Both Dynamic Discounting and Supply Chain Finance (SCF) are powerful early payment solutions designed to optimise working capital and strengthen supplier relationships. However, they are not the same. They are funded differently and serve different strategic objectives. This guide will provide a clear comparison to help you, as a finance or procurement leader, decide which solution is right for your organisation.
The Core Difference
The fundamental difference between the two models comes down to one simple question: where does the money come from?
- Dynamic Discounting is self-funded. Your company uses its own excess cash from its balance sheet to pay suppliers early in exchange for a discount.
- Supply Chain Finance is third-party funded. A bank or financial institution provides the capital to pay your suppliers early, based on your company’s creditworthiness. You then pay the bank on the original invoice due date.
A Head-to-Head Comparison
| Feature | Dynamic Discounting | Supply Chain Finance |
| Funding Source | Your company’s own cash. | A third-party bank or financier. |
| Primary Goal | Generate a high, low-risk return on cash. | Optimise working capital by extending payment terms. |
| Impact on DPO | Neutral. You are paying early. | Positive. You can extend your DPO. |
| Ideal For | Cash-rich companies. | Companies focused on preserving cash. |
| Beneficiary | Your company’s P&L (from discounts). | Your company’s balance sheet (from improved cash flow). |
When to Choose Dynamic Discounting
You should prioritise a dynamic discounting programme when:
- Your company has significant cash reserves sitting on the balance sheet earning a low return.
- Your primary objective is to improve profitability by reducing your Cost of Goods Sold (COGS).
- You want to offer a flexible early payment option to all of your suppliers.
Learn more in our full Guide to Dynamic Discounting.
When to Choose Supply Chain Finance
You should prioritise a supply chain finance programme when:
- Your primary objective is to improve your working capital and extend your Days Payable Outstanding (DPO).
- You want to preserve your own cash for other strategic investments like R&D or CapEx.
- You need to provide liquidity support to your most critical, strategic suppliers.
Learn more in our full Guide to Supply Chain Finance.
The Modern Approach: Using Both
The most sophisticated companies don’t see this as an “either/or” decision. A modern, digital platform like TASConnect allows you to run both programmes simultaneously. You can use a third-party funded SCF programme as your baseline and then deploy your own cash via dynamic discounting when it makes strategic sense.
This hybrid approach gives your treasury team the ultimate flexibility to optimise both your P&L and your balance sheet.
Explore the TASConnect Platform for CFOs.
