full amount with no discount.

Benefits of Dynamic Discounting

With dynamic discounting, both sides of the supply chain equation benefit:


  • Cost savings – Buyers can save millions of dollars by taking advantage of paying less for goods and services through invoice discounts; cash that can be invested for a much greater ROI. 
  • Optimize Working Capital – In conjunction with a payment terms extension, buyers receive a working capital benefit from sellers that choose not to opt for early payments.
  • Improved Relationships with Sellers – Dynamic discounting helps bolster sellers’ working capital, giving them more incentive to do business with the buyer.
  • Diversified Supplier Pool – By providing options for fast, flexible, predictable access to cash, more sellers are incentivized to do business with you, strengthening the health of your supply chain.


  • Improved Liquidity – Dynamic discounting provides sellers with payments in a matter of days as opposed to waiting 30, 60, or 90 days. 
  • Payment Certainty – Sellers can choose when and which of their approved invoices get paid and, therefore, at what discount.
  • Predictability – Dynamic discounting allows for better forecasting of working capital and better planning for growth.
  • Reduced Financing Costs – Accessing working capital through dynamic is often a more affordable option than other types of financing.

LSQ supports dynamic discounting through its LSQ FastTrack® working capital platform, making it easy for buyers and sellers to set up and manage not only dynamic discounting, but supply chain finance and accounts receivables financing also.


Photo by Ibrahim Boran on Unsplash

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