A/R Finance & Factoring Terms GLossary

What isDiscount

A Discount is a reduction in the selling price of the merchandise as indicated by the “Terms of the Sale”. There are two major types:

  1. An early pay or cash discount is an incentive for quicker payment from your B2B or Government Customer. It is a deduction for paying within a stated shorter period of time. For example, 3% Cash, 2% 10 days or Net 45 days is a typically seen early pay discount. Be careful that your large corporate Customer doesn’t take the 2% discount and still takes 60 days to pay you!
  2. A trade discount is not a reduction for early payment. Rather it is a deduction which the customer takes because the discount offered is customary in a particular industry or the customer purchased merchandise in large quantities.

 

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