Although it is easing somewhat, there is still a global credit crunch particularly for small and medium sized businesses. Large corporates are sitting on record piles of cash while certain segments of suppliers are being squeezed by the lack of liquidity in the marketplace.  Having learned during the recession how critical it is to ensure the health of their trading partners, many buyers and suppliers are collaborating around supply chain financing leveraging a new breed of solutions. In particular, they are turning to cloud-based offerings that enable them to more effectively manage their working capital.

 

In the past 12 months, Ariba has seen a 60 percent growth in the number of buyers using Ariba Discount Professional, a cloud-based solution that allows buyers to fund their suppliers’ short-term cash needs in exchange for prorated or dynamic discounts. In addition,

 

  • The total number of discount transactions conducted through Ariba Discount Management grew by 67 percent.
  • Average discount amount off the invoice value was 1.41%
  • The dollar value of discounts earned grew by 47 percent
  • On average, 15 percent of invited suppliers were participating in dynamic discount programs, with one buyer finding over 23% of their suppliers collaborating with them on discounts

 

Suppliers are increasingly leveraging Ariba Discount Management as well as. Using the solution, they can self-nominate and get funds when they want (i.e. to collaborate automatically on their terms and their timing), much like an ATM for receivables-related cash on demand. Ariba has seen a 70 percent growth in supplier participation over the last year as it seems that an increasing number of selling organizations like the idea of removing receivables from their books, lowering their DSO and reducing their exposure to buyer payment risk.

 

What’s behind these trends? For many organizations, prevailing cash management strategies place a priority on earning interest on cash balances. But in today’s post-recession environment, enterprises are increasingly turning to a mutually beneficial early-payment discount program as the most efficient and effective strategy for maximizing returns on cash. And Ariba provides the tech