Early pay discounts – they’re back !

The Wall Street Journal has recently reported increases in US GDP, home sales, manufacturing output and other key indicators. Obvious signs of an improving economy. From the perspective of Accounts Payable management, we are seeing another sign of improvement: corporates willing and able to take advantage of early pay discounts are on the rise.

Last year, with corporate capital constrained and organizations conserving cash, the notion of taking early pay discounts had all but completely vanished. Almost no AP leader we talked to was talking (out loud anyway) about taking advantage of early pay discounts. But fast forward one year. The topic comes up fairly often at this point – 3 times alone last week. A clear indication that organizations are feeling more confident about their cash flows, their access to capital, or both.

In addition, with investment returns very low, and bank earnings credit rates hardly meaningful, corporates who do feel comfortable with their cash balances are taking early pay discounts since the return easily outpaces these alternatives. AP departments taking early pay discounts – they’re back.