Negotiation Strategy: Cash Discount Conversion
This video covers the cash discount conversion negotiation strategy that the user may have the option to use during the supplier payment term negotiations. This strategy is found on the indidivual Supplier Card's within the ADA Platform.
Exploring Cash Discount Conversion Strategy:
- The video introduces the negotiation strategy known as cash discount conversion on the ADA Platform.
Availability Check:
- Specifies that the cash discount conversion is available in the example presented.
- Acknowledges that not all suppliers may have a cash discount opportunity, clarifying communication with the data team for inclusion.
Locating Strategies:
- Informs users that all negotiation strategies, including cash discount conversion, can be found by hovering over the tooltips button.
Understanding Cash Discount Conversion:
- Describes cash discount conversion as a strategy involving the conversion of existing cash discounts to longer payment terms, ensuring cost neutrality.
- Emphasizes that the strategy aims to extend terms without additional cost to the supplier.
Detailed View:
- Guides users to click on cash discount conversion to view details such as cash flow opportunity, total change in terms, supplier financing estimated rate, and the current discount option.
Optimizing Working Capital:
- Illustrates how the strategy optimizes working capital by converting early cash discounts into longer payment terms.
- Shares an example where the extension of terms results in a significant cash flow gain of $21.6 million.
Enabling Cash Discount Conversion:
- Explains that the availability of cash discount conversion depends on the presence of cash discounts in the original spend file.
- Mentions that if disabled, users can enable it within the setup module by navigating to cash discount conversion.
Enabling in Setup Module:
- Demonstrates the process of enabling cash discount conversion within the setup module on the left-hand side.
Conclusion:
- Concludes by expressing gratitude for the viewer's attention and providing a comprehensive overview of the cash discount conversion negotiation strategy.
0:00 - The next negotiation strategy we will cover in this video is cash discount conversion. We see in this example the cash discount conversion is available.
0:14 - The supplier you're looking at did not have a cash discount opportunity which was provided in the original spend file to the data team
0:23 - The definition of the cash discount conversion and all the strategies can be found by hovering over the tool tips button here. Now the cash discount conversion is the strategy to pay the supplier by converting existing cash discounts to longer payment terms up to the level where the extension of the terms is cost neutral
0:41 - You click on it we see what the cash flow opportunity would be, the total change in terms, what the supplier financing estimated rate is, and what the current discount option is on the table.
0:52 - So assuming the early payment cash discount count. Could be replaced by term extension instead the cash discount conversion strategy looks at the cost of the discount for the supplier how much the terms can be extended incrementing the cost
1:04 - For the supplier in this example we have different terms including early cash discounts offered for different spend lines for the supplier and were always showing that on a weighted average level the early cash discounts used per line are sixty days two percent and two spend lines have no cash discount
1:21 - working capital can be optimized by converting the early cash discounts we pay Bye! To the supplier into longer payment terms so in this example they identified an opportunity to extend them hundred forty seven days which are result in an additional twenty one point six million dollars in cash flow gain
1:37 - as I said before this strategy won't be available if there is no cash discount uploaded in the original spend file however if you see that it's disabled that means that you're going to have to enable this within the setup module I'll show you that now so you close out of the supplier card You navigate to
1:55 - the setup module on the left hand side and you find cash discount conversion you want to ensure this is turned on.
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