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Demica’s Early Settlement functionality
Published 10th October 2024 by Guillermo Egoavil Cisneros in Blogs
Demica has expanded its range of Supply Chain Finance solutions to support Dynamic Discounting programmes with our new Early Settlement functionality add-on to our platform for payable transactions. The design of this functionality provides flexibility to buyers for managing their excess cash and ensures that liquidity is available for Suppliers that need to access early payments.
Demica’s Early Settlement enables our funders to offer a market leading product, and be directly involved with their clients, even in pure-play Dynamic Discounting programmes.
How does Demica’s Early Settlement functionality work?
Typical Dynamic Discounting programmes involve a buyer paying suppliers’ invoices ahead of the original maturity date for a discount. Demica’s Early Settlement functionality works within an existing Payables Finance programme. It allows buyers to settle their invoices at any point before the original maturity date, after funders fulfil suppliers’ Advance Payment Requests.
The supplier is still paid early by the funder, and the buyer can pay the funder early to capture part of the supplier discount by early settling at any time before invoice maturity.
Customisable Early Settlement Requests: Buyers have the option, but not the obligation, to deploy their excess liquidity with full flexibility. They can control and adjust when they early settle invoices, and how much they pay when they do so.
Constant liquidity for suppliers: programmes can be configured so advance payment requests raised by suppliers can be fulfilled by funders, independently from whether the buyer will raise an early settlement request afterwards
Automated or Manual Early Settlement: Buyers have the option of selecting which invoices they want to early settle or requesting a value amount. Auto selection can also be turned on to minimise manual intervention, or create a true Dynamic Discounting programme
Flexible pricing: flexible pricing options give funders full control to negotiate early settlement discounts with buyers. Options include the ability to set a Nominal or Timebound discount type, minimum gains for the funder, and the ability to override pricing at a supplier level, for example to tie in with a supplier’s ESG rating
Flexible Limits: Funders can configure limits for Advance Payment and for Early Settlement, allowing them to control the utilisation of both programmes at once
By providing this level of flexibility, optimisation of working capital, and enhancing user experience, Demica aims to empower greater financial efficiency in a way that benefits all parties.
Example invoice lifecycle with Early Settlement:
Day 0:
- Invoice is uploaded into the Demica platform by the buyer as an approved payable
- The invoice passes all eligibility checks and is offered to the supplier for advance payment request
Day 1:
- The supplier issues an advance payment request to the funder (manually or automatically)
- The funder accepts the advance payment request
- Payment is issued to the supplier minus the advance payment request fee
- The invoice becomes available for early settlement by the buyer
Any point between Day 1 and maturity:
- The buyer issues an early settlement request for the invoice (manually or automatically)
- The early settlement request is accepted by the funder
- Buyer’s account is debited for the original invoice amount minus the early settlement request discount
For more information, or to discuss enabling this feature, please contact our team today.