How treasury can do more with its capital

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As the economy moves further away from the financial crisis, treasurers find themselves in a stable era of solid balance sheets, rising markets, and low inflation. After years of focus on maintaining cash positions and minimizing risk, their mindsets are shifting towards strategically improving their liquidity, returns, and risk positions.

Money market and yield backdrop

Fallout from the Great Recession led to a spate of new regulations on money market funds in both the United States and Europe. In 2008, the Primary Fund, a U.S.-based money market fund, “broke the buck” when it’s net asset value fell below the traditional $1.00 a share fixed value of money market funds[i]. The fund experienced a decline in the value of its investments, leading to the devaluation in net asset value.

The U.S. Securities and Exchange Commission finalized rules that prescribed a floating net asset value on institutional money market accounts, which went into effect in October 2016. In Europe, the Council of the European Union approved rules that limit redemptions on money market accounts while imposing stricter liquidity requirements[ii]. Those rules go into effect in 2018 or 2019.

Floating net asset value of institutional money market funds affects investors such as corporate treasury departments. A floating rather than fixed rate is more risky, which will potentially drive those investors into other types of investments.  

Higher rates not only impact money market funds, but also top-rated corporate and government bonds as well as bond funds. Longer maturity bonds and bond funds are more at risk, which is an area that many institutional investors have flocked to due to overall low interest rates.

However, as rates rise, those longer maturity bonds and bond funds will experience the greatest decline in value, resulting in significant risk for institutional investors and corporate treasury departments. Rates are still low from a historical standpoint, but they will rise. With every increase in the Fed’s discount rate, the value of existing bonds and bond funds will decline.

Given this investment environment, treasury’s strategic shift is occurring within a backdrop of rising interest rates and changes in money market regulations. While treasurers have other options, including bank deposits, government funds and top-rated government and corporate bonds, a contraction in the number of options leave corporate treasurers seeking no-risk, guaranteed yield products. Dynamic discounting offers both of these advantages, and fits as part of your strategic treasury “toolkit.”

ABCs of true dynamic discounting

Dynamic discounting is a type of financing option where corporations that contract with suppliers of all sizes can offer easy and affordable access to working capital to those suppliers. Instead of those suppliers waiting 60 or 90 days for payment on invoices, they can select the speed at which they want to be paid and your company can decide what terms and conditions to accept.

While supplier discounting has been in the market for decades, true dynamic discounting leverages a marketplace model to bring suppliers and their customers together to set terms that are mutually beneficial. At its most flexible, dynamic discounting includes variables such as the date of the early payment, the frequency at which a supplier uses dynamic discounting, the amount of early payment and the rate of the discount.

Through a sophisticated dynamic discounting platform, suppliers and their customers – Corporate Treasury Departments – collaboratively determine the optimal pricing and timing of early payments.  

Benefits to buyers and suppliers

Corporate treasury departments who utilize this investment tool have the potential to earn a no-risk yield. Transactions are collaborative where a company can determine the pool of cash and the desired yield to achieve in this investment in suppliers. Suppliers choose their best rate and which invoices they would like paid early. Typically, the faster the payment, the steeper the discount.

True Dynamic discounting is a win-win for both parties. Suppliers benefit in the following ways:

  •      Convenient access to working capital
  •      Favorable rates on working capital
  •      Avoidance of fees attached to factoring and bank lines of credit
  •      Flexibility in setting rates and terms

At a time when interest rates are rising, both corporate Treasurers and suppliers need reliable access to favorable rates for investment and cash flow. Dynamic discounting solves both problems by bringing suppliers who need working capital together with their customers who seek no-risk investment options for their idle capital.

Dynamic discounting is especially valuable because companies are in charge of how and when to leverage this tool. There is no need for excess cash on the balance sheet. If your company has a low cost of capital, you can also use dynamic discounting to arbitrage a lower rate of debt against the working capital needs of your suppliers in a way that is mutually beneficial.

Without dynamic discounting, many SMEs are at risk of cash flow crises, especially as rates rise. You can support your suppliers by participating in dynamic discounting programs that provide them with hassle-free, easy access to working capital as they need it.

Business conditions change all the time. For corporates, true dynamic discounting offers a degree of flexibility to control how much money is allocated to this strategy as well as the desired yield.

Put your capital to work today

C2FO offers a high-tech as well as high-touch platform, combining its unique model with supporting services for true dynamic discounting. C2FO brings many of the world’s largest corporations together with their suppliers to ensure a smooth flow of working capital and investment flexibility. The platform is easy to use, allowing buyers to upload their approved invoices and establish targeted rates of return and amounts of cash available.

A proprietary C2FO algorithm matches suppliers who request early payment of their approved invoices at rates that meet their needs for working capital.

The result? Your company generates higher returns on cash and improves the financial health of your supply chain. Your suppliers receive the opportunity to improve their cash flow and grow their businesses without increasing their level of debt.


[i] “Money Market Fund ‘Breaks the Buck’,” The New York Times, Sept. 17, 2008,

[ii] “Corporate Treasurers Assess Impact of European Money Market Fund Reform,” The Wall Street Journal, May 17, 2017,