Work out dynamic discounting benefit instantly with clear inputs, formula shown and shareable results.
Dynamic discounting replaces fixed terms with a sliding scale: the earlier the payment, the larger the discount, priced at an agreed annual rate. It lets the buyer deploy surplus cash at an attractive return while giving the supplier control over when they need liquidity.
Discount percentage
Discount % = Annual rate x Days accelerated / 365
Discount earned
Discount = Invoice value x Discount %
It is continuous rather than a single step, so the supplier can choose any payment date and both parties are priced fairly at every point.
It is negotiated, usually between the supplier's borrowing cost and the buyer's return on cash, which is where both parties gain.