What is dynamic discounting, and how does it differ from supply-chain (reverse) factoring?

Both let suppliers get paid early, but the funding source and mechanics differ. Dynamic discounting is self-funded by the buyer: using its own surplus cash, the buyer offers suppliers early payment in exchange for a discount that scales with how early the payment is (the earlier, the bigger the discount) — effectively earning a high risk-free-equivalent return on cash while helping suppliers. Reverse factoring (supply-chain finance) is bank-funded: a third-party financier pays the supplier early based on the buyer's (stronger) credit, and the buyer repays the financier at the original due date — so it doesn't use the buyer's own cash and can extend the buyer's payment terms. Choose dynamic discounting when you have surplus cash and want a better yield than money-market returns while supporting the supply chain; choose SCF when you want to preserve/extend your own working capital and leverage your credit rating to fund suppliers. The trade-off: dynamic discounting consumes the buyer's liquidity but earns a return and is simple; SCF preserves the buyer's cash but introduces a financier, cost, and (as covered earlier) potential debt-reclassification scrutiny.