How JetBlue is Reaping the Rewards of
Dynamic Discounting
Joni Geurts - JetBlue
Paul Kerins - iPayables
What is Dynamic Discounting?
 Traditional Terms
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Determined with supplier during contract negotiations
One static net due date
One static discount due date
 Always Take Discount Buyer

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Pay after discount due date
Take full discount anyway
 Traditional Terms with auto-sloping
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
Use traditional term
Pay after discount due date
Take pro-rated discount
 Dynamic Discounting
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Customer offers discount to supplier
Supplier selects payment date
Discount calculated by customer APR
Potential Hurdles
External Factors to Consider:
Internal Factors to Consider:
 Some providers charge additional
licensing fees to use it.
 Must have working capital.
 Dynamic Discounting not as successful
with paper invoicing.
 Some providers have limited early pay
functionality (no auto-sloping, vacation
re-route, escalation emails).
 Must have the approval from the Treasury
department.
 Must understand the cost of capital to
determine the appropriate APR.
 Possible Wall Street implications to
increasing working capital.
 Some providers charge discount share on
standard terms.
 Need to inform / encourage suppliers to
use the discounting feature.
 Most providers charge extra for supplier
adoption.
 Making a business case.
JetBlue Before Implementation
Prior metrics:
 Cash Discount $35k (2007)
 DPO Averaged 26.2 Days
Processing Issues:
 Limited visibility at a Vendor Level
 Impacted AP team as well as Procurement
 There was a lack of awareness in procurement of related vendors, where JetBlue was
receiving 2% / 3% cash discounts from only one small division of a public
company. Leveraging these supplier relationships could yield incremental cash discounts
(~$500K).
 Due to vendor and internal delays, invoices were not available on a timely basis to capture
cash discounts.
 Existing DPO was 26.2 (many companies have moved to net 45, net 60 or in certain
industrial companies, net 90 days).
JetBlue’s Success with Automation & Discounting
JetBlue’s Perspective:
Supplier Side:

Accounts Payable department has
generated substantial revenue.
 Suppliers gain financial flexibility.

Savings generated has offset AP
Automation costs.
 Cash flow is improved / suppliers get paid
faster.

Treasury can change APR when cash is
needed.
 Invoices get processed faster.

Annual Disbursements of $2 Billion.
 6,600 active vendors.

SAP; Integrated with InvoiceWorks, TRAX
(FAA tracking program for all A/C parts and
repairs), and FirstStrike.
 12,000 invoices per month are entered
into our e-invoicing system.

Only 11 crewmembers in Accounts Payable,
divided by airports, region and Aircraft
related expenses.
 Standard Discounts were not a priority for
procurement (only 2.6% of vendors offered
a standard discount).

Invoice processing time down to just 7 days for
internal approvals.
Solutions in the Market Place
There are a few providers in the AP Automation marketplace that offer a version of Dynamic Discounting.
An organization needs to determine what is important to them and find the best fit for their needs. When
evaluating the particular needs of our organization, there were some important items that factored into
our decision:

JetBlue Chose a Provider Who –
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Does not charge a License Fee.
Whose discounting is standard with the AP Automation Platform.
Does not charge for Standard Discounts.
Has reasonable “discount share” on auto-slope and dynamic discounts.
Other Providers We Did Not Choose 



Charged Hundreds of Thousands of dollars in License Fees.
Charged for standard discounts.
Expensive discount share on all discounts.
Had no escalation emails and weak workflow
Supplier Flagged in
InvoiceWorks as
eligible for Early Pay
How JetBlue Utilizes it
Invoice Submitted in
InvoiceWorks
Invoice Approved or
Matched
Invoice Sent to SAP
Invoice Status Sent
Back to iPayables
At JetBlue, we had specific workflow needs that led to the following
configuration:
Discount Credit
Memo Transmitted
to SAP
Discount Credit
Memo and Original
Invoice Pay together
AP Approves
Discount Credit
Memo
AP Modifies the
Terms on the
Original Invoices to
PayPay
NowNow
in SAP
Discount Credit
Memo Routed to AP
Supplier Offered
Early Pay via Email
Supplier Ops for
Early Pay Online
Discount Credit
Memo Created in
InvoiceWorks
Automatically with
Default Data
How JetBlue Utilizes it
Pre-Offering Stage
The first portion of the process shows how JetBlue makes sure Dynamic Discounting was
only offered to suppliers we selected. The payables system’s connections to InvoiceWorks
ensured that the system knows which suppliers can participate. JetBlue decided against
showing the supplier the Dynamic Discounting options up front, so the option did not
appear at the time of submission, but only after approval and transmission.
Invoice Submitted in
InvoiceWorks
Invoice Approved or
Matched
Invoice Sent to SAP
Invoice Status Sent
Back to iPayables
Supplier Flagged in
InvoiceWorks as
eligible for Early Pay
Supplier Offered
Early Pay via Email
How JetBlue Utilizes it
Discount Credit
Memo Transmitted
to SAP
Discount Credit
Memo and Original
Invoice Pay together
AP Approves
Discount Credit
Memo
AP Modifies the
Terms on the
Original Invoices to
PayPay
NowNow
in SAP
Supplier Ops for
Early Pay Online
Discount Credit
Memo Routed to AP
Discount Credit
Memo Created in
InvoiceWorks
Automatically with
Default Data
Post-offering Stage
In this part of the process, after the supplier has opted for early payment, a discount
credit is created. Not every company is going to want to do this with credit memos, the
other configuration option is to adjust the terms of the invoice so the discount is
included in the invoice itself. The end result is the same, the invoice is discounted and
the invoice and discount are recorded with the appropriate coding in the payables
system.
Questions?