As the debt crisis looms, companies are increasingly parking cash to mitigate financial risk. But in doing so, they may actually be creating it. With capital exlusive and expensive to access, suppliers across industries are finding it difficult to meet their short-term cash needs. To help remedy the situation, buyers and sellers alike are turning to Ariba, Inc. (Nasdaq: ARBA), the leading provider of collaborative business commerce solutions.

Using Ariba^® Discount Professional^™, buyers are accelerating payments for approved invoices to key suppliers in return for discounts, earning an immediate return on their cash. And sellers are gaining increased visibility into future cash flows, certainty in payment timing and the ability to use cash sooner to fund daily business needs.

“In the face of renewed market volatility and economic uncertainty, companies are tightening their grip on cash to hedge against financial risk,” said Drew Hofler, Senior Manager, Working Capital Management Solutions, Ariba. “But with little prospect of earning a return on parked capital, many buyer organizations are increasingly seeing their supply chains as a more viable opportunity for investment. Likewise, suppliers are seeing large, cash-rich customers as a better source of faster cash for their receivables.”

Leveraging Ariba Discount Professional, buyers can achieve a greater return on their cash that is effectively risk-free because they are investing in their own suppliers.

Collaboration and flexibility

“In today’s volatile economy, two things are crucial to the success of any organization: collaboration and flexibility. This is particularly true when it comes to managing cash,” said Tom Piersa, vice president, procurement and supply chain management, Republic Services, Inc. “With the help of Ariba’s technology and services, we have been able to engage a significant number of our suppliers in a dynamic discount program that gives us visibility into our options for early payment, the ability to make more informed buying decisions and allows our suppliers to choose alternative payment terms that meet their needs.”

And by creating a reliably efficient and completely automated process for managing discounts, Republic gives its trading partners greater control over their cash acceleration options and visibility into payment status so that they can improve their planning and forecasting.

“It makes sense for any buying organizations to do the best they can with their cash flow, and getting a discount does more for them than letting it sit in a low-interest-bearing account,” said Dana Gardner, Principal Analyst at Interarbor Solutions. “But for the suppliers, it gives them a chance to really analyze the fulfillment timing that best works to their advantage, and then incentivize using these discounts in ways that benefit them. There is a huge efficiency potential for these suppliers when they exercise this dynamic discount capability.”

Joy Stoelting, Studio Manager for Big-Giant, a Portland-based design firm that participates in an early discount program with a major sport equipment manufacturer, agrees. “When we submit paper invoices, it can take a long time to get them approved,” she says. “Through Ariba, we get our invoices paid as quickly as four days, and the visibility into payment status is like gold.”

Delivered in the cloud via the Ariba Network^™, Ariba Discount Professional provides buyers and sellers with all of the tools necessary to fully automate the process of offering, negotiating, and agreeing on early payment terms, including:

• Prorated discount terms through which buyers can capture discounts at any point between the invoice approval and net due date.
• Dynamic discounting that lets suppliers control the acceleration of payment on an ad-hoc basis on individual invoices
• Automatic presentation of discount offers by buyers
• One-button acceptance of accelerated payment by suppliers
• Ariba Cash Flow Optimizer™ offering suppliers insight into cash flow opportunity and single-click acceleration of cash.

Hear more from Hofler and Gardner on dynamic discounting

Learn more about Ariba Discount Professional