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PHIL WATTS

Head of Product


Xelix’s iteration of dynamic discounting isn’t dependent on e-invoicing, accounts payable automation or other more complex supply chain finance initiatives.



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What is Dynamic Discounting?

Using technology to drive innovation in the finance function

How can CFOs best champion innovation in the supply chain?

‘Champion of innovation’ is the latest of many hats modern finance directors are expected to wear as their role expands beyond the narrow confines of crunching the numbers. Forward-looking CFOs need to lead by example within the firm, developing processes and procuring tools that are cost-effective and strategic. They need to create impact in the finance function itself, but also across the enterprise and its supply chain. Innovation is now an imperative: a successful CFO career will depend on fostering and not constraining it.

Xelix offers a dynamic discounting solution that is one such innovation designed to boost the FD’s reputation as a tech-savvy innovator, with immediate pay-off within the finance and treasury function. But it is also a concrete example of how to innovate without introducing complexity. It transcends finance because of its supportive effects for procurement and the supplier network itself.

Finance should not be a block on innovation

The finance function is often seen as a block on innovation. The reasons for this may be obvious. But it is worth remembering that this perception stems from the necessary role the CFO must play as the objective, data-driven scrutineer of risk in the organisation as well as the ultimate controller of the firm’s cost base.

But this objectivity and impartiality means that the CFO is also best placed to play the role of steward of innovation. Change for change’s sake can very easily add expense and complexity, and so create vulnerability – particularly where novel technologies are concerned. The CFO provides the corporation with the analytical toolkit to separate the wheat from the chaff of which options are best pursued. That means having a clear focus on which investments of time and resource will generate the surest returns in the short and long term.

CFO as role-model

So, to be a role-model of innovation requires the FD personally to introduce technologies that solve problems in a novel way while at the same time requiring minimal investment. In that way, they can show the rest of the organisation by example ‘this is how it’s done.’

Dynamic discounting is an innovative financial technique that leverages technology to reduce the dependence on banking, both for the buyer and supplier. Suppliers become less reliant on banks for finance, while buyers get much better return on cash than they can from bank deposits. In this respect, it can accurately be described as disruptive. But, unlike so many disruptive innovations, it actually reduces complexity and risk for both parties.

Dynamic discounting as catalyst for collaboration

On top of that, it can act as a catalyst for closer collaboration within the supply chain because it supports procurement managers and others in their relationships with vendors particularly where a supplier’s access to working capital might be an issue. This is a proactive way to support the supplier’s finances and strengthen the working relationship.

That’s because dynamic discounting as a financial technology innovation solves significant problems. It supports the more innovative firms in the supply chain that are vital to competitive advantage but who may be too small to access credit when they need it, particularly when credit conditions are tight for small firms – as they have been since the financial crisis. In so doing, it de-risks the company’s upstream relationships and boosts innovation across the enterprise.

These competitive benefits could range from preferential access to supplies during periods of disruption or increased demand, or a readiness on the part of the supplier to respond quickly to your marketing imperative. At a deeper level, because you are supporting the supplier’s funding position and access to working capital, it might also help cement other partnership initiatives specific to joint product development that are necessary for an ongoing market advantage.

Dynamic discounting gives cash flow control to suppliers

From the point of view of the supplier’s finance director, dynamic discounting is a major boon because it gives them unprecedented control over when they get paid, removing a major source of cash flow uncertainty. It’s also off-balance sheet and optional, allowing the supplier a hassle-free way of smoothing out monthly volatility. For the buyer – because the invoices have to be paid in any event – there is no risk, and the returns are significantly higher than current low interest rates.

Xelix is easy to deploy

What’s more, Xelix’s dynamic discounting option is intentionally easy to deploy for both buyers and suppliers. It is not contingent on any major technological implementation within the firm. Xelix plugs in easily and works alongside existing processes. Crucially, it does not require suppliers to be educated on new technology or adopt new ways of working. Suppliers simply respond to an email offer and can submit their responses in a few clicks.

A financial and strategic win

Xelix’s iteration of dynamic discounting isn’t dependent on e-invoicing, accounts payable automation or other more complex supply chain finance initiatives. It fits around existing processes, making adoption straightforward. The benefits for buyers and suppliers are tangible and immediate. The impact is both financial and strategic for each party. Significant supply chain risks are removed and innovation is moved forward seamlessly.

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